HomeMy WebLinkAboutAgenda Report - October 20, 1993 (55)1
CITY COUNCIL MEETING 04
October 20, 1993
REPORT BY LIVE MEDICAL .,iu+w.wa,s.s REGARDING MERGER
The City Council .received. a report by Mike 1ilssen,,Lile
Medical Industries, regarding the ambulance company merger.
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1500 Broadway
New York. New York 10036
Direct (212) 70441255
Fax (212) 704-0121
Robed C. Hubbell
Execu;.ve Vice President
and Managing Director
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PAUL M. VERROCHI
PRESIDENT & CEO
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BASIC REPORT
HEALTH CARE SERVICES
Thomas E. Sullivan (415) 627-2505
Randall J. Heppner (415) 627-2254
AMERICAN MEDICAL RESPONSE
• We have initiated coverage of American Medical
Response with a rating of BUY.
• EMT is the leading private provider of 911 emergency
response/pre-hospital care and general ambulance
services in the country.
• Expenditures in the emergency transport and general
ambulance market are expected to reach S4.5-5.0 bil-
lion in 1993 with intemal growth rates of approximate -
y 10%. The private sector of the ambulance service
market is consolidating rapidly as municipalities and
large payer groups seek out cost effective regional
and national providers to deliver increasingy sophis-
ticated lc*;is of care and to meet more stringent re-
sponse time goals.
• EMT has taken the bad in the race to consolidate the
ambulance service sector by aggressively pursuing
the acquisition of key strategic operators in attractive
markets. Since its initial public offering in August
1992, the company is ahead of schedule in acquiring
core properties having closed seven acquisitions with
annual revenues exceeding $75 million and signing a
letter of intent to acquire one additional provider with
annual revenues exceeding $50 million.
• Our calendar 1993 EPS estimate is $0.80, increasing
to $1.07 in 1994. At $20.5/8. the stock is trading at
26x our 1993 estimate and 19x our 1994 estimate.
Based on a sscular growth in earnings of 30%, we
have established a 12 -month price range target of
$23.00-25.00 (+12-21%).
July 22, 1993
DJIA: 3525
S&P 500: 445
Rating: BUY
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MONTGOMERY
Summary and Investment Conclusion
We have initiated coverage of American Medical Response (EMT) with a rating of BUY. EMT is the
leafing private provioer of 911 emergency response and general ambulance services in the country.
Since its initial public offering in August 1992, thJ company has nearly doubled annualized revenues
through an aggressive expansion plan that has featured the acquisition of eight (one of which is pending
under a letter of intent) additional providers and continued strong internal growth from existing operations.
Net income has grown steadily in the three quarters following the IPO and all acquisitions consummated
to date have been accretive to earnings. We believe EMT is in a premier position to continue to take ad-
vantage of the ongoing consolidation in the private ambulance sector and achieve sur*ained revenue and
eamings growth of 30% plus based on the following:
• The private sector of the a.mmbutance service market is highly fragmented with over 2,000
providers, the vast majority of which have revenues under $5 million. The mar:.et is
sharply bifurcated with only a handful of large providers employing a multi -site strate-
gy. The balance of providers are smaller operators focused on a single or limited local
markets. The ambulance service sector is undergoing rapid consolidation as a num-
ber of factors including increasingly sophisticated levels of care in 911 emergency re-
sponse calls, enhanced response time requirements imposed by municipalities, the
investment required to implement advanced technolonies and the emerging dominance
of the mega -payer heavily favor the Viabilities of strong regional and national ambu-
lance companies.
• Expenditures on a "same store" basis are increasing approximately 10% annually as fa-
vorable demographic trends (more of us and we're getting older), higher levels of medi-
cal content associated with emergency care, and an increase in the number of inter-
hospital transports stimulate both transport and price growth.
• EMT has taken the lead in the race to acquire key properties in attractive markets. By
securing "beachhead" positions in markets such as Denver, San Francisco, Miami, Port-
land, OR, etc., EMT has secured an important competitive advantage and is favorably
positioned to proceed with the second stage of its acquisition strategy with "lock -on" ac-
quisitions of providers in contiguous communities. Since its IPO in August 1992, the
company has successfully demonstrated this strategy in tine Colorado market by acquir-
ing three private providers in the Denver. Colorado Springs, Boulder corridor over a nine
month period.
■ Consolidating local acquisitions into a unified network leads to tangible cost savings
and operating and financie synergies on both a regional and nationPl basis. With its
recent acquisitions, we expect EMT will continue to achieve further savings and produc-
tivity gains in capital intensive dispatching systems, labor, equipment purchase and as-
set utilization, collection and administration of accounts receivables, insurance and
maintenance.
■ Barriers to entry in the ambulance service market are very high. The technological and
capital requirements of the industry have risen logarithmically over the past twenty-five
years, fueling the move toward consolidation and mi '",.g the efforts of new entrants.
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• EMTs success in consolidating eleven (to date) independent providers into one organi-
zation in Tess than a year reflects management's understanding of the independent op-
erators' needs and the successful execution of its acquisition strategy. We believe the
company's ability to integrate acquisitions as partners in the business with significant eq-
uity positions goes a long way toward insuring optimal performance at the local level.
EMT is viewed as the leader in the race to consolidate the ambulance sector and we be-
lieve that existing independent providers seeking to gain liquidity through sales of their
companies would prefer to join an organization of proven winners.
• EMT's senior management has an extensive background in consolidating local opera-
tors into strong regional networks. Through the merger of the four providers at the time
of the IPO and subsequent acquisitions, EMT has also assembled operating manage-
ment with unparalleled experience and stature within the ambulance service indus-
try.
Our EPS estimates of $0.80 in 1993 and $1.07 in 1994 are based on our confidence in the growth
of the private ambulance sector, management's ability to integrate recent acquisitions and the opportuni-
ties to close additional acquisitions in this consolidating sector. Our earnings model does not incorporate
any upside from the company's recently announced letter of intent to acquire a California-based provider
which had $50 million in annual revenues in 1992. This transaction, which remains subject to extensive
due diligence and negotiations, will be incorporated into our model if and only when the probability of dos-
ing the acquisition increases. EMT is currently trading at 26x our 1993 estimate of $0.80, and 19x our
1994 estimate of $1.07. We recommend purchase of the stock at this price level with a 12 -month price
range target of $23.00-25.00. The following charts highlight the historical (restated to include the impact
of the recent Miami acquisition which was a pooling of interests) and projected growth in revenues and
eamings by quarter since the company's IPO in August 1992:
Historical and Projected Revenues
($ millions)
$80.0 --
$70.0 —
$60.0 — $54.4
549.3 ■
$50.0 — $41.4 s44.3
$40.0 — $31 7
$31.2
$30.0 —
$20.0 I I I I
$62.8
$58.2
03 04 I Q1 02 03 04 I 01 02
92A 92A j 93A 93E 93E 93E 94E 94E 94E 94E
$67.6
03
I
$72.6
04
2
I
Moo r-
56.00 —
2
E $4.00--
$2.00 —
$o.00
Historical and Projected Earnings Growth
MONTGQMERY
swamis
—$0.30
$0.25 3
$0.20
m
$0.15
$o.to
03 04 01 02 03 04 ' 01 02 03 04
92A 92A 93A 93E 93E 93E 94E 94E 94E 94E
Net Income
Operating Income Earnings Per Share
(fully taxed)
Company Background
American Medical Response was formed in 1992 through the merger of four leading private ambu-
lance providers in California (2), Connecticut, and Delaware. Since its initial public offering in August
1992, the company has expanded considerably by acquiring seven additional providers in Mississippi,
Colorado (3), Oregon, Florida and Connecticut and has also signed a letter of intent to acquire one addi-
tional provider in California. As a result of these acquisitions, the company is the dominant private pro-
vider of 911 emergency response and general ambulance services in the country. We forecast that
the company i ill transport over 500,000 patients in 1993 in its existing service areas. EMT was the first
publicly traded ambulance service company in the country. At the time of this report, EMT employs ap-
proximately 2,950 people and leases or owns approximately 555 ambulances and transport vans.
