Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For the
quarterly 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
EMERGENCY MEDICAL SERVICES CORPORATION
EMERGENCY MEDICAL SERVICES L.P.
(Exact name of Registrants as Specified in their Charters)
|
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20-3738384
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Delaware
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20-2076535
|
(State or other jurisdiction of
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(IRS Employer
|
incorporation or organization)
|
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Identification Numbers)
|
|
|
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6200 S. Syracuse Way,
Suite 200
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|
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Greenwood Village, CO
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80111
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(Address of principal executive offices)
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(Zip Code)
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Registrants telephone number, including area code:
303-495-1200
Former name, former address and former fiscal year, if changed since
last report:
Not applicable
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past
90 days. Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of large accelerated filer, accelerated filer, and smaller
reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
|
|
|
|
Accelerated filer
x
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Non-accelerated filer
o
|
(Do not check if a smaller reporting
company)
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|
Smaller reporting
company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange act). Yes
o
No
x
Shares
of 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.
Table
of Contents
EMERGENCY
MEDICAL SERVICES CORPORATION
INDEX
TO QUARTERLY REPORT
ON
FORM 10-Q
FOR
THE THREE AND NINE MONTHS ENDED
SEPTEMBER
30, 2008
2
Table of Contents
EMERGENCY
MEDICAL SERVICES CORPORATION
PART I. FINANCIAL INFORMATION
FOR
THE THREE AND NINE MONTHS ENDED
SEPTEMBER
30, 2008
ITEM 1.
FINANCIAL STATEMENTS (UNAUDITED)
Emergency
Medical Services Corporation
Consolidated Statements of Operations
and Comprehensive Income
(unaudited;
in thousands, except share and per share data)
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Quarter ended
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Nine months ended
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September 30,
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September 30,
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|
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2008
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2007
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2008
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2007
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Net revenue
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$
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679,328
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$
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529,752
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$
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1,816,193
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$
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1,569,783
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Compensation and
benefits
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426,755
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366,835
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1,221,607
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1,079,076
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Operating
expenses
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135,087
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82,473
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302,014
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238,731
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Insurance
expense
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25,109
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13,465
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63,640
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51,242
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|
Selling, general
and administrative expenses
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20,509
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15,876
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50,621
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|
44,082
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Depreciation and
amortization expense
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16,993
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17,809
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52,156
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52,165
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Restructuring
charges
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2,242
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Income from
operations
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54,875
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33,294
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126,155
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102,245
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Interest income
from restricted assets
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1,623
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|
1,919
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|
5,113
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|
5,294
|
|
Interest expense
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|
(11,117
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)
|
(12,652
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)
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(31,387
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)
|
(35,281
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)
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Realized gain on
investments
|
|
768
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|
9
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|
3,011
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|
68
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Interest and
other income
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|
508
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|
602
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|
1,097
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|
1,791
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|
Income before
income taxes and equity in earnings of unconsolidated subsidiary
|
|
46,657
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|
23,172
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|
103,989
|
|
74,117
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|
Income tax
expense
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|
(18,138
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)
|
(8,672
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)
|
(40,170
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)
|
(28,146
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)
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Income before
equity in earnings of unconsolidated subsidiary
|
|
28,519
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14,500
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|
63,819
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45,971
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Equity in
earnings of unconsolidated subsidiary
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98
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|
170
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|
152
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|
425
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Net income
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28,617
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14,670
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63,971
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|
46,396
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Other
comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
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Unrealized
holding (losses) gains during the period
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(869
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)
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1,439
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(2,629
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)
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1,014
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Unrealized gains
(losses) on derivative financial instruments
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205
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(555
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)
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Comprehensive
income
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$
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27,953
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$
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16,109
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$
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60,787
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$
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47,410
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|
|
|
|
|
|
|
|
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Basic earnings
per common share
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$
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0.69
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$
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0.35
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$
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1.54
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$
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1.12
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|
Diluted earnings
per common share
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|
$
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0.66
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$
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0.34
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$
|
1.49
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$
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1.08
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Weighted average
common shares outstanding, basic
|
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41,637,765
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41,567,657
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41,594,270
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|
41,544,741
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Weighted average
common shares outstanding, diluted
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|
43,062,364
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43,190,779
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43,058,904
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43,143,997
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|
The accompanying
notes are an integral part of these financial statements.
3
Table of Contents
Emergency
Medical Services Corporation
Consolidated Balance Sheets
(in
thousands, except share and per share data)
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September 30,
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December 31,
|
|
|
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2008
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2007
|
|
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(Unaudited)
|
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Assets
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|
|
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Current assets:
|
|
|
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Cash and cash
equivalents
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$
|
135,682
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$
|
28,914
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|
Insurance
collateral
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50,693
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37,776
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Trade and other
accounts receivable, net
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552,795
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495,348
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Parts and
supplies inventory
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20,177
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|
20,010
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Prepaids and
other current assets
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19,225
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11,715
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|
Current deferred
tax assets
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78,072
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76,997
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Total current
assets
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856,644
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|
670,760
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|
Non-current
assets:
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|
|
|
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Property, plant
and equipment, net
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126,732
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|
143,342
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|
Intangible
assets, net
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75,274
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|
81,717
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|
Non-current
deferred tax assets
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59,165
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|
94,961
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Insurance
collateral
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|
115,109
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146,638
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Goodwill
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|
336,886
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313,124
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|
Other long-term
assets
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|
23,369
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|
29,021
|
|
Total assets
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$
|
1,593,179
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|
$
|
1,479,563
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|
Liabilities
and Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
65,059
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|
$
|
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
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|
Long-term debt
|
|
474,885
|
|
478,166
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|
Insurance
reserves and other long-term liabilities
|
|
242,547
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|
245,010
|
|
Total
liabilities
|
|
1,077,482
|
|
1,030,067
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|
Equity:
|
|
|
|
|
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Preferred stock
($0.01 par value; 20,000,000 shares authorized, 0 issued and outstanding)
|
|
|
|
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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
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|
Class B
common stock ($0.01 par value; 40,000,000 shares authorized, 142,545 issued
and outstanding in 2008 and 2007)
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|
1
|
|
1
|
|
Class B
special voting stock ($0.01 par value; 1 share authorized, issued and
outstanding in 2008 and 2007)
|
|
|
|
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|
LP exchangeable
units (32,107,500 shares issued and outstanding in 2008 and 2007)
|
|
212,361
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|
212,361
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|
Additional
paid-in capital
|
|
122,491
|
|
117,079
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|
Retained
earnings
|
|
182,927
|
|
118,956
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|
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 accompanying
notes are an integral part of these financial statements.
4
Table of Contents
Emergency
Medical Services Corporation
Consolidated Statements of Cash Flows
(unaudited;
in thousands)
|
|
Nine months ended September 30,
|
|
|
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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 accompanying
notes are an integral part of these financial statements.
5
Table of Contents
Emergency
Medical Services Corporation
Notes to Unaudited Consolidated
Financial Statements
(in
thousands, except share and per share data)
1.
General
Basis of Presentation of Financial Statements
The accompanying interim
consolidated financial statements for Emergency Medical Services Corporation (EMSC
or the Company) have been prepared in accordance with U.S. generally accepted
accounting principles (GAAP) for interim reporting and accordingly, do not
include all of the disclosures required for annual financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation 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 the
full year ending December 31, 2008. For further information, see the
Companys consolidated financial statements, including the accounting policies
and notes thereto, included in the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2007.
The consolidated
financial statements of EMSC include those of its direct subsidiary, Emergency
Medical Services L.P. (EMS LP), a Delaware limited partnership. EMS LP
acquired American Medical Response, Inc. and its subsidiaries (AMR) and
EmCare Holdings Inc. and its subsidiaries (EmCare) from Laidlaw International, Inc.
