Edgar Online, Inc.

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 EMSC's filings with
the SEC from time to time, including in the section entitled "Risk Factors" in
EMSC's most recent Annual Report on Form 10-K. 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; the impact of
changes in the healthcare industry; our ability to recruit and retain qualified
physicians and other healthcare professionals, and enforce our non-compete
agreements with our physicians; our ability to generate cash flow to service our
debt obligations; the cost of capital expenditures to maintain and upgrade our
vehicle fleet and medical equipment; 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 successfully restructure our operations
to comply with future changes in government regulation; the loss of existing
contracts and the accuracy of our assessment of costs under new contracts; the
high level of competition in our industry; our ability to maintain or implement
complex information systems; our ability to implement our business strategy; our
ability to successfully integrate strategic acquisitions; our ability to comply
with the terms of our settlement agreements with the government; the risk that
the benefits from the Merger, and related transactions may not be fully realized
or may take longer to realize than expected; and risks related to other factors
discussed in the Quarterly Report.

Words such as "anticipates," "believes," "continues," "estimates," "expects,"
"goal," "objectives," "intends," "may," "opportunity," "plans," "potential,"
"near-term," "long-term," "projections," "assumptions," "projects," "guidance,"
"forecasts," "outlook," "target," "trends," "should," "could," "would," "will"
and similar expressions are intended to identify such forward-looking
statements. We qualify any forward-looking statements entirely by these
cautionary factors.

All references to "we", "our", "us", or "EMSC", refer to Emergency Medical Services Corporation and its subsidiaries. Our business is conducted primarily through two operating subsidiaries, EmCare Holdings Inc., or EmCare, and American Medical Response, Inc., or AMR.

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This Quarterly Report should be read in conjunction with EMSC's consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 16, 2012.

Healthcare Reform

As currently enacted, the Patient Protection and Affordable Care Act, or PPACA,
changes how health care services are delivered and reimbursed, and increases
access to health insurance benefits for the uninsured and underinsured
population in the United States. On June 28, 2012, the U.S. Supreme Court upheld
the constitutionality of the individual mandate provisions of the PPACA, but
struck down the provisions that would have allowed the Department of Health and
Human Services to penalize states that do not implement Medicaid expansion
provisions through the loss of existing federal Medicaid funding.  It is unclear
how many states will decline to implement the Medicaid expansion.  Modification
or repeal of the PPACA has become a campaign theme for many of the Presidential
and Congressional candidates seeking election in 2012.  While the current PPACA
law would increase the likelihood of more people in the U.S. with access to
health insurance benefits, we cannot quantify or predict with any certainty the
likely impact of the PPACA on our business model, financial condition or result
of operations.

Company Overview

We are a leading provider of outsourced facility-based physician services and
medical transportation services in the United States. We operate our business
and market our services under the EmCare and AMR brands. EmCare, over its 40
years of operating history, is a leading provider of physician services in the
United States based on number of contracts with hospitals and affiliated
physician groups. Through EmCare, we provide facility-based physician services
for emergency departments, anesthesiology, hospitalist/inpatient, radiology,
teleradiology and surgery staffing, and other management services. AMR, over its
nearly 55 years of


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operating history, is a leading provider of ground and fixed-wing ambulance services in the United States based on net revenue and number of transports.

On May 25, 2011, the Company merged with affiliates of Clayton, Dubilier & Rice,
LLC, or CD&R. This transaction is referred to in this Quarterly Report as the
"Merger". See "Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations," in the Company's Annual Report on
Form 10-K for the year ended December 31, 2011 for details related to the

EMSC applied business combination accounting to the opening balance sheet and
results of operations on May 25, 2011 as the Merger occurred at the close of
business on May 24, 2011. The business combination adjustments had a material
impact on the Successor periods presented, for the three and nine months ended
September 30, 2012, the three months ended September 30, 2011 and the period
from May 25, 2011 through September 30, 2011, due most significantly to the
amortization of intangible assets and interest expense and will have a material
impact on future earnings. Initial adjustments to allocate the acquisition
consideration to fixed assets and identifiable intangible assets were recorded
in the third and fourth quarters of 2011 based on a valuation report from a
third party valuation firm. The Company finalized its business combination
accounting during the first quarter of 2012 with adjustments related to goodwill
allocations between segments.