The Emergency Transport and General Ambulance Market
Industry sources and the company believe that expenditures in the emergency transport/general
ambulance market in the U.S. are conservatively estimated at $4.5-5.0 billion annually. Approximately
70% of this figure is associated with traditional 911 emergency responses with approximately 30% com-
ing from general ambulance services such as inter -hospital and critical care transports. Overall :market
growth is estimated to equal 10% annually. The primary factors driving growth in this sector include:
■ Favorable demographic trends as the population ages and demand for 911 emergency
response services increases
Expanding use of inter -hospital transports consistent with the growth in managed care
Higher levels of medical content delivered in pre -hospital care situations
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We believe these trends will continue to have a favorable impact on the private ambulance sector
and project continued and sustainable industry growth in the foreseeable future.
A snapshot of the emergency transport and general ambulance market in the U.S. today reveals a
highly fragmented industry poised for consolidation. Industry sources place the number of ambulance
service providers at approximately 14,000 (inducing municipal and volunteer organizations) with
greater than 2,000 of these being private operators. From our viewpoint. the ambulance service industry
resembles the waste management and death care (funeral homes and cemeteries) industries of the
1970s prior to the emergence of the consolidators such as Waste Management and Service Corporation.
The 2,000 plus private ambulance providers are sharply bifurcated into a handful of large (>$25 mil-
lion in revenues annually). multi -site operators and an overwhelming majority of small (410 million in rev-
enues annually) operators serving one or limited contiguous markets. Expenditures in the private sector
are estimated to be growing at a rate exceeding that of the overall 10% market growth as municipalities
increasingly tum to the private sector for their 911 emergency response services in response to the bud-
get crisis faced by many communities.
Consolidation within the private ambulance sector is occurring as a result of competitive pressures
in the industry and increasingly stringent standards imposed by municipalities and managed care provid-
ers. Simpy put, larger regional operators can more cos effectively meet tougher demands for
higher levels of care, shorter response times, etc. than smaller local providers. With the estimated
annual savings for eliminating one redundant Advanced Life Support (ALS) ambulance from service at
$400,000 annually, it is easy to envision further consolidation in the ambulance service sector as local
operators seek to remain competitive.
Access to capital for private ambulance providers has historically been limited to an individual op-
erator's personal wealth and limited secured debt financing. Liquidity options for independent operators
have also been minimal with many companies passed on to new generations within the same family.
EMT's foray into the public sector has given it a unique advantage in offering acquirees an attractive exit
vehide and alloy+ed the company to acquire an outstanding group of top flight operators at attractive val-
uations.
For a more complete analysis of the emergency transport and general ambulance market, please
refer to the Montgomery Securities industry review titled "The Private Sector to the Rescue — An Overview
of the 911 Emergency Response and General Ambulance Market.'
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Discussion of EMT Operations
1) Existing Services and Markets
American Medcal Response provides 911 emergency response in selected markets where EMT is
designated the exclusive provider of these services by the municipal authority. The company also derives
revenues from general ambulance services as dagrammed below. The company's strategy is to seek to
expand its market penetration in the 911 emergency response sector and add incremental general am-
bulance revenues where it has an established 911 emergency response network. EMT management be-
lieves the 911 emergency response sector has proven to be very receptive to high quality, cost-
efficient
ostefficient larger private providers and offers the greatest opportunity for growth in the future. The
company's revenues in 1992 were derived from the following categories:
70%
911 Emergency
Response Seri ices
30%
(;eneral ;kinlnilance
Services
- Inter -hospital Transport
- Critical Care Transport
- Handicapped Transport
EMT's management has pursued an aggressive expansion program since its IPO in August 1992
resulting in a balanced operation with dominant positions in key markets in the westem, eastem, and
southern regions of the country. Establishing a "beachhead" position in key markets allows the company
to leverage off this base to proceed with lock -on" acquisitions of operators in contiguous markets and
realize significant operating synergies. In addition, the incremental revenue added to its base since 1992
significantly reduces the company's exposure to any regional regulatory, pricing, or reimbursement risks
and the impact of the loss of any single 911 emergency response contract.
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Highlighted below are the operators currently under the EMT umbrella and the areas in which they
operate:
Company
Location Date Acquired
Regional Ambulance
Vanguard Ambulance
New Haven Ambulance
Professional Ambulance
Mobile Medic Ambulance
Ambulance Service Co.
Buck Medical Services
A-1 Ambulance Services
San Francisco Bay Area
San Jose
Connecticut
Deiawara/New Jersey
Mississippi
Denver
Portland, OR
Boulder, CO
Randle-Eastem Ambulance Miami
Reed Ambulances Denver
Bridgeport Ambulance Service Connecticut
911 Emergency Services of California
Modesto
1PO—August 92
IPO—August 92
IPO—August 92
IPO — August 92
November 92
December 92
January 93
April 93
June 93
July 93
July 93
In Discussion
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The 911 Emergency Response Business
Municipalities suck as cities or counties typically contract with private ambulance providers for ex-
clusive 911 emergency response services within prescribed geographic boundaries. The sophistication
of the contracting process has increased in recent years with municipalities now specifying and monitor-
ing response time goals, standards for care, regulated rates and other requirements. Contracts typically
run 3-5 years in length with provisions for 1-2 year extensions. Contracts are generally put out for com-
petitive bidding. but in most cases the close relationship between the municipality and the provider give
the incumbent a distinct advantage in the bidding process. In return for agreeing to the terms of the con-
tract. the company is granted the right to transport in all 911 responses. While the ambulance company
may be designated the 'first responder" in certain areas, it is more common to see the local fire depart-
ment be designated as first responder with the ambulance company responsible for second responder
and transport.
As the 911 emergency response market has developed, its visibility within a community has grown
considerably. EleCted officials now view 911 emergency response as the third leg of a municipal services
stool alongside police and fire services. Mayors, supervisors, council members, etc. are keenly aware that
unsatisfactory response to a 911 call can end up on page one of the local media. As a result, municipal-
ities are factoring in performance and quality of service as the most important considerations in
awarding 911 emergency response contracts to private providers. Accordingly. those responsible for
approving contracts are utilizing more objective performance measures and demanding data from candi-
dates in the contracting process. We believe this trend is accelerating nationwide and heavily favors larg-
er operators such as EMT that employ sophisticated technology and can point to an outstanding track
record of performance in a number of markets.
The ambulance service companies that EMT has brought under its umbrella have a stellar record
in the 911 emergency response contract area. In evaluating suitable acquisition candidates, the company
places a premium on operators with a long established record of high quality, efficient 911 emergency
response service. None of the operators EMT has acquired have ever lost an existing 911 contract. We
believe EMT's strong position in the emergency transport sector provides the company with significant
downside protection as 911 emergency response call volume is highly statistically predictable by market
served and not subject to wide volatility. The company has also recently negotiated new contracts or ex-
tensions in important markets such as Santa Clara County. CA and Contra Costa County, CA giving it a
portfolio of high quality 911 emergency response contracts unparalleled in the industry.
The General Ambulance Service Business
Broadly defined. general ambulance service includes inter -hospital transport, discharge transport,
critical care transport, and transportation of the handicapped. A significant portion of general ambulance
transport is related to transport to and from long-term health care facilities. The majority of the general
ambulance transport market is controlled by hospitals and payers through contracts with local operators.
For example, if an individual is injured in an accident in Alameda County, CA and requires emergency
transport to a trauma center, that individual would be transported by EMT to the appropriate hospital. If
in our example, this individual happens to be one of the 4.5 million plus members of Kaiser Permanente
Health Plans (staff model HMO) and Kaiser desires to have that person in its own facility in Alameda
County, EMT (which holds an inter -hospital transport contract with Kaiser) would transport that patient,
once stable, from the trauma center to a Kaiser facility.
By virtue of its extensive operating profile and geographic coverage, EMT has been quite successful
in establishing general ambulance service contracts with key providers/payers. We believe the key to
growing this sector of the business lies in the company's ability to serve the large payer groups in a par-
ticular region. With its extensive regional networks in markets such as Denver, San Francisco Bay Area,
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Miami, etc., EMT has an inherent advantage over smaller competitors through its ability to offer "one-stop
shopping" to the likes of a Kaiser Permanente. As managed care plans grow and control more patients
in a region, EMT should control an increasing share of the non -emergency transports in its markets.