(Laidlaw) on February 10, 2005, with an effective transaction date after
the close of business on January 31, 2005. On December 21, 2005, the
Company effected a reorganization and issued class A common stock in an initial
public offering.
The Company is party to a
management agreement with a wholly-owned subsidiary of Onex Corporation, the
Companys principal equityholder. In exchange for an annual management fee of
$1.0 million, the Onex subsidiary provides the Company with corporate finance
and strategic planning consulting services. For each of the three and nine
months ended September 30, 2008 and 2007, the Company expensed $250 and
$750, respectively, in respect of this fee.
2.
Summary of Significant Accounting
Policies
Consolidation
The consolidated
financial statements include all wholly-owned subsidiaries of EMSC, including
AMR and EmCare and their respective subsidiaries. All significant intercompany
transactions and balances have been eliminated.
Use of Estimates
The preparation of
financial statements requires management to make estimates and assumptions
relating to the reporting of results of operations, financial condition and
related disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results may differ from those estimates under
different assumptions or conditions.
Insurance
Insurance collateral is
comprised principally of government and investment grade securities and cash
deposits with third parties and supports the Companys insurance program and
reserves. Certain of these investments, if sold or otherwise liquidated, would
have to be replaced by other suitable financial assurances and are, therefore,
considered restricted.
Insurance reserves are
established for automobile, workers compensation, general liability and
professional liability claims utilizing policies with both fully-insured and
self-insured components. This includes the use of an off-shore captive
insurance program through a wholly-owned subsidiary for certain professional
liability (malpractice) programs for EmCare. In those instances where the
Company has obtained third-party insurance coverage, the Company generally
retains liability for the first $1 to $2 million of the loss. Insurance
reserves cover known claims and incidents within the level of Company retention
that may result in the assertion of additional claims, as well as claims from
unknown incidents that may be asserted arising from activities through the
balance sheet date.
The Company establishes reserves
for claims based upon an assessment of actual claims and claims incurred but
not reported. The reserves are
established based on quarterly consultation with third-party independent
actuaries using actuarial principles and assumptions that consider a number of
factors, including historical claim payment patterns (including legal costs)
and changes in case reserves and the assumed rate of inflation in healthcare
costs and property damage repairs.
6
Table
of Contents
The Companys most recent
actuarial valuation was completed in September 2008. As a result of this
actuarial valuation, in the three months ended September 30, 2008 the
Company recorded an increase in its provision for insurance liabilities of
approximately $2.1 million related to its reserves for losses in prior
years. In the nine months ended September 30, 2008 the Company
recorded a reduction of approximately $4.0 million related to its reserves for
losses in prior years. In the three and
nine months ended September 30, 2007, the Company recorded a reduction in
its provision for insurance liabilities of approximately $7.9 million and $21.7
million, respectively, as a result of an actuarial valuation completed in September 2007.
The long-term portion of
insurance 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 determines
its allowances based on payor reimbursement schedules, historical write-off
experience and other economic data. The allowances for contractual discounts
and uncompensated care are reviewed monthly. Account balances are charged off against
the uncompensated care allowance when it is probable the receivable will not be
recovered. Write-offs to the contractual allowance occur when payment is
received. The allowance for uncompensated care is related principally to
receivables recorded for self-pay patients. The Companys accounts receivable
allowances 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 receivables
represent EmCare hospital subsidies and fees and AMR fees for stand-by and
special events and subsidies from community organizations. Other receivables at September 30, 2008
also included $62.5 million related to AMRs hurricane deployment for Hurricanes
Gustav and Ike pursuant to AMRs national contract with the Federal Emergency
Management Agency (FEMA).
AMR contractual
allowances are primarily determined on payor reimbursement schedules that are
included and regularly updated in the billing systems, and by historical
collection experience. The billing
systems calculate the difference between payor specific gross billings and
contractually agreed to, or governmentally driven, reimbursement rates. The allowance for uncompensated care at AMR
is related principally to receivables recorded for self-pay patients. AMRs allowances on self-pay accounts
receivable are estimated on claim level, historical write-off experience.
Accounts receivable
allowances at EmCare are estimated based on cash collection and write-off
experience at a facility level contract and facility specific payor mix. These allowances are reviewed and adjusted
monthly through revenue provisions. In
addition, a look-back analysis is done, typically after 15 months, to compare
actual cash collected on a date of service basis to the revenue recorded for
that period. Any adjustment necessary
for an overage or deficit in these allowances based on actual collections is
recorded through a retroactive revenue adjustment in the current period.
Revenue Recognition
Revenue is recognized at
the time of service and is recorded net of provisions for contractual discounts
and estimated uncompensated care. Provisions for contractual discounts and
estimated uncompensated care as a percentage of gross revenue and as a
percentage of gross revenue less provision for contractual discounts are as
follows:
|
|
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
|
%
|
7
Table of Contents
Healthcare reimbursement
is complex and may involve lengthy delays. Third-party payors are continuing
their efforts to control expenditures for healthcare, including proposals to
revise reimbursement policies. The Company has from time to time experienced
delays in reimbursement from third-party payors. In addition, third-party
payors may disallow, in whole or in part, claims for reimbursement based on
determinations 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 very
complex and subject to interpretation. As a result, there is a reasonable
possibility that recorded estimates will change materially in the short-term.
Retroactive adjustments may change the amounts realized from third-party payors
and are considered in the recognition of revenue on an estimated basis in the
period the related services are rendered. Such amounts, including adjustments
between provisions for contractual discounts and uncompensated care, are
adjusted in future periods, as adjustments become known. Retroactive
adjustments in the three months ended September 30, 2008, which increased
revenue, were 0.4% of consolidated net revenue compared to 1.3% of consolidated
net revenue for the three months ended September 30, 2007. Retroactive adjustments recorded in the nine
month period ended September 30, 2008, 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.
The Company also provides
services to patients who have no insurance or other third-party payor coverage.
In certain circumstances, federal law requires providers to render services to
any patient who requires emergency care regardless of their ability to pay.
Equity Structure
On December 21,
2005, the Company effected a reorganization and issued 8.1 million shares
of class A common stock in an initial public offering. Pursuant to the
reorganization, EMS LP, the former top-tier holding company of AMR and EmCare,
became the consolidated subsidiary of EMSC, a newly formed corporation. To
effect the reorganization, the holders of the capital stock of the sole general
partner of EMS LP contributed that capital stock to the Company in exchange for
class B common stock; the general partner was merged into the Company and the
Company became the sole general partner of EMS LP. Concurrently, the holders of
class B units of EMS LP contributed their units to the Company in exchange for
shares of the Companys class A common stock, and the holders of certain class
A units of EMS LP contributed their units to the Company in exchange for shares
of the Companys class B common stock.
The Company holds 23.2%
of the equity interests in EMS LP. LP exchangeable units, held by persons
affiliated with the Companys principal equity holder, represent the balance of
the EMS LP equity. The LP exchangeable units are exchangeable at any time, at
the option of the holder, for shares of the Companys class B common stock on a
one-for-one basis. The holders of the LP exchangeable units have the right to
vote, through the trustee holder of the Companys class B special voting stock,
at all stockholder meetings at which holders of the Companys class B common
stock or class B special voting stock are entitled to vote.
In the EMS LP partnership
agreement, the Company has agreed to maintain the economic equivalency of the
LP exchangeable units and the class B common stock, and the holders of the LP
exchangeable 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 Companys class B common stock. The LP
exchangeable units are intended to be economically equivalent to the class B
common stock of the Company in that the LP exchangeable units carry the right
to vote (by virtue of the class B special voting stock) with the holders of
class B common stock as one class, and entitle holders to receive distributions
only if the equivalent dividends are declared on the Companys class B common
stock. Accordingly, the Company accounts for the LP exchangeable units as if
the LP exchangeable units were shares of its common stock, including reporting
the LP exchangeable units in the equity section of the Companys balance sheet
and including the number of outstanding LP exchangeable units in both its basic
and diluted earnings per share calculations.