The accompanying Consolidated Financial Statements included elsewhere in this
Quarterly Report on Form 10-Q are presented for two periods for 2011:
Predecessor and Successor, which primarily relate to the periods preceding the
Merger and the period succeeding the Merger, respectively. The discussion in
this MD&A is presented on a combined basis of the Predecessor and Successor
periods for 2011. The 2011 Predecessor and Successor results are presented but
are not discussed separately. Management believes that the discussion on a
combined basis is more meaningful as it allows the results of operations to be
analyzed to a comparable period in 2012. Items that are not comparable between
the two periods presented include depreciation and amortization expense,
interest expense, interest and other income (expense) and income tax expense,
which had significant impacts as a result of the Merger, but are addressed
separately in the discussion below.  See Note 1 to the accompanying unaudited
condensed consolidated financial statements.

Key Factors and Measures We Use to Evaluate Our Business

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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
collectability 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 represents 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 without
corresponding increases in payor reimbursement.

The table below summarizes our approximate payor mix as a percentage of both net
revenue and total patient encounters and transports for the three and nine
months ended September 30, 2012 and 2011. In determining the net revenue payor
mix, we use cash collections in the period as an approximation of net revenue

                        Percentage of Cash Collections (Net Revenue)              Percentage of Total Volume
                         Quarter ended             Nine months ended       

Quarter ended Nine months ended

September 30,               September 30,          

September 30, September 30,

                       2012          2011          2012          2011       2012       2011       2012        2011
Medicare                  20.4 %        20.0 %        20.5 %        21.1 %    25.2 %     25.2 %     25.8 %      26.1 %
Medicaid                   4.9 %         5.4 %         5.0 %         5.5 %    10.7 %     12.3 %     10.9 %      12.7 %
insurance and
managed care              53.3 %        50.6 %        52.5 %        50.2 %    45.0 %     43.5 %     45.1 %      42.9 %
Self-pay                   4.3 %         4.8 %         5.0 %         4.6 %    19.1 %     19.0 %     18.2 %      18.3 %
Subsidies & fees          17.1 %        19.2 %        17.0 %        18.6 %       -          -          -           -
Total                    100.0 %       100.0 %       100.0 %       100.0 %  

100.0 % 100.0 % 100.0 % 100.0 %


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In addition to continually monitoring our payor mix, we also analyze certain measures in each of our business segments.


Of EmCare's net revenue for the nine months ended September 30, 2012,
approximately 78% was derived from our hospital contracts for emergency
department staffing, 11% from contracts related to anesthesiology services, 4%
from our hospitalist/inpatient services, 3% from our radiology/teleradiology
services, 1% from our surgery services, and 3% from other hospital management
services. Approximately 81% of EmCare's net revenue was generated from billings
to third party payors and patients for patient encounters and approximately 19%
was generated from billings to hospitals and affiliated physician groups for
professional services. EmCare's key net revenue measures are patient encounters,
segregated into emergency department visits, radiology reads, and anesthesiology
and hospitalist encounters and that we weight in certain analyses, net revenue
per patient encounter, and number of contracts.

The change from period to period in the number of patient encounters 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. EmCare's key cost measures include provider compensation per patient encounter and professional liability costs.

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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 resulted
in a reduction in the frequency, severity and development of claims.

Our EmCare business segment is less capital intensive than AMR, and EmCare's
depreciation expense relates primarily to charges for usage of computer hardware
and software, and other technologies. Amortization expense relates primarily to
intangibles recorded for customer relationships.