2) Economics of Transport
911 Emergency Response
As highlighted earlier, revenues from 911 emergency response service account for approximately
70% of EMTs revenues. The actual per transport charge in each municipality served varies by terms of
the contract, the level of medical content provided, and the type of service provided. Emergency response
and transport is most commonly serviced by Advanced Life Support (ALS) ambulances that are staffed
by one or two paramedl s with advanced medical training. Revenue per ALS transport averages between
$350-450. In regions where Basic Life Support (BLS) response is allowed, the average revenue per trans-
port is lower, primarily because BLS units are typically staffed by lower cost emergency medical techni-
dans (EMTs, and hence the ticker symbol!) with less sophisticated equipment. It is worth noting here that
EMT's ratio of ALS versus BLS units used for 911 emergency response calls is higher than indus-
try norms and an important strategic advantage employed by the company as a barrier to entry for the
competition.
Contracts for 911 emergency response service require the provider to respond to all requests for
emergency transport in their assigned territories. Unfortunately, not all individuals transported are capa-
ble of paying all or part of the eventual charges billed by the provider. Since the paramedic doesn't re-
quest a VISA card or credit history prior to administering care, the company does not know on a call -by -
call basis the capability of the patient to pay the eventual charges incurred. The uncollected portion of
billed revenues is termed "uncompensated care" in the ambulance industry. The level of uncompensated
care in any particular service area is a key component of the ultimate value of the 911 emergency re-
sponse contract and an important factor in establishing contracted rates within a community.
Industry wide, uncompensated care varies widely in the 15-40% range with fluctuations noted by
region and municipality. The factors impacting the level of uncompensated care are, as would be expect-
ed, related to the economic well-being of the population and demographic characteristics of the commu-
nity. By way of example, a provider could expect the level of uncompensated care in Harlem to be at the
high end of the range while the operator holding the 911 emergency response contract in Scarsdale would
experience uncompensated care levels al the low end of the scale. While the level of uncompensated
care will vary widely by community, it is statistically predictable over the years and varies within a
narrow range. In our previous example, if the level of uncompensated care in Harlem historically aver-
aged 40%, the operator might see the level drop to 39% or rise to 41% in any given period, but rarely
wou:d see a dramatic shift in either direction during the length of a contract. Because it is statistically pre-
dictable within a narrow range, the level of uncompensated care can be factored into the rate schedule
with a high degree of confidence when negotiating a 911 emergency response contract with the munici-
pality
EMTs uncompensated care has averaged 22-23% of revenues over the past few years. We believe
EMT's uncompensated care expense is lower than the industry average due primarily to the quality of
reimbursement in the markets served and EMT's sophisticated collection process. In evaluating the at-
tractiveness and value of potential acquisitions, EMT management carefully reviews the uncompensated
care profile in a service area. Revenues are reported on a gross, billed basis while uncompensated care
is charged as an expense against revenues on the income statement.
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General Ambulance Transport
General ambulance transport revenues account for approximately 30% of EMTs revenues. The
majority of general ambulance transports are handled under contracts with hospitals (discharge, inter-
hospital), payers and other care providers. As most patients being transported are medically stable, the
majority of these transports are handled by Basic Life Support units staffed by EMTs. Revenue per trans-
port varies by region and medical content required and averages $150-250. Uncompensated care is less
of a concern in this market due to the higher proportion of insured patients and some degree of selectivity
in patients transported.
In certain cases, high risk patients are transferred between hospitals to access advanced technol-
ogy, particular surgical procedures, etc. In these cases the patients are transported in a unique ambu-
lance called a critical care transport (CCT) unit, outfitted with equipment similar to that found in a
hospital's intensive care unit and are usually accompanied by either a nurse or a physician. Revenues
from these critical care transports can easily average $1,000-1.500 per transport
The smallest element of the company's general ambulance services is its wheelchair transport ser-
vices in selected regions. Revenues per transport average $50 will specially modified vans handling all
handicapped transport.
3) Reimbursement
EMT receives reimbursement from three primary sources:
• The Private Insurer
• Medicare/MediCaid
• Individuals
Private insurers (including managed care organizations) are billed the full amount of the charges or
contracted rate. Typically, the insurer pays 80% of the charge with the insured responsible for the bal-
ance. In instances where the patient is covered by Medicare, the ccmpany is reimbursed at the rate of
80% of the prevailing market rate. If the patient has no insurance and is not covered under a govemment
health plan, the company bills the individual for the entire amount. In certain municipalities with a high
percentage of uncompensated care, the municipality will pay a subsidy to the provider in an effort to keep
the contracted rate within reasonable limits.
The plethora of payers and the not inconsequential payments required of individuals make accounts
receivable management and relationships with payers of paramount importance. We believe EMT has a
distinct advantage in the receivables management area due to the scope of its operations and corre-
sponding ability to develop real economies of scale in billing and collection. After establishing a'beach-
head" position in a particular market, the company is able to consolidate the billing and receivables
functions from subsequent acquisitions in the region, achieving superior cash management efficiencies
and tangible cost savings. By way of example, EMT recently completed the acquisition of Bridgeport Am-
bulance Services in Connecticut. With its existing presence in the Connecticut market through New Ha-
ven Ambulance Service, the company will be able to consolidate the billings and receivables
management into the New Haven operations and realize tangible savings in labor and overhead and
more effective cash management.
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The reimbursement profile for EMT in 1992 was approximately as follows:
Reimbursement by Payer as a Percent of Revenues
lincormensated car. Medicarathhedicaid
23% 28%
Private Insurance Individuals
26% 23%
4) Corporate Strategy
EMT is executing a specific business strategy that it believes is unique in the industry and distin-
guishes the company from its competitors. The company also believes its strategy is consistent with the
trends in the industry, particularty the 911 emergency response sector, toward higher standards of care
and more stringent performance goals. Key elements of their business strategy include the following:
■ Focus on 911 Emergency Response: The company intends to continue to rely on 911
emergency response contacts as its primary source of revenues. Management believes
significant opportunities f.A. growth exist in the 911 emergency response market as mu-
nicipalities tum to the Ovate sector for assistance in cost-effectively managing their 911
emergency response systems. In addition, revenues in this market are highly predictable
statistically and, given the tong -term nature of 911 emergency response contracts, very
stable. In evaluating the attractiveness of acquisition candidates, management focuses
on the operators' 911 emergency response component as a percent of total revenues.
• Technological Leadership: Management believes it is imperative to utilize the latest
technology available to maximize efficiency and productivity. In particular, the company
believes cost-effective improvements are available by implementing sophisticated dis-
patching systems using global positioning satellite technology, digital mapping, etc., re-
ducing the level of uncompensated care by installing predictive dialers, and updating
MIS systems to provide real-time data capable of identifying performance issues imme-
diately. Employing the most cost-effective technology is key to managing a nationwide
network ;I regional operators.
■ The Use of ALS Units in 911 Emergency Response: An important component of the
company's strategy is to use Advanced Life Support units in the majority (65%) of 911
emergency response calls. Employing more highly trained paramedics, the use of ALS
units parallels the trend toward increasing levels of medical content in on -scene treat-
ment aad pre -hospital care.
■ Expand Operations Utilizing Experienced Management: Through its aggressive ac-
quisition program, EMT has acquired literally hundreds of years of senior operating ex-
perience. In all key acquisitions, existing management has remained in place and is
motivated through the financial structure of the consideration paid to continue to improve
performance. Having senior operating management in-house is an important element in
the company's strategy to expand in existing markets to create a network of strong re-
gional operators.
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• Maintain Community Roots: Choosing a private ambulance company to serve a com-
munity's 911 emergency response requirements remains a derision that is made at a
focal level. Choosing the wrong provider can be a minefield for elected officials and they
naturally find solace in working with established local management. EMTs strategy of
giving local operators an incentive to stay on board post -acquisition in "beachhead"
properties is a key to maintaining roots in a community.
5) Acquisition Strategy
As highlighted in our industry report, The Private Sector to the Rescue -An Overview of the 911
Emergency Response and General Ambulance Market' we believe the industry is poised for growth and
ripe for consolidation. The future leaders in this industry sector by the end of the decade wilt be those
companies that take action now to acquire strategically critical properties and begin to develop the infra-
structure required to realize the operating and financial synergies inherent in consolidation. It is our belief
that EMT has a substantial lead in the race to acquire key properties and that the willingness of manage-
ment to be at the forefront in consolidating this industry will be rewarded in the years to come.