Recent Accounting Pronouncements
The Company adopted
Statement of Financial Accounting Standards (SFAS) No. 157 Fair Value
Measurement (SFAS 157) effective January 1, 2008, which among other
things, requires additional disclosures about investments that are reported at
fair value. SFAS 157 establishes a
hierarchal disclosure framework which ranks the level of market price
observability used in measuring investments at fair value. Market price
observability is impacted by a number of factors, including the type of
investment and the characteristics specific to the investment. Investments with readily available active
quoted prices or for which fair value can be measured from actively quoted
prices generally will have a higher degree of market price observability and a
lesser degree of judgment used in measuring fair value.
8
Investments measured and
reported at fair value are classified and disclosed in one of the following
categories:
Level 1 Quoted prices
are available in active markets for identical investments as of the reporting
date. As required by SFAS 157, the Company does not adjust the quoted price for
these investments.
Level 2 Pricing inputs
are other than quoted prices in active markets, which are either directly or
indirectly observable as of the reporting date, and fair value is determined
through the use of models or other valuation methodologies.
The following table
summarizes the valuation of EMSCs investments by the above SFAS 157 fair value
hierarchy 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, the
Company completed its acquisition of River Medical, Inc. based in Lake Havasu,
Arizona, which provides exclusive emergency ambulance transportation services
to Lake Havasu City, and La Paz and Mohave Counties in western Arizona. The
Company believes that this acquisition positions the Company for future
expansion in the Arizona market. In April 2008, the Company completed its
acquisition of Aldan Emergency Physicians, P.A. which provides emergency
department staffing and management services at facilities located in
Brooksville, Florida and Hudson, Florida. In August 2008, the Company
completed its acquisition of the management services entity of Clinical
Partners, P.A., a provider of anesthesiology services, as well as an associated
billing company based in Longview, Texas. The total cost of these acquisitions
was $28.3 million and the Company has recorded $21.1 million of goodwill, which
amount is subject to adjustment based upon completion of purchase price
allocations.
4.
Accrued Liabilities
Accrued liabilities were
as follows at September 30, 2008 and December 31, 2007. Included in
the Other category at September 30, 2008 were accrued liabilities of
$52.7 million for AMRs hurricane deployment associated with AMRs national
contract 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
5.
Long-Term Debt
Long-term debt consisted
of 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 leases
various facilities and equipment under operating lease agreements.
The Company also leases
certain vehicles and certain leasehold improvements under capital leases.
During the first quarter of 2007 the Company extended the term on the vehicles
lease for an additional three years. Assets under capital leases are
capitalized using inherent interest rates at the inception of each lease.
Capital leases are collateralized by the underlying assets.
Services
The Company is subject to
the Medicare and Medicaid fraud and abuse laws which prohibit, among other
things, any false claims, or any bribe, kick-back or rebate in return for the
referral of Medicare and Medicaid patients. Violation of these prohibitions may
result in civil and criminal penalties and exclusion from participation in the
Medicare and Medicaid programs. Management has implemented policies and
procedures that management believes will assure that the Company is in
substantial compliance with these laws and regulations but there can be no
assurance the Company will not be found to have violated certain of these laws
and regulations. From time to time, the Company receives requests for
information from government agencies pursuant to their regulatory or
investigational authority. Such requests can include subpoenas or demand
letters for documents to assist the government in audits or investigations. The
Company is cooperating with the government agencies conducting these
investigations and is providing requested information to the government
agencies. Other than the proceedings described below, management believes that
the outcome of any of these investigations would not have a material adverse
effect on the Company.
On April 17, 2006,
the Office of Inspector General for the United States Department of Health and
Human Services, or OIG, finalized its draft report requesting that the Companys
Massachusetts subsidiary reimburse the Medicare program for approximately $1.8
million in alleged overpayments from Medicare for services performed between July 1,
2002 and December 31, 2002. The OIG claims that these payments
were made for services that did not meet Medicare medical necessity and
reimbursement requirements. On December 10, 2006, AMR paid the
$1.8 million in alleged overpayments. However, the Company disagreed with
the OIGs finding, filed an administrative appeal and on May 15, 2008,
received $1.2 million back from Medicare as a result of the successful appeal. The
outcome of this appeal did not have an impact on the results of operations of
the Company.
Other Legal Matters
On December 13,
2005, a lawsuit purporting to be a class action was commenced against AMR in
Spokane, Washington in Washington State Court, Spokane County. The
complaint alleges that AMR billed patients and third party payors for
transports it conducted between 1998 and 2005 at higher rates than
contractually permitted. The court has certified a class in this case, but
the size and membership of the class has not been determined. At this
time, AMR does not believe that any incorrect billings are material in amount.
EmCare entered into a
settlement agreement with respect to June Belt, et. al. v. EmCare, Inc.
et. al. brought by a number of nurse practitioners and physician assistants
under the Fair Labor Standards Act. The suit was filed on February 25,
2003 in the Eastern District of Texas. Pursuant to the settlement
agreement, EmCare paid $1.7 million during the first quarter of 2007 in
satisfaction of all claims in the lawsuit.
10
AMR and the City of
Stockton, California, are parties to litigation regarding the terms and
enforceability of a memorandum of understanding and a related joint venture
agreement between the parties to present a joint bid in response to a request
for proposals to provide emergency ambulance services in the County of San
Joaquin, California. The suit was filed on June 28, 2005, in the United
States District Court for the Eastern District of California. The parties were
unable to agree on the final terms of a joint bid. AMR has been awarded the San
Joaquin contract. While we are unable at this time to estimate the amount of
potential damages, we believe that Stockton may claim as damages a portion of
our profit on the contract or the profit Stockton might have realized had the
joint venture proceeded.
7.
Restructuring Charges
The Company restructured
certain billing functions of AMR and operations in the Los Angeles, California
market during the first quarter of 2007 and recorded a restructuring charge of
$2.2 million. This restructuring charge included $0.2 million in lease
termination and exit costs and $2.0 million related to termination benefits.
8.
Equity Based Compensation
The Company adopted the
provisions of SFAS No. 123 (revised 2004) Share-Based Payment (SFAS 123R)
on January 1, 2006 using the prospective transition method. The
stock options are valued using the Black-Scholes valuation method on the date
of grant.
Equity
Option Plan
Under the Companys
Equity Option Plan, key employees were granted options that permit the
individuals to purchase class A common shares and vest ratably generally over a
period of four years. In addition, certain performance measures must be met for
50% of the options to become exercisable. Options with similar provisions were
granted to non-employee directors. The Company recorded a compensation charge
of $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-Employee
Director Compensation Plan
The Non-Employee Director
Compensation Plan, approved in May 2007, is available to non-employee directors
of the Company, other than the Chair of the Compliance Committee. Under this
plan, eligible directors are granted Restricted Stock Units (RSUs) following
each annual stockholder meeting with each RSU representing one share of the
Companys class A common stock. Eligible directors receive a grant of RSUs
having a fair market value of $100 on the date of grant based on the closing
price of the Companys class A common stock on the business day immediately
preceding the grant date. The Non-Employee Director Compensation Plan allows
directors to defer income from the grant of RSUs, which vest immediately prior
to the election of directors at the next following annual stockholder meeting. In
connection with this plan, the Company granted 4,145 and 2,705 RSUs per
director in 2008 and 2007, respectively, and expensed $100 for each of the
three month periods ended September 30, 2008 and 2007 and $300 for each of
the nine month periods ended September 30, 2008 and 2007.
Long-Term
Incentive Plan
The Companys original
Long-Term Incentive Plan was approved by stockholders in May 2007 and an
Amended and Restated Long-Term Incentive Plan (the Plan) was approved by
stockholders in May 2008. The Plan provides for the grant of long-term
incentives, including various equity-based incentives, to those persons with
responsibility for the success and growth of the Company and its subsidiaries.