Approximately 87% of AMR's net revenue for the nine months ended September 30,
2012 was transport revenue derived from the treatment and transportation of
patients, including fixed wing medical transportation services, based on
billings to third party payors, healthcare facilities and patients. The balance
of AMR's net revenue is derived from direct billings to communities and
government agencies for the provision of training, dispatch center and other
services. AMR's measures for net revenue include transports, segregated into
ambulance and wheelchair transports and that we weight in certain analyses, and
net revenue per transport.

The change from period to period in the number of transports and net revenue per
transport is influenced by the mix of emergency versus non-emergency transports,
changes 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
and markets AMR has exited.

The costs we incur in our AMR business segment consist primarily of compensation
and benefits for ambulance crews and support personnel, direct and indirect
operating costs to provide transportation services, and costs related to
accident and insurance claims. AMR's 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.

Our AMR business segment requires various investments in long-term assets and
depreciation expense relates primarily to charges for usage of these assets,
including vehicles, computer hardware and software, equipment, and other
technologies. Amortization expense relates primarily to intangibles recorded for
customer relationships.


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Factors Affecting Operating Results

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.


Certain of our expenses, such as wages and benefits, insurance, fuel and
equipment repair and maintenance costs, are subject to normal inflationary
pressures. Fuel expense represented 14.1% and 11.4% of AMR's operating expenses
for the three months ended September 30, 2012 and 2011, respectively, and 12.8%
and 11.3% for the nine months ended September 30, 2012 and 2011, respectively.
Although we have generally been able to offset inflationary 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
inflationary cost increases through similar efficiencies and fee changes.

Medicare Fee Schedule Changes

Medicare law requires the Centers for Medicare and Medicaid Services, or CMS, to
adjust the Medicare Physician Fee Schedule, or MPFS, payment rates annually
based on a formula which includes an application of the Sustainable Growth Rate,
or SGR, that was adopted in the Balanced Budget Act of 1997. This formula has
yielded negative updates every year beginning in 2002, although CMS was able to
take administrative steps to avoid a reduction in 2003 and Congress took a
series of legislative actions to prevent reductions each year from 2004 through
2012. Absent further legislative action by Congress, the reduced MPFS would go
into effect on January 1, 2013, and CMS estimates that the reduction in rates
for 2013 would then be 26.5%.

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, "Management's 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, 2011. As of September 30, 2012, there
were no significant changes in our critical accounting policies or estimation

Results of Operations

Quarter and Nine Months Ended September 30, 2012 Compared to the Quarter and Nine Months Ended September 30, 2011

The following tables present a comparison of financial data from our unaudited
condensed consolidated statements of operations for the three and nine months
ended September 30, 2012 and 2011 for EMSC and our two operating segments.

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 (expense), loss on early debt extinguishment, realized gain (loss) on
investments, interest expense, equity-based compensation, related party
management fees, restructuring charges, depreciation and amortization expense,
and net income attributable to noncontrolling interest. 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.



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Unaudited Consolidated Results of Operations and as a Percentage of Net Revenue

                             (dollars in thousands)