In the short term, the company's focus is on acquiring operators in strategically important
markets. These "beachhead" properties, as the company terms them, form the nucleus of a future net-
work that the company develops in a region along with future "lock -on" acquisitions of smaEar providers
in contiguous markets. As the network takes shape, the company expects to realize significant operating
and financial synergies as discussed later in this report.
Implementation of EMT's acquisition strategy will vary by the market dynamics, availability of acqui-
sition candidates and other factors in any particular region. EMT's ability to be flexible with regard to tim-
ing and structure of acquisitions is a key strength of the company and positions them as a strong buyer
in any competitive bidding situation. The company's recent success in establishing EMT as the dominant
private ambulance provider in Colorado is illustrative of the "beachhead"/"lock-on" acquisition strategy
and an excellent example of its ability to be opportunistic in implementing this strategy. At the time of Its
IPO, EMT had no operations in the state of Colorado. In December 1992, EMT closed the acquisition of
Denver-based Ambulance Service Company, Colorado's leading private ambulance service company. In
April 1993, the company closed the acquisition of A-1 Ambulance Service which serves the surrounding
communities of Boulder, Colorado Springs, and Longmont. Using the previously acquired Ambulance
Se, /ice company, EMT was awarded the 911 emergency response contract for Aurora, CO, a suburb of
Denver and the third largest city in the state. This month, the company solidified its position in Colorado
by acquiring Reed Ambulances, Inc. of Denver. With this acquisition, EMTs service in Colorado will have
progressed from zero at the time of the IPO to the dominant provider in the state in a period of Tess than
one year.
EMT's success in acquisitions is attributable not only to a well -executed acquisition strategy, but
also to its pace -setting reputation in the ambulance sector — people like to join winners! EMT's use of
equity in "beachhead" acquisitions gives acquirees substantial incentives to maximize performance. The
financial resources available to the company and its experience in structuring acquisitions that appeal to
acquirees will be an important strategic advantage to EMT over the next 12-24 months as desirable
"beachhead" properties turn over.
6) Synergies and Economies of Scale
EMT's strategy of creating strong regional networks by acquiring ambulance providers in contiguous
markets is rooted in the premise that operating and financial synergies will be available from consolidating
the operations of several independent providers in a region. The benefits to consolidating operations in -
dude tangible cost savings in labor, equipment, and overheaa as well as productivity gains as the "down -
11
i
MQNTGOMERY
SECURInrs
time" component is reduced and asset utilization rates are increased. As an example, eliminating one
redundant Advanced Life Support unit from a combined fleet can save an operator approximately
$400,000 annually. As the reader can imagine, companies involved in the 911 emergency response seg-
ment of the market are forced to keep a "safety stock' of units in operation to meet response time goals
and cover unexpected events. Simply eliminating duplication in the safety stock in a combined operation
can lead to tangible savings. Consolidating operations and the resulting synergies also presents a barrier
to entry for competitors who do not enjoy similar synergies in the competitive bidding process.
The operating synergies and economies of scale experienced by EMT can be categorized as both
regional and national in nature. On a national basis, EMT experiences savings in the following key ex-
pense categories:
• Purchase of Equipment and Supplies: Bought in bulk and distributed throughout the
network
• Insurance: Multi-million dollar umbrella policy in place to cover all its operations
• Lower Cost of Capital: Distinct advantage in acquisitions
EMT also sees tangible cost savings and productivity gains when it consolidates providers in a re-
gion such as the Denver market and the San Francisco Bay Area. Some of the more visible regional op-
erating synergies occur in the following areas:
▪ Dispatching Systems: At the heart of optimizing equipment and labor productivity and
achieving response time goals is a technologically sophisticated dispatching system.
Stepping into EMTs dispatching center In Fremont, California that handles an average
of 600 calfs per day for Alameda and Cofira Costa Counties, one could envision that in
their spare moments (of which there are few) the operators could guide a San Francisco
bound 747 into SFO International Airport. In the darkened control room are multiple op-
erators seated at sophisticated communications consoles watching an array of electron-
ic maps that pinpoint the exact location and status of every ambulance on the streets.
Features such as satellite -based navigators, computer graphics and electronic maps for
counties accurate to the block are part of an impressive array of equipment designed to
enhance efficiency, pare operating costs and meet more stringent 911 emergency re-
sponce contract requirements. The company esti.nates that its GPS -based dispatching
system operating in the Bay area decreases the number of ambulances required to ser-
vice the counties by twenty units.
The productivity gains experienced result from utilizing computer derived algorithms
which position units in high demand locations by the minute, significantly reducing down-
time and shortening response time. Real time data on location and status allows the r'a-
patchers to move units around like chess pieces to better meet anticipated demands. Aa
a result, Tess ambulances are required to service an area and tangible productivity
gains are realized. Smaller, local providers typically lack the capital to invest in ad-
vanced dispatch systems and the call volume to justify installation of a state-of-the-art
dispatching system. As the company acquires smaller operators in contiguous markets.
EMTs strategy is to fold the acquiree's dispatching system into a regional center to le-
verage off an infrastructure of advanced dispatch centers. In addition to tangible cost
savings and productivity gains, an advanced dispatching system is a significant barrier
to entry for any competitor looking at bidding on a 911 emergency services contract held
by EMT.
12
MONTGOMERY
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■ Billing and Receivables: Regionalized administration of billing and management of ac-
counts receivable eliminates redundancy in the collection process leafing to more effec-
tive cash management. Since the payers are the same, a centralized billing function can
produce a much higher collection rate per employee than several smaller providers each
handling billing and collection on their own.
• Maintenance: Ambulances are under extreme use and require extensive and frequent
maintenance to insure 100% performance. Consolidating several maintenance centers
into one facility leads to labor, equipment and overhead savings.
7) Management
The strategy outlined by EMT requires management with expertise in both ambulance service op-
erations and in identifying and structuring acquisitions to add value in consolidating industries. EMTs se-
nior management has the optimal blend of both sides of the management coin. The management team
is led by Paul Verrochi, Chairman and CEO and Dominic Puopoto, Executive Vice President and CFO.
Both Mr. Verrochi and Mr. Puopolo are founders of the company. Prior to founding EMT, Mr. Verrochi and
Mr. Puopolo built and managed two highly successful service industry companies through the consolida-
tion of local providers into regional and national companies.
The company has hundreds of years of senior operating management experience as a result
of the consolidation of the original four providers at the time of the IPO and subsequent acquisitions. Paul
Shirley, previously Executive Vice President of the company, was recently named Chief Operating Officer
of EMT. Mr Shirley has over thirty years of expedence in the ambulance service industry and has served
on numerous industry association and municipal commissions. Other key members of management in -
dude: William "Earl" Riggs, Executive Vice President, with approximately thirty years of direct operating
experience in the ambulance service sector, Joseph Paotette, Executive Vice President, with over twenty
years of industry experience and currently the Chairman of the government affairs committee of the Amer-
ican Ambulance Association; and Michael McClymont, Senior Vice President, with extensive experience
in the integration of new acquisitions into a corporate structure in a variety of service organizations. In
addition to the depth of senior management expertise, the company benefits from a Board of Directors
with noteworthy experience in acquisitions, capital markets and health care reimbursement.
One feature that attracts us to the company is its success in retaining local management after ac-
quiring a "beachhead" provider. In all major acquisitions, the company has retained senior management
and benefits from their invaluable ties in the community. Retaining management insures a seamless tran-
sition from day one and brings with it a wealth of experience that further solidifies the company's man-
agement base. From our conversations with operators recently brought under the EMT umbrella, it is
evident that the company recognizes the challenges associated with rapid expansion and takes great
pains to create an environment and compensation structure that rewards the acquiree for continued su-
perior performance.