The Company granted
options to key employees during the nine months ended September 30, 2008
under the Plan. The options permit employees to purchase a total of 214,750
shares of class A common stock at a weighted average exercise price of
$30.28 per share, vest and become exercisable ratably over a period of
four years from the date of grant and have a maximum term of ten years.
The Company recorded a
compensation 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
Stock
Purchase Plan/Employee Stock Purchase Plan
During the first quarter
of 2008, the Company commenced an offering of its class A common stock to
eligible employees and independent contractors associated with the Company and
its subsidiaries pursuant to a Stock Purchase Plan and the Companys Employee
Stock Purchase Plan (together, the SPPs). The purchases of stock under
the SPPs occured in September 2008 at a 5% discount to the closing price
of the Companys class A common stock on September 15, 2008, and as such
no compensation charge is required to be recorded for the SPPs during the nine
months ended September 30, 2008. Employee contributions to the SPPs
totaling $644 were used to purchase a total of 20,627 shares of class A common
stock.
9.
Segment Information
The Company is organized
around two separately managed business units: healthcare transportation
services and emergency management services, which have been identified as
operating segments. The healthcare transportation services reportable segment
focuses on providing a full range of medical transportation services from basic
patient transit to the most advanced emergency care and pre-hospital
assistance. The emergency management services reportable segment provides
outsourced business services to hospitals primarily for emergency departments,
urgent care centers and for certain inpatient departments. The Chief Executive
Officer has been identified as the chief operating decision maker (CODM) for
purposes of SFAS No. 131
Disclosures about Segments of an Enterprise and Related Information
(SFAS 131), as he assesses the performance of the business units and
decides how to allocate resources to the business units.
Net income before equity
in earnings of unconsolidated subsidiary, income tax expense, interest and
other income, realized gain on investments, interest expense and depreciation
and amortization (Adjusted EBITDA) is the measure of profit and loss that the
CODM uses to assess performance, measure liquidity and make decisions. The
accounting policies for reported segments are the same as for the Company as a
whole.
|
|
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
A reconciliation of Adjusted
EBITDA 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 the
acquisition of AMR and EmCare in part by issuing $250.0 million principal
amount of senior subordinated notes and borrowing $370.2 million under its
senior secured credit facility. Its wholly-owned subsidiaries, AMR HoldCo, Inc.
(f/k/a EMSC Management, Inc.) and EmCare HoldCo, Inc., are the
issuers of the senior subordinated notes and the borrowers under the senior
secured credit facility. As part of the transaction, AMR and its subsidiaries
became wholly-owned subsidiaries of AMR HoldCo, Inc. and EmCare and its
subsidiaries became wholly-owned subsidiaries of EmCare HoldCo, Inc. The
senior subordinated notes and the senior secured credit facility include a
full, unconditional and joint and several guarantee by EMSC, EMS LP and EMSCs
domestic subsidiaries. The senior subordinated notes and senior secured credit
facility do not include a guarantee by the Companys captive insurance
subsidiary. All of the operating income and cash flow of EMSC, EMS LP, AMR
HoldCo, Inc. and EmCare HoldCo, Inc. is generated by AMR, EmCare and
their subsidiaries. As a result, funds necessary to meet the debt service
obligations under the senior secured notes and senior secured credit facility
described above are provided by the distributions or advances from the
subsidiary companies, AMR and EmCare. Investments in subsidiary operating
companies are accounted for on the equity method. Accordingly, entries
necessary to consolidate EMSC, EMS LP, AMR HoldCo, Inc., EmCare HoldCo, Inc.
and all of their subsidiaries are reflected in the Eliminations/Adjustments
column. Separate complete financial statements of the issuers, EMS LP and
subsidiary guarantors would not provide additional material information that
would be useful in assessing the financial composition of the issuers, EMS LP
or the subsidiary guarantors. The condensed consolidating financial statements
for EMSC, EMS LP, the issuers, the guarantors and the non-guarantor are as
follows:
13
Consolidating
Statement of Operations
For
the 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
|
|
Consolidating
Statement of Operations
For
the 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
Consolidating
Statement of Operations
For
the 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
|
|
Consolidating
Statement of Operations
For
the 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
Consolidating
Balance Sheet
As
of 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
Consolidating
Balance Sheet
As
of 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
Condensed
Consolidating Statement of Cash Flows
For
the 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
|
|
Condensed
Consolidating Statement of Cash Flows
For
the 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
The
Company completed the acquisition of Templeton Readings, LLC in October 2008
for $27.5 million. Based in Baltimore,
Maryland, Templeton Readings, LLC is a provider of final reads and
teleradiology services with contracts in 31 states as of October 20, 2008. The
Company 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 and
Exchange Commission. The Company has not commenced any offering. Upon
effectiveness, the shelf registration will allow EMSCs existing stockholders to
sell a portion of their holdings of class A common stock, and it will also
allow EMSC to issue and sell new shares of class A common stock. In the
aggregate, up to 10,000,000 shares of class A common stock will be eligible to
be sold by the Companys stockholders and by the Company pursuant to the shelf
registration statement.
18
ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking
Statements and Factors That May Affect Results
Certain statements and
information herein may be deemed to be forward-looking statements within the
meaning of the Federal Private Securities Litigation Reform Act of 1995.
Forward-looking statements may include, but are not limited to, statements
relating to our objectives, plans and strategies, and all statements (other
than statements of historical facts) that address activities, events or
developments that we intend, expect, project, believe or anticipate will or may
occur in the future. Any forward-looking statements herein are made as of the
date this Quarterly Report on Form 10-Q is filed with the Securities and
Exchange Commission, and EMSC undertakes no duty to update or revise any such
statements. Forward-looking statements are not guarantees of future performance
and are subject to risks and uncertainties. Important factors that could cause
actual results, developments and business decisions to differ materially from
forward-looking statements are described in EMSCs filings with the SEC from
time to time, including in the section entitled Risk Factors in the Companys
most recent Annual Report on Form 10-K and in subsequent Quarterly Reports
on Form 10-Q. Among the factors that could cause future results to differ
materially 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 and
uninsured patients, and third party reimbursement rates and methods; the
adequacy of our insurance coverage and insurance reserves; potential penalties
or changes to our operations if we fail to comply with extensive and complex government
regulation of our industry, both as it exists now and as it may change in the
future; our ability to recruit and retain qualified physicians and other
healthcare professionals, and enforce our non-compete agreements with our
physicians; the loss of one or more members of our senior management team; the
outcome of government investigations of certain of our business practices; our
ability to generate cash flow to service our debt obligations and fund the cost
of capital expenditures to maintain and upgrade our vehicle fleet and medical
equipment; and the loss of existing contracts and the accuracy of our
assessment 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 Companys business is
conducted primarily through two operating subsidiaries, American Medical
Response, Inc., or AMR, and EmCare Holdings Inc., or EmCare.
This Report should be
read in conjunction with the Companys consolidated financial statements and
notes thereto included in our Annual Report on Form 10-K filed with the
SEC on February 27, 2008.
Company Overview
We are a leading provider
of emergency medical services in the United States. We operate our business and
market our services under the AMR and EmCare brands. We believe that AMR, over
its more than 50 years of operating history, has become the leading provider of
ambulance transport services in the United States. We believe that EmCare, over
its more than 30 years of operating history, has become the leading provider of
outsourced emergency department staffing and management services in the United
States.
Key Factors and Measures We Use to Evaluate Our Business
The key factors and
measures we use to evaluate our business focus on the number of patients we
treat and transport and the costs we incur to provide the necessary care and
transportation for each of our patients.