                            Successor               Successor                Successor                  Combined
                               Quarter ended September 30,                     Nine months ended September 30,
                                   % of net                % of net                  % of net                  % of net
                         2012      revenue       2011      revenue        2012       revenue        2011       revenue
Net revenue            $ 820,811      100.0 %  $ 788,087      100.0 %  $ 2,428,203      100.0 %  $ 2,329,420      100.0 %
Compensation and
benefits                 577,502       70.4      542,655       68.9      1,706,205       70.3      1,639,092       70.4
Operating expenses       100,617       12.3      108,112       13.7        305,005       12.6        306,708       13.2
Insurance expense         22,907        2.8       30,442        3.9         75,352        3.1         87,760        3.8
Selling, general and
expenses                  18,541        2.3       18,493        2.3         57,670        2.4         54,595        2.3
compensation expense      (1,062 )     (0.1 )       (910 )     (0.1 )       (3,186 )     (0.1 )      (16,452 )     (0.7 )
Related party
management fees           (1,250 )     (0.2 )     (1,250 )     (0.2 )       (3,750 )     (0.2 )       (2,163 )     (0.1 )
Interest income from
restricted assets            116        0.0         (957 )     (0.1 )         (429 )     (0.0 )       (2,243 )     (0.1 )
Adjusted EBITDA        $ 103,440       12.6 %  $  91,502       11.6 %  $   291,336       12.0 %  $   262,123       11.3 %
compensation expense      (1,062 )     (0.1 )       (910 )     (0.1 )       (3,186 )     (0.1 )      (16,452 )     (0.7 )
Related party
management fees           (1,250 )     (0.2 )     (1,250 )     (0.2 )       (3,750 )     (0.2 )       (2,163 )     (0.1 )
Depreciation and
amortization expense     (30,592 )     (3.7 )    (29,966 )     (3.8 )      (91,844 )     (3.8 )      (69,494 )     (3.0 )
charges                   (2,028 )     (0.2 )     (3,374 )     (0.4 )      (10,751 )     (0.4 )       (3,374 )     (0.1 )
Interest expense         (41,322 )     (5.0 )    (43,745 )     (5.6 )     (126,288 )     (5.2 )      (69,581 )     (3.0 )
Realized gain
on investments                 5        0.0           30        0.0            366        0.0             28        0.0
Interest and other
income (expense)             937        0.1       (2,480 )     (0.3 )        1,340        0.1        (31,493 )     (1.4 )
Loss on early debt
extinguishment            (1,561 )     (0.2 )          -          -         (6,733 )     (0.3 )      (10,069 )     (0.4 )
Income tax expense       (11,448 )     (1.4 )     (4,079 )     (0.5 )      (21,952 )     (0.9 )      (27,479 )     (1.2 )
Equity in earnings
of unconsolidated
subsidiary                    90        0.0           82        0.0            304        0.0            258        0.0
Net income             $  15,209        1.9 %  $   5,810        0.7 %  $    28,842        1.2 %  $    32,304        1.4 %

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                                            Successor                     Predecessor
                                        Period from May 25           Period from January 1
                                      through September 30,             through May 24,
                                                     % of net                       % of net
                                        2011          revenue          2011          revenue
Net revenue                         $   1,107,630        100.0 %   $   1,221,790        100.0 %
Compensation and benefits                 764,459         69.0           874,633         71.6
Operating expenses                        149,968         13.5           156,740         12.8
Insurance expense                          40,531          3.7            47,229          3.9
Selling, general and
administrative expenses                    25,354          2.3            29,241          2.4
Equity-based compensation
expense                                    (1,340 )       (0.1 )         (15,112 )       (1.2 )
Related party management fees              (1,764 )       (0.2 )            (399 )       (0.0 )
Interest income from restricted
assets                                     (1,119 )       (0.1 )          (1,124 )       (0.1 )
Adjusted EBITDA                     $     131,541         11.9 %   $     130,582         10.7 %
Equity-based compensation
expense                                    (1,340 )       (0.1 )         (15,112 )       (1.2 )
Related party management fees              (1,764 )       (0.2 )            (399 )       (0.0 )
Depreciation and amortization
expense                                   (41,027 )       (3.7 )         (28,467 )       (2.3 )
Restructuring charges                      (3,374 )       (0.3 )
Interest expense                          (61,695 )       (5.6 )          (7,886 )       (0.6 )
Realized gain (loss) on
investments                                    37          0.0                (9 )       (0.0 )
Interest and other expense                 (2,620 )       (0.2 )         (28,873 )       (2.4 )
Loss on early debt
extinguishment                                  -            -           (10,069 )       (0.8 )
Income tax expense                         (8,237 )       (0.7 )         (19,242 )       (1.6 )
Equity in earnings of
unconsolidated subsidiary                     115          0.0               143          0.0
Net income                          $      11,636          1.1 %   $      20,668          1.7 %
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