Opportunities For Growth
We believe the leadership exhibited by EMT in consolidating the private ambulance service sector
and the favorable market conditions in this industry will allow the company to achieve sustainable revenue
and eamings growth of 25-30% for the foreseeable future. A few of the more visible trends expected to
impact the company's growth include the following:
• Compelling Market Dynamics: We estimate from industry sources that the 911 emer-
gency response and general ambulance market is growing at approximately 10% annu-
13
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MONTGOMERY
saivaJnas
ally. Contributing to this growth are increasing transport volumes as the baby boomers
begin to enter their 'golden years' and a growing U.S. population, particularly in metro-
politan regions on the coasts where the company is strong. Revenue per transport is also
rising faster than inflation as municipalities require increasingly sophisticated levels of
pre -hospital care and medical content rises. Early intervention by trained emergency
personnel in the 10-20 minute "golden period' post trauma has been shown to improve
the probability of recovery. As an example, the availability of a defibrillator and trained
paramedics can mean the difference between lite and death for a heart attack victim. The
capability to stabilize the patient on -scene and administer appropriate treatment can also
significantly reduce the risks and complications associated with delayed treatment.
■ Industry Sector in Transition: The private ambulance market is evolving from a highly
fragmented industry populated by numerous small providers to one in which strong na-
tional and regional operators that can take advantage of the synergies available in con-
solidation will prosper. The change in the structure of the industry is accelerating as more
stringent performance goals and higher standards of care are demanded by municipali-
ties in the 911 emergency response market. The emergence of group health care plans
and their interest in contracting with providers capable of serving Targe patient popula-
tions under their control is another factor behind the consolidation trend. In addition,
many private providers that entered the industry in the 1960s and 1970s are looking for
a liquidity vehicle to realize value.
• Trend Toward Privatization: Municipally managed, tax subsidized 911 emergency re-
sponse services can cost residents of a community more than contracting from a private
provider and these programs are being evaluated daily to justify their continued exist-
ence. Since we don't see the municipal budget picture getting any brighter, the opportu-
nities for private providers such as EMT should increase. The budding trend toward
public/private partnerships in which providers divide up a service area to maximize effi-
ciency is a compelling development that could accelerate even further the privatization
trend.
■ Leadir:.3 Consolidator in Sector: EMT management has put theory into practice by
successfully closing seven acquisitions and signing a letter of intent with one other com-
pany in less than a year. All of the acquisitions completed to date have been accre-
tive to eamings and we foresee this pattem continuing in the future. Having proven
successful in the public market since its IPO in August 1992, EMT is in a premier position
to negotiate with potential sellers to bring further acquisitions under the EMT umbrella.
■ Synergistic Upside: As proven by the company in markets such as the San Francisco
Bay Area and the Denver corridor, significant upside is available through operating and
financial synergies in the consolidation process. EMT's management has proven capa-
ble of identifying synergies in dispatching systems, Tabor and equipment utilization, in-
surance, maintenance, and billing/receivables management. As future acquisitions are
consolidated into the company's corporate structure, the leverage gained from these
synergies will become an important component of eamings growth.
14
MONTGOMERY
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Financial Overview/Forecast Assumptions
American Medical Response has enjoyed substantial growth in revenues. operating income. and
earnings per share over the last several years.
Summary Historical and Protected Income Statements'
(S millions except per share)
1E12 1= 1921 1992 1923E 1994E
Revenues 365.6 384.9 3108.0 3121.2 3189.4 52612
Operating Income 45 5.5 9.5 10.3 16.4 23.3
Pre-tax Income 3.4 43 8.3 9.5 15.3 21.6
Net Income 1.9 2.4 4.7 5.9 8.8 12.5
EPS $024 30.30 30.59 50.67 50.80 51.07
• Note: results prior to the company's IPO in August 1992 are the combined results of the four separate ambu-
lance companies acquired at the time of the !PO plus the financial results from the purchase of Randle -Eastern
Ambulance which was treated as a pooping of interests transaction.
1) RIvenue9
EMT dervas revenues from two sources:
• 911 emergency response
• General ambulance services
Approximately 70% of the compan/s revenues are from 911 emergency response with the balance
from general ambulance services. Future revenue growth in our model will be derived from:
• Existing Operations - We are assuming an internal or `same-store" growth rate of 12%
for existing operations. This growth is attributable to an increase in both the number of
transports and the average revenue per transport as described earlier in this report.
• Acquisitions - The balance of the company's future revenue growth will come from ac-
quisitions. Our model assumes the following acquisitions:
1993: One additional acquisition with an annual revenue run rate of $10 million is
dosed in the fourth quarter.
1994: Four acquisitions with annual run rates of $9 million each are dosed evenly
throughout the year at the beginning of each quarter resulting in $23 million of
additional revenues for the year.
• New Contracts - New contracts are 911 emergency response contracts that are award-
ed to existing EMT operators in markets contiguous to existing service areas. For 1993
we are assuming the Aurora, CO contract in the second quarter, with $3 million in annual
revenues, and one more new contract in the fourth quarter with $3 million in annual rev-
enues. For 1994 we are assuming $9 million (annual ran rate) in new contracts acquired
evenly throughout the year.
15
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MONTGOMERY
srcvinrn
Summary of Revenues by Category 1993-1994
($ millions)
1993 1224
Existing Operations' $155.8 $233.9
Acquisitions 31.1 22.8
New Contracts 25 4.5
Total Revenues $189.4 $261.2
• Acquisitions and new contracts are added to existing operations in the following year. For example, all 1993
acquisitions and new contrails become part of existing operations in 1994 and grow at the internal growth rate
for all existing operations of 12%.
2) Operating Expenses
Operating expenses consist of Salaries and Benefits, Uncompensated Care, Depreciation and Am-
ortization, and Other Expenses. We assume total operating expenses will decrease slightly from 91.5%
of revenues in 1992 to 91.3% in 1993, and to 91.1 % in 1994. The most significant category of operating
expenses is uncompensated care which, as described earlier in this report, is an expense category to ac-
count for non -reimbursed ambulance services provided. The company's experience has been for uncom-
pensated care to run between 22-23% of total revenues. We are conservatively assuming
uncompensated care of 22.4% of revenues in 1993 and increasing slightly to 22.9% in 1994.
3) Balance Sheet
EMT's balance sheet is very strong and the company is well-positioned to finance future acquisi-
tions. As of March 31, 1993 EMT had working capital of $24.8 million and a debt to total capitalization
ratio of 23.7%. As a result of the company's IPO in August 1992, in which the company raised over $23
million, EMT has sufficient cash for further acquisitions. in addition, the company is cash flow positive on
an operating basis and also has $18.5 million available under a $30 million credit line to fund future ac-
quisitions.The company expects to increase this line to $50 million in the third quarter. Note that future
key acquisitions will most likely follow historical precedence and be financed mainly by stock, which his-
torically has comprised 60% of the total purchase price. Details regarding the company's letter of intent
to purchase 911 Emergency Services of Modesto are unavailable at publication. This acquisition, if com-
pleted, is a major acquisition which could significantly alter the company's outstanding debt, cash position
and capital structure depending on the terms.
Accounts receivable at March 31, 1993 were approximately $40.2 million, net of allowance k 7 un-
compensated care of 514.7 million. Average days outstanding is currently running at 87 days which is
down from 103 and 102 days in 1992 and 1991, respectively. When EMT records revenue from a 911
emergency response, it also immediately records approximately 22-23% of this amount as a reserve
against uncollected revenues. As these revenues are either collected or deemed uncollectible and cred-
ited against uncompensated care, accounts receivable and the allowance are adjusted accordingly. Cur-
rently, the allowance for doubtful accounts is 36.7% of accounts receivable which suggests that EMT is
very conservative with respect to reserving for uncompensated care.
16
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MONTGOMERY
sEcramEs
Competition
EMT and Rural Metro are currently the only publicly traded ambulance service companies in the
industry. Rural Metro operates private fire service for rural communities in the Southwest and Florida as
well as emergency transport and general ambulance services in these markets. A number of other private
companies are seeking to expand through acquisition and compete directly with EMT for core 'beach-
head properties. Some of the more successful but smaller private companies following a similar acqui-
sition strategy include:
Company
Location
CareLine
LifeFleet
Chaulk Ambulance
Mercy Ambulance
National Medical Transport Network(Medtrans)
Southern Cal'domia
Southem Cafdomia/SoutWNorthwest
Northeast
Midwest/South
Washington/Califomia/Nevada/Texas (Recently acquired
by Laidlaw Inc.).