We evaluate our revenue
net of provisions for contractual payor discounts and provisions for
uncompensated care. Medicaid, Medicare and certain other payors receive
discounts from our standard charges, which we refer to as contractual
discounts. In addition, individuals we treat and transport may be personally
responsible 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 have
no insurance or other third party payor coverage. Due to the uncertainty
regarding collectibility of charges associated with services we provide to
these patients, which we refer to as uncompensated care, our net revenue
recognition is based on expected cash collections. Our net revenue is gross
billings after provisions for contractual discounts and estimated uncompensated
care. Provisions for contractual discounts and uncompensated care have
increased historically primarily as a result of increases in gross billing
rates.
The table below
summarizes our approximate payor mix as a percentage of both net revenue and
total 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 cash
collections in the period as an approximation of net revenue recorded.
19
|
|
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 to
continually monitoring our payor mix, we also analyze certain measures in each
of our business segments.
AMR
Approximately 52%, 57%
excluding deployment revenue from AMRs agreement with the Federal Emergency
Management Agency, or FEMA, of AMRs net revenue for the nine months ended September 30,
2008 was generated from emergency 9-1-1 ambulance transport services. The FEMA
contract is described further in Item 2 Managements Discussion and Analysis
of Financial Condition and Results of Operations -
Factors
Affecting Operating Results
.
Non-emergency
ambulance transport services, including critical care transfers, wheelchair
transports and other interfacility transports, or IFTs, accounted for 27%, 30%
excluding FEMA deployment revenue, of AMRs 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.
AMRs measures for net revenue include transports, segregated into ambulance
and wheelchair transports and in certain analyses weighted, and net revenue per
transport.
The change from period to
period in the number of transports is influenced by increases in transports in
existing markets from both new and existing facilities we serve for
non-emergency transports, the effects of general community conditions for
emergency transports and the impact of newly acquired businesses.
The costs we incur in our
AMR business segment consist primarily of compensation and benefits for medical
crews and support personnel, direct and indirect operating costs to provide
transportation services, and costs related to accident and insurance claims.
AMRs key cost measures include unit hours and cost per unit hour, to measure
compensation-related costs and the efficiency of our ambulance deployment,
operating costs per transport, and accident and insurance claims.
We have focused our risk
mitigation 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 mitigation
processes which we believe have resulted in a reduction in the frequency,
severity and development of claims. We continue to see positive trends in our
claims costs but cannot provide assurance that these trends will continue.
EmCare
Of EmCares net revenue
for the nine months ended September 30, 2008, approximately 99% was
derived from our hospital contracts for emergency department staffing,
hospitalist and radiology services and other management services. Of this
revenue, approximately 78% was generated from billings to third party payors
and patients for patient visits and approximately 22% was generated from
billings to hospitals and affiliated physician groups for professional
services. EmCares key net revenue measures are patient visits, net revenue per
patient visit, and number of contracts.
The change from period to
period in the number of patient visits under our same store contracts is
influenced by general community conditions as well as hospital-specific
elements, many of which are beyond our direct control.
The costs incurred in our
EmCare business segment consist primarily of compensation and benefits for physicians
and other professional providers, professional liability costs, and contract
and other support costs. EmCares key cost measures include provider
compensation per patient visit and professional liability costs.
We have developed
extensive professional liability risk mitigation processes, including risk
assessments on medical professionals and hospitals, extensive incident
reporting and tracking processes, clinical fail-safe programs, training and
education and other risk mitigation programs which we believe have historically
resulted in a continued reduction in the frequency, severity and development of
claims.
20
Recent Developments
The Company adopted SFAS
157 Fair Value Measurement effective January 1, 2008, which among other
things, requires additional disclosures about investments that are reported at
fair value. SFAS 157 establishes a hierarchal disclosure framework which
ranks the level of market price observability used in measuring investments at
fair value. Market price observability is impacted by a number of factors,
including the type of investment and the characteristics specific to the
investment. Investments with readily available active quoted prices or
for which fair value can be measured from actively quoted prices generally will
have a higher degree of market price observability and a lesser degree of
judgment used in measuring fair value.
Factors Affecting Operating Results
Federal Emergency Management Agency
Contract
In 2007, FEMA awarded AMR
with a national contract to provide ambulance, para-transit, and rotary and
fixed-wing air ambulance transportation services to supplement federal and
military responses to disasters, acts of terrorism and other public health
emergencies. The contract covers the 21 states along the Gulf and Atlantic
coasts and can be expanded by FEMA to the 48 contiguous states if necessary. The
national contract took effect on August 1, 2007 and was renewed by FEMA for a
second year. FEMA has the option to
renew the contract for three more years on an annual basis. In August 2008,
AMR was deployed under this contract to provide patient evacuations and
disaster relief efforts in three Gulf Coast states for hurricanes Gustav and
Ike and recorded $101 million, which included approximately $11 million of
expense pass-throughs, in net revenue during each of the three and nine months
ended September 30, 2008. For the three and nine months ended September 30,
2007, net revenue for the FEMA contract was $11 million associated with the
deployment for hurricane Dean.
Changes in Net New Contracts
Our operating results are
affected directly by the number of net new contracts and related volumes we
have in a period, reflecting the effects of both new contracts and contract
expirations. We regularly bid for new contracts, frequently in a formal
competitive bidding process that often requires written responses to a Request
for Proposal, or RFP, and, in any fiscal period, certain of our contracts will
expire. We may elect not to seek extension or renewal of a contract, or may
reduce certain services, if we determine that we cannot continue to provide
such services on favorable terms. With respect to expiring contracts we would
like to renew, we may be required to seek renewal through an RFP, and we may
not be successful in retaining any such contracts, or retaining them on terms
that are as favorable as present terms.
Inflation
Certain of our expenses,
such as wages and benefits, insurance, fuel and equipment repair and
maintenance costs, are subject to normal inflationary pressures. Excluding the
impact of the FEMA contract, fuel expense represented 16.2% and 12.7% of AMRs
operating 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 we
have generally been able to offset inflationary and other cost increases
through increased operating efficiencies and successful negotiation of fees and
subsidies, we can provide no assurance that we will be able to offset any
future fuel and inflationary cost increases through similar efficiencies and
fee changes.
Critical Accounting Policies
Revenue
Recognition
Management regularly
analyzes the ultimate collectability of accounts receivable after certain
stages of the collection cycle using a look-back analysis to determine the
amount 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.
Results
of Operations
Three
and Nine Months Ended September 30, 2008 Compared to Three and Nine Months
Ended September 30, 2007
The following tables
present a comparison of financial data from our unaudited consolidated
statements of operations for the three and nine months ended September 30,
2008 and for the three and nine months ended September 30, 2007 for EMSC
and our two operating segments.
21
Non-GAAP
Measures
Adjusted
EBITDA.
Adjusted EBITDA is defined as net income before equity
in earnings of unconsolidated subsidiary, income tax expense, interest and
other income, realized gain on investments, interest expense and depreciation
and amortization. Adjusted EBITDA is
commonly used by management and investors as a performance measure and
liquidity indicator. Adjusted EBITDA is not considered a measure of financial
performance under U.S. generally accepted accounting principles, or GAAP, and
the items excluded from Adjusted EBITDA are significant components in
understanding and assessing our financial performance. Adjusted EBITDA should
not be considered in isolation or as an alternative to such GAAP measures as
net income, cash flows provided by or used in operating, investing or financing
activities or other financial statement data presented in our financial
statements as an indicator of financial performance or liquidity. Since
Adjusted EBITDA is not a measure determined in accordance with GAAP and is
susceptible to varying calculations, Adjusted EBITDA, as presented, may not be
comparable to other similarly titled measures of other companies. The tables
set forth a reconciliation of Adjusted EBITDA to net income and cash flows
provided by operating activities.
Unaudited Consolidated Results of
Operations and as a Percentage of Net Revenue
(dollars
in 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 Adjusted
EBITDA to Cash Flows Provided by Operating Activities
(dollars
in 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
Unaudited Segment Results of
Operations and as a Percentage of Net Revenue
(dollars
in 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
Quarter ended September 30, 2008 compared to the
quarter ended September 30, 2007
Consolidated
Our results for the three
months 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 the
three months ended September 30, 2007. The increase in net income is
attributable primarily to hurricane deployments under AMRs national FEMA
contract, growth in income from operations, which includes an increase in
insurance expense, and a decrease in interest expense, partially offset by
increased 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.
Net
revenue.
For
the 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 attributable
primarily to an increase of $90.6 million of FEMA deployment revenue, increases
in rates and volumes on existing contracts and increased volume from net new
contracts and acquisitions.
Adjusted
EBITDA.
Adjusted
EBITDA 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 months
ended September 30, 2007. The 2008 period includes the Adjusted EBITDA
impact related to increased deployment under the FEMA contract.
Interest
expense.
Interest
expense for the three months ended September 30, 2008 was $11.1 million
compared to $12.7 million for the three months ended September 30,
2007. The decrease is attributable primarily to the lower rate under our
interest rate swap agreement, which became effective in the fourth quarter of
2007. The swap agreement converts $200.0 million of variable rate debt to
fixed rate debt with an effective rate of 6.3%.
Income
tax expense.
Income
tax expense for the three months ended September 30, 2008 was $18.1
million compared to $8.7 million for the same period in 2007. Our
effective tax rate for the three months ended September 30, 2008
was 38.9%, and 37.4% for the same period in 2007. The increase is due
primarily to growth in income from operations.
AMR
Net
revenue.
Net
revenue 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 same
period in 2007. The increase in net revenue was due primarily to an
increase of $90.6 million of FEMA deployment revenue, and rate increases offset
by lower transport volume. Excluding the
impact 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, in
weighted transport volume. The increase in net revenue per transport is
attributable primarily to rate increases in several markets including
adjustments for increased fuel costs. Weighted transports decreased 4,100
from the same quarter last year. Ambulance transports, including
acquisitions, increased 17,500 offset by a reduction of 19,300 transports in
markets exited since last year. Same market ambulance transports increased 1.0%
from last year.
Compensation
and benefits.
Compensation
and 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 primarily
to compensation costs incurred as a result of increased hurricane deployments
under our national FEMA contract, annual salary increases and additional
ambulance unit hour deployment.
Excluding the estimated impact of the increased FEMA deployment, ambulance
crew wages per ambulance unit hour increased by approximately 6.4%, or $7.2
million primarily attributable to wage rate increases. Ambulance
unit hours increased period over period by 1.2%, or $1.4 million, excluding the
impact of hurricane deployments. The
increase is attributable to our recent acquisitions partially offset by the
restructuring and exit of certain of our operations in 2007. Benefit
costs increased by $4.0 million, excluding FEMA deployment benefit costs, for
the three months ended September 30, 2008 compared to the same period in
2007. The change is attributable to increased health insurance costs and
additional benefit costs related to our acquisitions.
Operating
expenses.
Operating
expenses for the three months ended September 30, 2008 were $126.2
million, or 29.7% of net revenue, compared to $71.7 million, or 23.1% of net
revenue, for the three months ended September 30, 2007. The change
is due primarily to increased external provider expenses from our FEMA
deployment of $46.3 million, increased fuel costs of $3.5 million and
additional operating expenses of $1.7 million from our acquisitions.
Insurance
expense.
Insurance
expense 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, for
the same period in 2007. We recorded a reduction of prior year
24
insurance provisions of
$1.7 million during the three months ended September 30, 2008 and $4.7
million during the three months ended September 30, 2007.
Selling,
general and administrative.
Selling, general and administrative expense for the
three months ended September 30, 2008 was $15.1 million, or 3.5% of net
revenue, compared to $10.9 million, or 3.5% of net revenue, for the three
months ended September 30, 2007.
The increase is due primarily to travel and other administrative costs
associated with our increased FEMA deployment.
Depreciation
and 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, or
4.6% of net revenue, for the same period in 2007.
EmCare
Net
revenue.
Net
revenue 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 three
months ended September 30, 2007. The increase was due primarily to an
increase in patient visits from net new hospital contracts and net revenue
increases in existing contracts. Following June 30, 2007, we added 74 net
new contracts which accounted for a net revenue increase of $24.9 million for
the three months ended September 30, 2008. Of the 74 net new
contracts added since June 30, 2007, 16 were added in 2007 resulting in an
incremental increase in 2008 net revenue of $6.1 million. The remaining 58 net new contracts were added
in 2008, resulting in an increase in net revenue of $18.8 million for the three
months ended September 30, 2008.
During the three months ended September 30, 2008, EmCare added a
total of 63 new contracts and terminated 25 contracts. Of the 63 new
contracts added in 2008, 45 were from our acquisition of Clinical Partners in August 2008
with 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 $10.3
million, or 5.3%, for the three months ended September 30, 2008. The
change is due to a 3.3% increase in revenue per visit and an increase in same
store patient visits of 2.0% over the prior period. Retroactive revenue
adjustments in the third quarter of 2008 were not material.
Compensation
and benefits.
Compensation
and 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 benefits
costs increased $18.3 million from net new contract additions. Same store provider
compensation and benefits costs were $9.4 million over the prior period due to
a 5.4% increase in provider compensation per patient visit attributable
primarily to higher net revenue and patient visits.
Operating
expenses.
Operating
expenses 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, for
the same period in 2007. Operating expenses decreased due primarily to
lower collection agency fees.
Insurance
expense.
Professional
liability insurance expense for the three months ended September 30, 2008
was $14.4 million, or 5.7% of net revenue, compared to $6.7 million, or 3.1% of
net revenue, for the three months ended September 30, 2007. The change is related primarily to an
increase in prior year insurance provisions of $3.9 million for the three
months ended September 30, 2008, compared to a reduction of prior period
insurance provisions of $3.1 million for the same period last year.
Selling,
general and administrative.
Selling, general and administrative expense for the
three months ended September 30, 2008 was $5.4 million, or 2.1% of net
revenue, compared to $5.0 million, or 2.3% of net revenue, for the three months
ended September 30, 2007.
Depreciation
and 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, or
1.6% of net revenue, for the three months ended September 30, 2007.
Nine months ended September 30, 2008 compared to the
nine months ended September 30, 2007
Consolidated
Our results for the nine
months 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 the
nine months ended September 30, 2007. The increase in net income is
attributable primarily to increased hurricane deployments under AMRs national
FEMA contract, growth in income from operations, higher realized gains on
investments and a decrease in interest expense partially offset by increased
income tax
25
expense. Basic and
diluted earnings per share were $1.54 and $1.49, respectively, for the nine
months ended September 30, 2008. Basic and diluted earnings per share were
$1.12 and $1.08, respectively, for the same period in 2007.
Net
revenue.
For
the nine months ended September 30, 2008, net revenue was $1,816.2 million
compared to $1,569.8 million for the nine months ended September 30, 2007,
representing an increase of 15.7%. The increase is attributable primarily to
increased FEMA deployment revenue at AMR, increases in rates and volumes on
existing contracts and increased volume from net new contracts and
acquisitions.
Adjusted
EBITDA.
Adjusted
EBITDA 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 months
ended September 30, 2007. The nine
months ended September 30, 2007 included incremental positive revenue
adjustments with an Adjusted EBITDA impact of $9.9 million. The 2008 period
includes the Adjusted EBITDA impact related to increased deployment under the
FEMA contract.
Interest
expense.
Interest
expense for the nine months ended September 30, 2008 was $31.4 million
compared to $35.3 million for the nine months ended September 30,
2007. The decrease is attributable primarily to the lower rate under
our interest rate swap agreement, which became effective in the fourth quarter
of 2007. The swap agreement converts $200.0 million of variable rate debt
to fixed rate debt with an effective rate of 6.3%.
Income
tax expense.