Perhaps the most significant competitors for desirable 911 emergency response contracts are the
municipalities themselves. While the economic justification for going to a private operator is compelling
and municipal budgets remain under pressure, the political reality of wresting control from a fire depart-
ment can be an obstacle in certain cases. Private ambulance providers of 911 emergency response ser-
vices must generally be approved by local fire departments within the service area. As a result, private
providers are forced to walk a fine line between selling themselves as economically attractive and capable
of providing a high level of service without denigrating existing service provided by municipal agencies.
On the positive side, we are greatly encouraged by the growth in public/private 911 emergency response
partnerships and believe this model could prove to be a most attractive solution for private providers in
large urban areas.
Risks
▪ The Unknown Quantity of Health Care Reform: At this stage, it is not possible to predict how
health care reform and the much discussed HPICs, price freezes, managed competition, etc. will
impact the private ambulance industry. However, it is our belief that any program to cover the unin-
sured in a national health plan could provide a short-term boost to private providers by greatly re-
ducing the level of uncompensated care. Eventually, we expect that private payers presently stuck
paying a portion of every bill to compensate for the uninsured would push for lower rates and the
market would retum to equilibrium. Overall, we believe EMT's earnings projections have minimal
exposure to downward pressure from health care reform initiatives and could, in fact, enjoy shot .•
term upside until prevailing rates adjust to account for coverage of the uninsured.
■ Shortage of Attractive Acquisition Candidates: A significant portion of the company's earnings
growth is dependent on future, unannounced acquisitions. 11 attractive properties are unavailable or
the price for available properties increases markedly, EMT may fall behind in its acquisition strategy.
This risk is minimized by the sheer number of private operators, market dynamics that favor large
17
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MONTGOMERY
sarcema3
call volume operators and our belief expressed earlier in this report that potential acquirees want to
be associated with a winner like EMT.
• Level of Uncompensated Care Increases: From an expense control standpoint, EMT has the
least degree of control over the level of uncompensated care in any particular quarter. Should the
company experience greater levels of uncompensated care than historically noted, eamings could
be negatively impacted. Based on the company's tenure in markets in which it has major 911 emer-
gency response contracts, we believe any short-term exposure to uncompensated care is mini-
mized by the insight gained from operating in these markets for extended periods of time. Further,
while the level of uncompensated care varies by community, it is highly predictable and subject to
minimal volatility on a quarterly and annual basis.
• Loss of a Municipal Contract: The loss of a major 911 emergency response contract would have
an unfavorable impact on the company's operations. In particular, EMT's contracts to provide 911
emergency response services in Alameda County, Santa Clara County, and Contra Costa County
in the San Francisco Bay Area are expected to individually provide between 3-7% of the company's
revenues in 1993. Offsetting the risk of losing an 911 emergency response contract is the com-
pany's tenure in providing service in their respective markets, its position as the incumbent supplier
and the company's track record of 100% success in winning contracts in existing markets. Of the
contracts mentioned above, all have recently been re -negotiated and extended with the earliest con-
tract expiration date set for June 1994 (with a two year extension at the county's option).
• Poor Results from an Acquisition: The company's earnings could be adversely impacted by un-
anticipated problems in a key acquisition. Given the pace of consolidation in the industry, this risk
exists for all companies at the forefront of the acquisition process. In the due diligence process of
evaluating acquirees, EMT management expends considerable effort understanding operations
and the characteristics of the markets it serves. We believe EMT's ability to draw on the expertise
of its operating management is a key advantage in the due diligence process and minimizes the
risks associated with the aggressive pace of acquisitions.
Valuation
At $20-5/8, EMT is trading at 26x our 1993 EPS estimate of $0.80 and 19x our 1994 EPS estimate
of 51.07. We note that at this price level, the P/E as a percent of our forecasted 30% growth rate in earn-
ings is 87% based on 1993 estimates a our 1994 estimates. The most direct comparable is Ru-
ral/Metro which recently went public ?nd is currently trading at 21x 1993 EPS estimates and 18x 1994
EPS estimates, although preliminary secular EPS growth is forecast 'o equal 20%. In addition, we re-
viewed the P/E ratio as a percent of eamings growth for leading consolidators in the death care (funeral
homes and cemeteries), waste management, and medical rehabilitation areas. Our analysis shows that
a sample of six companies in these sectors have an average P/E ratio of 21x 1993 estimates and a P/E
over growth ratio of 1.1x. Using this analysis as a guide, we have established a 12 month price range
target for EMT shares of $23-25. Again, it should be noted that at press time EMT announced an agree-
ment to acquire another Califomia ambulance provider with 1992 revenues of approximately 550 million.
This potential acquisition, which is expected to have a favorable impact on 1994 eamings estimates, has
not been factored into our earnings model or valuation analysis. Wnen further detals are available and
the certainty surrounding this transaction increases, we will adjust our eamings model accordingly.
18
MONTGOMERY
srvama -4
Conclusion
American Medical Response is the leading private provider of emergency transport and general am-
bulance service in the country. Since its initial public offering fess than one year ago. the company has
successfully executed its strategy of acquiring top flight private ambulance service providers In key mar-
kets at 2ttractive valuations. Further. the company is beginning to recognize operating and financial syn-
ergies from its early acquisitions resulting in both impressive revenue growth and corresponding growth
in operating income. With the great deal of uncertainty surrounding health care reform and its eventual
impact on health care service providers. it is refreshing to find a company in the health care sector
ahead of schedule in executing its strategy with the potential for significant earnings growth and
limited downside risk. We believe American Medical Response fits this profile and are initiating cover-
age of the company with a BUY recommendation and a 12 -month price target of $23.00-25.00 0 (12-21 %
above current levels).
Thomas E. Sullivan
(415) 627-2505
Randall J. Heppner
(415) 627-2254
19
AMERICAN MEDICAL RESPONSE
Income Statement
Woos)
7...1 ..M 014.141 79444 DiSTORICIL PROIECI2 D
711.1 111.1
W 01 517 04 VIA VII VIE 171E
04110,5713 TA TIME512 IT 1710 711.1 10231 6114411 4444.1 11000 111.1 VII AI 3514A1 V4A, 1171.41
419900 : 4141.0 11011014 6'111 MVO MIM 1. 'I NA 41211.1 144.1: 444A1 NI 70 64.01
117114 I INC E4RNH3'
ti4:4.406% 0,427 1140 11.721 14.317 11422 515541
U..77n9s..446 4.'10 11160 11 447 1511 1.23 1.303 '044
5311. 16554 16,610 1112 4.30 4 731 4.444
L3r.1e1...n 2.166 161 4.1 125 451 OS
20.4.64.4 410A..4lM 1.313 127 144 147 177 161
2401 0454•0644 4... . 4321 .511 7445* 76054 31430 25.137
OPERATING INCOME 1,46 5.101 4,43 2701 2.117 2.1:2
1762... 74.4..41141 1.240 1.211 471 761 115 11
13E 3A4134C423E 42011 111 4.574 2403 11141 7.310
1..4..2.77. 1410 4101 MI 1.(D I.r4 60
AEI INCOME 4240 34.1 0011 41.414 31041 N AN
E SNA! IS OUTSTANDING
EARNINGS PER SHARE
FULLY FA %ED EPS (62%72.44.461
MA "GIN ANALYSIS
REVENUES
7957 1447 7,00 1.47 .141 10.733
41517 11410 111.2 24.642
3104 9.214 4100 1 001 12.201
14.17' 4111 14.112 0212
3344 5 I. 1.315 1 471 1]10
Al 114 MS 1.1. 443
IIO�19 410 41677 41.h4 0311
17773 3241 3,44. 1412 3.517
14 253 754 311 167
4 40 3,014 3 411 4142 1710
3.577 1306 1 13 11.1 14,4
44441 117.. 41..% 124,7 4291
ILLY 10.705 1041' 11 125 11.210
341.341 50.59 50.12 50.16 511.20 50 47 50.67
031 1039 10.12 1071 10.20 10.13 042
1440% 00111 1410% 1000. MC%
1YIRATING L4PENSES
N 5•1414.311.4. 661 MI% S12% MTA 471% 5174
O L'I4..p....154 C. 23J% 0.% 2202 2114 134% 223%
5.51.7 1111 1141 1L0% 147% 14 2% I1w
133..4511777 33•. 241 1w 11% 274 74%
5.444114.. a 101,1146. 27% 011 05% 0414 X14% 05%
7.411}..411771.77' 435% .74 411% 1001 IA6% 4231
07f RA TIAL INCOME 63% 04% 46% 91% 101% 174
7N.M E..... NM 11% 111 0.4 0.4 025% '3%
ERI TAS INCCME 100 11 541 13% ..% 71%
YET INCOME 271 13% 32% In 176 51%
7.. R... 111% 071 175% 4201 301% TO%
CRU WDI R.4775 (1S PRIOR 51A0)
R 204% 773% 16.% .43%.14% '31
0148.7..... 744% 742% 11.'1 143% 146% 17%
0.0457,I,,74.. 7144 713% 044*1 314% 21 5% 0.1
h.4.. 145•51•. 214% 9311 (014%) 111 346% 402
4.11.14. 711% 514% 1100.) 33014 411% 1111
14057934 777 S5... 2411 031'% 1191%1 720* 201% 0"
E.O. :.106 EIS 141% 016% 249.1 170% 11% 1121-1
50.46 50.74 51122 101.24
10.14 10.11 10.22 10.21
5.43041 00244 !01541 1441" I0/3*
100* WO% 01% 074 IDYL
211% 224% 123% :71% 2221
1321 144% 110\ 153% 151%
41% 202 201 2.% 402
5% 04% 04% 000 002
01 5% 9221 1.1 0118 1074
4S% 71% 421 40% 93%
' 444 04% 04% •3444 074
102 73% 774 141 441
In 41% 4/% 401 !04
771% 433% 4211* 42.5 1101
12 2% 01% IV OA ", 11 TI
0211 419% 5171 n , 074
11% 1121 33 PS 1711 142921
111% 11% 044% .119% 101,15
1611 11 I% 7131 11 434%
116% 319% 11% 10.5 451%
502 Al% II% 40* 125%
/11441
5317 417 5317 017
111.1! 01146 4.3044 44435*. 111144.4.