Income
tax expense increased $12.0 million for the nine months ended September 30,
2008, compared to the same period in 2007, resulting primarily from increased
operating income, increased realized gain on investments and lower interest
expense. 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
Net
revenue.
Net
revenue 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 same
period in 2007. The increase in net revenue was due primarily from $90.9
million of additional FEMA deployment revenue, rate increases and higher
transport volume. Excluding the impact
of 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. The
increase in net revenue per transport is attributable primarily to rate
increases in several markets including adjustments for increased fuel
costs. Weighted transports increased 50,900 from the same period last
year. The change was due to an increase in weighted transports of 95,400
from acquisitions and an increase in weighted transport volume in existing
markets of 0.5%, offset by a decrease in weighted transports of 55,000 from the
restructuring and exit of certain of our operations.
Compensation
and benefits.
Compensation
and benefit costs for the nine months ended September 30, 2008 were $635.0
million, or 59.1% of net revenue, compared to $576.3 million, or 63.0% of net
revenue, for the nine months ended September 30, 2007. The increase was due
primarily to increases in compensation costs incurred as a result of increased
hurricane deployments under our national FEMA contract, expenses from our
acquisitions, annual salary increases and additional ambulance unit hour
deployment. Excluding the impact of FEMA
deployments, ambulance crew wages per ambulance unit hour increased by
approximately 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 our
recent acquisitions and increased transport volume in existing markets
partially offset by the restructuring of certain of our operations and exit of
other markets in 2007. Non-crew wages increased $11.2 million, excluding
the impact of hurricane deployments, due primarily to additional compensation
expenses from acquisitions of $5.8 million and annual salary increases of
3.2%. Benefit costs increased by $10.7 million, excluding FEMA deployment
benefit costs, for the nine months ended September 30, 2008 due primarily
to increased health insurance costs and additional benefit expense from our
acquisitions.
Operating
expenses.
Operating
expenses 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 increased
external provider expenses from our national FEMA deployment of $46.4 million,
increased fuel costs of $9.2 million and additional operating expenses of $9.4
million from our acquisitions.
Insurance
expense.
Insurance
expense for the nine months ended September 30, 2008 was $30.8 million, or
2.9% of net revenue, compared to $26.0 million, or 2.8% of net revenue, for the
same period in 2007. We recorded a reduction of prior year insurance
provisions of $5.3 million during the nine months ended September 30, 2008
and $11.9 million during the nine months ended September 30, 2007.
Selling,
general and administrative.
Selling, general and administrative expense for the
nine months ended September 30, 2008 was $34.1 million, or 3.2% of net
revenue, compared to $30.3 million, or 3.3% of net revenue, for the nine months
ended
26
Table
of Contents
September 30,
2007. The increase is due primarily to
travel and other administrative expenses for our national FEMA deployment.
Restructuring
charges.
Restructuring charges of $2.2 million were
recorded during the nine months ended September 30, 2007, related to the
closure of one of our billing offices and the restructuring of our operations
in Los Angeles and Orange Counties in California.
Depreciation
and amortization.
Depreciation and amortization expense
for the nine months ended September 30, 2008 was $42.0 million, or 3.9% of
net revenue, compared to $41.7 million, or 4.6% of net revenue, for the same
period in 2007.
EmCare
Net
revenue.
Net revenue for the nine months ended September 30,
2008 was $740.9 million, an increase of $85.4 million, or 13.0%, from $655.4
million for the nine months ended September 30, 2007. The increase was due
primarily to an increase in patient visits from net new hospital contracts and
net revenue increases in existing contracts.
Following December 31, 2006, we added 75 net new contracts which
accounted for a net revenue increase of $57.9 million. Of the 75 net new
contracts added since December 31, 2006, 17 were added in 2007 resulting
in an increase in 2008 net revenue of $21.1 million. For the nine months
ended September 30, 2008, EmCare added 108 new contracts and terminated 50
contracts resulting in an incremental increase in net revenue of $36.8
million. Of the 108 new contracts added in 2008, 45 were from our
acquisition of Clinical Partners in August 2008 with related management
fee revenue totaling $1.1 million. Net
revenue under our same store contracts increased $27.5 million, or 5.1%, for
the period ended September 30, 2008 due to a 1.1% increase, or a 5.6%
increase excluding retroactive revenue adjustments discussed below, in revenue
per visit and an increase in same store patient visits of 4.0% over the prior
period. Retroactive adjustments, which increased revenue for the nine
months ended September 30, 2008 and 2007, were approximately 0.9% and 4.3%
of EmCares net revenue, respectively.
Compensation
and benefits.
Compensation and benefits costs for the
nine months ended September 30, 2008 were $586.6 million, or 79.2% of net
revenue, compared to $502.8 million, or 76.7% of net revenue for the same
period in 2007. Provider compensation and benefits costs increased $49.7
million from net new contract additions.
Same store provider compensation and benefits costs were $29.2 million
over the prior period due to a 4.6% increase in provider compensation per
patient visit. The increase is due primarily
to higher net revenue per patient visit and additional staffing due to growth
in patient volumes.
Operating
expenses.
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, or
4.8% of net revenue, for the same period in 2007. Operating expenses
decreased due primarily to reduced off-hours radiology coverage, lower
collection agency fees, and bank fees of approximately $2.1 million, which are
now included in selling, general and administrative expenses.
Insurance
expense.
Professional liability insurance expense for
the nine months ended September 30, 2008 was $32.8 million, or 4.4% of net
revenue, compared to $25.2 million, or 3.8% of net revenue, for the nine months
ended September 30, 2007. An increase of prior year insurance provisions
of $1.3 million was recorded during the nine months ended September 30,
2008 compared to a reduction of $9.7
million recorded for the nine months ended September 30, 2007.
Selling,
general and administrative.
Selling, general and
administrative expense for the nine months ended September 30, 2008 was $16.5
million, or 2.2% of net revenue, compared to $13.8 million, or 2.1% of net
revenue, for the nine months ended September 30, 2007. The increase
is due primarily to an increase in regional travel expense associated with the
increase in contracts during the period and increased bank fees of
approximately $2.1 million, which bank fees were previously included in
operating expenses.
Depreciation
and amortization.
Depreciation and amortization expense
for the nine months ended September 30, 2008 was $10.2 million, or 1.4% of
net revenue, compared to $10.5 million, or 1.6% of net revenue, for the nine
months ended September 30, 2007.
Critical
Accounting Policies
For a discussion of
accounting policies that we consider critical to our business operations and
the understanding of our results of operations that affect the more significant
judgments and estimates used in the preparation of our unaudited condensed
consolidated financial statements, please refer to Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies contained in our annual report on Form 10-K
for the year ended December 31, 2007 and incorporated by reference herein.
As of September 30, 2008, there were no significant changes in our
critical accounting policies or estimation procedures.
27
Table
of Contents
Liquidity
and Capital Resources
Our primary source of
liquidity is cash flows provided by our operating activities. We can also use
our revolving senior secured credit facility, described below, to supplement
cash flows provided by our operating activities if we decide to do so for
strategic or operating reasons. Our liquidity needs are primarily to service
long-term debt and to fund working capital requirements, capital expenditures
related to the acquisition of vehicles and medical equipment,
technology-related assets and insurance-related deposits.
We believe our cash and
cash equivalents, cash provided by our operating activities, and amounts
available under our senior secured credit facility will meet the liquidity
requirements of our business through at least the next 12 months. We have available
to us, upon compliance with customary conditions, $100.0 million under the
revolving credit facility, less outstanding letters of credit of $34.5 million
at September 30, 2008. Further, we have a conditional right under our
senior secured credit facility to request new or existing lenders to provide up
to an additional $100.0 million of term debt in $20.0 million increments.
Cash
Flow
The table below
summarizes cash flow information derived from our statements of cash flows for
the 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
|
)
|
|
|
|
|
|
|
|
|
Operating
activities
. 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 accounts
receivable decreased operating cash flows by $54.5 million for the nine months
ended September 30, 2008 compared to $71.0 million for the same period in
2007. Accounts receivable increased
during 2008 due to FEMA deployment receivables outstanding as of September 30,
offset by increased collections for receivables delayed in 2007 for billing
system conversions and for delays in obtaining provider numbers.
Increases in accounts payable and accrued liabilities increased operating cash
flows by $42.0 million in 2008 compared to $5.3 million in 2007 primarily as a
result of FEMA-related deployment accruals.
We regularly analyze days
sales outstanding, or DSO, which is calculated by taking our net revenue for
the quarter divided by the number of days in the quarter. The result is
divided into net accounts receivable at the end of the period. DSO
provides us with a gauge to measure receivables, revenue and collection
activities. The following table outlines our DSO by segment and in total
excluding the impact of the deployment under AMRs 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
|
|
EMSCs DSO decreased 7
days for the nine months ended September 30, 2008, 10 days including the
impact of FEMA deployment revenue and related accounts receivable
balances. AMRs DSO decreased 6 days for
the nine months ended September 30, 2008 and was primarily from the
collection of receivables delayed as a result of the billing system conversion
in several markets during 2007. AMRs DSO increased 8 days in 2007, of which 6
days were related to this conversion.
EmCares DSO declined 7
days for the nine months ended September 30, 2008. The reduction was
due to improved cash collections and from the collection of Medicare and
Medicaid billings which had been delayed as a result of the time required to
obtain provider numbers. During the nine months ended September 30,
2008, the total enrollment delayed amount decreased by approximately 33% and
has been negatively affected by recent contract starts. The Company expects to
collect these net Medicare and Medicaid receivables, which currently represent
approximately 5 days of EmCares DSO.
Investing
activities
. 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 flows
used in investing activities was affected by insurance collateral requirements,
net capital expenditures and acquisitions of businesses. Net insurance collateral requirements
provided $16.0 million during 2008 compared to cash required for insurance
collateral of $7.3 million during the 2007 period. Net capital
expenditure 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 to
the timing of capital purchases and the completion of system upgrades in the
first
28
Table
of Contents
half of 2007. Cash
used 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 in
2007.
Financing
activities.
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 financing
activities is due to net debt repayments of $4.0 million for the nine months
ended September 30, 2008 compared to net borrowings of $34.5 million for
the same period in 2007. Net cash from
financing activities for the nine months ended September 30, 2008 also
includes an increase in bank overdrafts of $8.8 million and issuance of common
stock from exercises of stock options totaling $1.9 million. At September 30,
2008 there were no amounts outstanding under our revolving credit facility.
29
Table
of Contents
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to
market risk consists of changes in interest rates on certain of our borrowings
and changes in fuel prices. We have not entered into hedging transactions or
used derivative instruments for speculative or trading purposes to mitigate our
exposure to fluctuations in fuel prices.
We monitor the risk from
changing interest rates and evaluate ways to mitigate possible exposures, as
appropriate, using derivative and hedging instruments. Our use of derivative instruments is limited
to highly effective fixed interest rate swap agreements used to manage
well-defined interest rate risk exposures.
At September 30, 2008, we were party to one interest rate swap
agreement. The swap agreement is with
major financial institutions and amounts to $200 million of our variable rate
debt. This swap agreement effectively
converts $200 million of variable rate debt to fixed rate debt with an
effective rate of 6.3%. The Company continues to make interest payments
based on the variable rate associated with the debt (based on LIBOR which had
an average rate of 4% at September 30, 2008) and periodically settles with
its counterparties for the difference between the rate paid and the fixed
rate. The swap agreement expires in December 2009.
As of September 30,
2008, we had $474.1 million of debt excluding capital leases, of which $22.4
million was variable rate debt under our senior secured credit facility ($200
million 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 aggregate
principal amount of our senior subordinated notes. An increase or decrease in
interest rates of 0.125% will change our interest costs on our senior secured
credit facility by less than $0.1 million per year based on outstanding
indebtedness at September 30, 2008.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain a system of
disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act))
that are designed to ensure that information required to be disclosed in the
reports that we file under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or furnishes
under the Exchange Act is accumulated and communicated to the issuers
management, including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, our management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Based on their evaluation
of our disclosure controls and procedures conducted within 90 days of the date
of filing this Report on Form 10-Q, our principal executive officer and
our principal financial officer have concluded that, as of the date of their
evaluation, our disclosure controls and procedures (as defined in Rules 13a
-15(e) and 15d -15(e) promulgated under the Exchange Act) are
effective.
Changes in Internal Control Over Financial Reporting
There were no changes in
our internal control over financial reporting that occurred during our fiscal
quarter ended September 30, 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
30
Table
of Contents
EMERGENCY
MEDICAL SERVICES CORPORATION
PART II. OTHER INFORMATION
FOR
THE THREE AND NINE MONTHS ENDED
SEPTEMBER
30, 2008
ITEM 1.
LEGAL PROCEEDINGS
For additional
information regarding legal proceedings, please refer to note 5, under the
caption Commitments and Contingencies of the notes accompanying the
consolidated financial statements included herein, to our Annual Report on Form 10-K
filed with the SEC on February 27, 2008 and to our Quarterly Reports on Form 10-Q
filed with the SEC on May 9, 2008 and August 7, 2008.
ITEM
1A. RISK FACTORS
Other than with respect
to the risk factors below, there have been no material changes from the risk
factors disclosed in the Risk Factors sections of the Companys Annual Report
on Form 10-K for the year ended December 31, 2007 and in the Companys
Quarterly Report for the quarter ended June 30, 2008.
Volatility
in current market conditions could negatively impact insurance collateral
balances and result in additional funding requirements.
The Companys insurance
collateral is comprised principally of government and investment grade
securities and cash deposits with third parties. The recent volatility experienced in the
market has not had a material impact to the Companys financial position or
performance. Future volatility could, however,
negatively impact the insurance collateral balances and result in additional
funding requirements.
Volatility and disruption of financial markets could affect access to
credit.
The current economic
market environment is causing contraction in the availability of credit in the
marketplace. This could potentially reduce the sources of liquidity for the
Company. While there have not been changes to date regarding the Companys
ability to access credit under its revolving credit facility or additional
borrowings under our senior secured facility, future volatility could have a
negative impact on our financial position and performance which could put us in
default of the credit conditions and impact our ability to access credit. Additionally, future volatility and financial
market disruptions could impact the creditors ability to honor the terms of
the Companys credit agreements.
Our consolidated revenue and earnings could vary
significantly from period to period due to our national contract with the
Federal Emergency Management Agency.
Our revenue and earnings
under our national contract with the Federal Emergency Management Agency, or
FEMA, are likely to vary significantly from period to period. In the
first two years of the FEMA contract, our annual revenues from services
rendered under this contract have varied by approximately $90 million. In
its present form, the contract generates revenue for us only in the event of a
national emergency and then only if FEMA exercises its broad discretion to
order a deployment. Our FEMA revenue therefore depends largely on circumstances
outside 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 may
lead to increased volatility in our actual revenue and earnings period to period.
We may be required to enter into large scale deployment of
resources in response to a national emergency under our contract with FEMA,
which may divert management attention and resources.
We do not believe that a
FEMA deployment adversely affects our ability to service our local 911
contracts. However, any significant FEMA deployment requires significant
management attention and could reduce our ability to pursue other local
transport opportunities (such as IFT) and to pursue new business opportunities,
which could have an adverse effect on our business and results of operations.
31
Table
of Contents
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.*
|
|
|
|
*
Filed
with this Report
32
Table
of Contents
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrants have duly
caused this report to be signed on their behalf by the undersigned, thereunto
duly 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
|
|
33
Table
of Contents
EXHIBIT
INDEX
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.*
|
|
|
|
*
Filed
with this Report
34
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