4141441 1.0144 1.21741 617 614 1.72 615 -_--Y
0.214 1 A6 41941 0 340 51,411 .! •,1
12.11 13.141 14710 1155: 11147 i .41.4
49110 4.71 431 1021.1 10/.2 143W
1.411 1741 160 2049 2.174 2 1
1114 497 41 665 %1
173 00 •475 77 047 42 0.4 A 04
1102 51) 1401 5QI
1.143 141 420 110
13 741 2001 S 144 5 471
1.132 7010 1141 211._
0214 4:142 11.113 11161
1451 . 5
•tl41 .
211. 4 "
10412 i 1,11.
11014 1130 11.E 45.92 11711 ' 1:54'
102.101 50.20 5026 *42.21 51129 41417 514,4
50.0 10.25 *0.20 10.27 0.29 1407 j 11 40
61
1.014 1030% 1.547*
1054* 10101
447% 40141 403% M2* 011 A .
224% 124% 24% 23* 232%
114% 131% 7511 51)% 12116 ..
402 11* .0% 120 3402 .
0n ors .•4% nn 09%
453% 4444 01 I% 0121 N I1 5 1 . 1
51.
11 91% 01% 0" 09% la% ,
0444 074 01 .•74 07%
41% 402 42% 01% 12% 41%
11 44% 41% 41 49% IM
423% .20% 411. 4101 42031 47174 1 1 ^•
43% 404% 4111 3201 .13'1
x10 10145 477% 7731 1171
599% 01% 179* 1121 4 1 ,
194 174% ,13% 7141* 41.
004 661% 113% 321% 766% 4' 1%
10.1% 563% 411% 221% 204%
263% Yn 441% 1271 334%
119%
AMERICAN MEDICAL RESPONSE
Summary Balance Sheet and Cash Flow Statement
($000s)
Fatal Yaw LAY 1571
SI/WAWA V BALANCE SHEET
MONTGOMERY
S CL'B1T1L9
FY 1444 001441 FY 114) 93 14011 03HUE FY 10401
ASSETS
Cub and cash eg44.a144a4 $3502 112000 14594 SANS SSA/
Aaw.d.. raaw.6M 30515 31210 50.9)0 00216 91541
Las A0elsn far .neee.p...4*N .0. 1100431 111.435/ 1171191 (33533) 131.0573
NO mom*,nea44eble 19.677 77,655 33.619 6942 6020
08..9 60.7 9.139 10000 17.000 16.000
T4161C944491 Anew 711041 46369 0314 4413 01696
pyamly ad equipment n•1 4020 10365 37061 73.432 31935
Gooderil w•1 399 11.153 .0917 6.120 683.7
08e• 2.084 7.771 7771 2771 1771
19161 A4*40• 510044 170.6 SE 472 5134.353 5163719
15AIN-HES AND STOCKHOLM 1V EQUITY
Cunard 5903+44 117928 510273 021010 924031 120255
taegbe.. debt 8.031 8.9:5 19.97 36.835 37740
OOw 1511 9361 6,090 6000 6000
2..41 12.54144a 27.193 33.632 42.74* 96009 4503
Ste39e16wi .44.11y 13071 37.216 55016 10061 117221
3•404*4.5144....4 Eq.iy 114044 570018 996.672 9136.153 9144719
MAMMY CASH ROWS
FY 1942 FY 1101 FY 1497 EY 1441E FY 1991E FY 1091?
0,44•1190 Aei.iiew
Nat buxom 02554 14044 03.236 44014 112499 114.441
Dg44arr 5.74 3079 1096 1435 7336 10071
Amrlaaba 1213 927 561 1539 7251 1039
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21
TM study on the papa and any preceding Magee w ria a wm9W analyses of every mawul act respecting any company, industry or security. TM opinrona tiers a epressed reflect the tudgment of t1t
awry at tlos Ma and an 'utast: to change. Facts hart been ootamw from sources considered rshabie, but an red guaranteed. Montgomery Securities (or Ns atfihatesl. hs partners, and1or employees
may hare an /hems in the ase,raea and oprone on securities d the arae deserveW herein and may make purchases a salsa, as pnncpal a agent in secunhaa mentioned, while this report is in circulation.
tWmw the information nor any opinion s.prsssed herein conwhnes a wktatation by us of the purchase or sales of any securities or options thereon Montgomery Securhlea may horn time to ere perform
itawal'nent Pinkert; or other sasiws tor. or soliclI investment banking or other business from. any company mentioned in the 'spat. O Copyright 1993 Montgomery Securities
600 MO.N TGO. !ER}':STREET SAN FRA NCLSC'O, C-11. IFORNM 94111 t 7 2OOO
1
� 1 Kidder, Peabody
SMALL CAP
July 1,1993
EQUITY RESEARCH
Company Report
American Medical Response, Inc.
(NYSE - EMT)
Stock Rating: Outperform
GAINING SHARE IN A GROWTH INDUSTRY — AMBULANCE SERVICES
Recent Recent Fiscal Earnings Per Share P/E Ratio Dividend Current
Range Price Yr -end 1992 1993E 1994E 1993E 1994E Rate Yield
20 - 8 19 Dec. $0.67 $0.80 $1.00 21.3 17.9 Nil Nl
- INVESTMENT RECOMMENDATION
We are initiating coverage of American Medical Response, a provider of ambulance services, with
an Outperform rating. EMT could expand EPS by over 20% annually over the next several years.
The industry is expanding 10% to 13% annually and operating leverage should lead to stronger
earnings growth. EMT is the largest publicly traded pure play in this consolidating industry.
Although EMT is not inexpensive on a statistical basis, we would begin to accumulate these shares
for the following reasons:
• EMT is purchasing the largest and best run private ambulance companies at attractive
multiples of eamings and cash flow that are additive to eaming, . Eamings should increase since
after about six months, operating units begin to benefit from operating economies of scale.
• For the long term, the company is building an organization of elite operators, with long
histories of service in their respective communities. Additional growth could take hold as the
company purchases smaller operators and merges them into existing operations. The company
has been acquiring larger ambulance companies for a combination of stock. debt and cash. Smaller
purchases are Iicey to be for cash.
• EMT has been completing acquisitions ahead of schedule. Additional acquisitions this year
should lead us to increase our earnings estimates.
• The valuation of the stock could improve if the number of shares held by the public increases
and the average trading volume rises. We would not be surprised if the company proceeded with
an offering to provide capital for future acquisitions as well as liquidity for certain operators who have
previously sold their ambulance companies to EMT.
Special Situations
Todd M. Berko
(212) 510-3727
Kidder, Peabody & Co.
Incorporated
BASIS FOR RECOMMENDATION
Valuation
On a purely statistical basis.
American Medical Response ap-
pears fairly valued. However, our
current estimates make the very
conservative assumption that EMT
will acquire no more companies in
1993. In addtion, we believe the
market penalizes the company's
valuation. as noncash charges de-
press eamings. In its short History
(the company was formed in early
1992 and went public midyear),
company management has often
exceeded expectations, and we an-
ticipate upward adjustments to our
eamings estimates.
Heavy goodwill amortization ex-
penses mask the company's real
earning power. The company's mul-
tiple on current -year eamings of
20.4 times is cbse to its expected
growth rate. Yet. this includes sig-
nificant charges from the
amortization of goodwill. Excluding
these charges, earnings would be
$0.92 per share and the growth rate
would be higher. Without goodwill
expense. the company's share price
could approach $20 per share. 23%
above current levels.
Our $0.80 per share estimate
for 1993 assumes no additional ac-
quisitions in the current year. Given
that the company has completed
five since November 1992 plus a
BUSINESS
2
recently signed tetter of intent. there
is the potential for additional acquisi-
tions that could move estimates up
$0.05 or more this year and an even
greater amount in future years.
The company has announced it
is in negotiations to purchase an ad-
d'Rional company with. perhaps, $50
million in sales.
Our assumption of only modest
improvements in operating margins
over the next several years could
also prove too conservative. The
company has already hired much of
the corporate staff to oversee any
integration. Addition of a senior ex-
ecutive expert at moving companies
from the entrepreneurial to the cor-
porate stage of development could
further enhance margins. These
improvements should begin to occur
in 1994.
Finally, the company has yet to
substantially benefit from add-on
acquisitions, which could generate a
greater impact on EPS from each
dollar of revenue acquired than from
the company's recent acquisitions.
Bridgeport Ambulance Service will
soon close, becoming the first add-
on acquisition. These acquisitions
have yet to occur as the market to
purchase Targe companies has been
more robust than expected. Gaining
significant market share through
major acquisitions expands the
number of potential add-on acquisi-
tions.
Reasons to Purchase
• The private ambulance industry
is growing 10% to 13% annually.
The number of ambulance trips is
increasing as the population ages
and transportation between hospi-
tals and other care facilities
becomes more commonplace. The
revenue generated per emergency
trip, about two thirds of company-
wide revenue. is increasing as there
is a rising level of medical sophisti-
cation required. An increasing
number of municipalities are seeking
ways to outsource this service.
• Market forces continue to move
owner -operated companies into
larger organizations. Ambulance
companies are facing increasing
capital requirements and face sig-
nificant obstacles when attempting
to expand. By setting to a larger en-
tity for stock, cash and seller debt,
the owner/operator diversifies his
assets, benefits from the growth in
the ambulance industry, and contin-
ues to operate the local company.
Further, the owner/operator elimi-
nates the financial pressure of
having to guarantee all company
debt personalty.
• The concern over health care
reform may provide incentives for
owner -operators to diversify their
assets.
• There continue to be many ac-
quisition opportunities. The
company makes under 15 acquisi-
American Medical Response is the largest publicly held provider of ambulance servsaks. This
industry is expanding a! 12.5%-15% annually. providing the company with the potential for 20%
EPS growth. The company acquires larger competitors for a combination of cash, stock and
company debt Smaller competitors are purchased for cash.
Projected 5 -Year Growth Rate 20%
Shares Outanding (Millions) 10.7
Average Daily Trading Volume 19.500
Institutional Holrrings 16 %
Insider Ownership 59%
Book Value (199-0E) 5464
Price/Book 4 3
Revenues Per Share (1993E) 516 41
Market Cap./Revenues (1993E) 1 2
Debt as % of 1993 Capital 31.2%
Est. Ret of 1993 Avg. Equity 22.2%
P/E relative to S&P 500
Cashftow Per Share (1994E) 51.45
Multiple of cash now 13.8
American Med Response Inc (EMT)
20
lilill 1111
is
to
1991
nm
11
1991
lWI' !... .1 i,. 1,
Source. Kidder, Peabody & Co Incorporated
`� tions annually and the number of
41'11) potential targets exceeds 300.
While the company has concen-
trated on larger acquisitions, sinal
add-on acquisitions have the poten-
tial to further enhance EPS. Smaller
acquisitions benefit from operating
economies of scale as they are usu-
., ally merged into a larger operation.
• EMT has advantages when
competing for acquisitiors. As the
largest of two publicly held ambu-
lance c,.,mpanies. EMT can offer
stock as part of the acquisition pack-
age. EMTs operating management
is well respected as it has run some
of the largest and best known inde-
pendent ambulance companies.
The company is completing acquisi-
tions ahead of schedule and on
favorable terms.
• Company EPS could grow 20%
annually over the next several years
given industry growth (12-15%) and
acquisitions. EMT purchases pri-
vate companies for about 8-10 times
trailing 12 -month earnings. This
valuation includes the goodwit em-
ptied by the acquisition. Economies
of scale gained from a private
company's joining a larger company
increase the positive impact on
eamings after about a six-month lag.
a Operating managers own a
targe amount of EMT's stock. In-
creasing earnings raise the market
value of the company and has a sig-
nificant impact on the operating
managers' personal net worth.
• The company is negotiating an
acquisition that, if completed, could
acid $0.05 in earnings in 1994.
Concerns
• Health care reform increases
uncertainty. However, under m ,st
scenarios, the demand tor ambu-
lance services could increase.
Universal coverage could lead to
reduced pricing, but this may be oft -
set by lower uncompensated -care
write-offs. The most negative sce-
nario is a price freeze without wage
controls.
Kidder, Peabody Sr Co.
Incorporated
American Medical Response, Inc.
Table 1
Market Participants
Volunteer
Munich
Hospitals
Private
Source: Company estimates.
• High insider ownership, particu-
larly among former ambulance
company owners, may lead to a sig-
nificant overhang. The company is
sensitive to this issue and insiders
have been seling shares in an or-
derly fashion.
• Over time, the price of acquisi-
tions may rise, particularly as
additional ambulance companies
come public. EMTs strategy of
concentrating on core acqu'r.°ons
should allow the company to gain
access to many markets before
competitors enter them and bid ac-
quisition prices up. If the market for
larger acquisitions later becomes
overpriced, the company can then
concentrate on add-on acquisitions.
• Revenue and profit growth may
slow as acquired revenues are likely
to diminish as a percent of a grow-
ing revenue base. Add-on
acquisitions could allow EPS growth
to expand more quickly than rev-
enue growth. EMT will most
probably make smaller acquisitions
for cash axf generate not only cor-
porate, but also operating
economies of scale.
7,000
3,700
2,000
2,100
AN EXPANDING, FRAGMENTED
INDUSTRY
The ambulance industry is a $5
billion, highly fragmented industry
with about 15,000 providers (see
Table 1). Only about 30 companies
have annual revenues in excess of
$20 million (see Table 2). Growth
has been about 1096 annually over
the last decade, but could acceler-
ate. About half the participants
serve markets in which population
densities are too small to support a
profitable private operation. Al-
though these operations may be
profitable, they are too small to inter-
est EMT.
Increasing Demand
Ambulance services has been a
growth industry throughout tho
1980s. In 1980, the total market
was $1.5 billion and private compa-
nies represented about 33%. Ey
1990, the market grew to $4.3 billion
and private companies represented
55%. The current size is estimated
at $4.9 billion. By 2000. the market
could reach $10 billion and private
American Medical Response, Inc.
Table 2
Participants' Size
Annual Revenues
Over $30 million
$20-$30 milion
$15-$20 milion
$10-$15 million
Under $10 million
No. of Participants
8
20
70
160
1.900
3
Kidder, Peabody & Co.
Inci,rporated
companies could represent 66%.
The number of ambulance trips
has been increasing. In the past,
emergency patients were trans-
ported to a hospital, where they
stayed until full and complete recov-
ery. Now, after the initial
emergency call, patients might be
transported to the respective health
maintenance organization of which
they are a member or a hospital that
specializes in a specific illness. Ad-
ditional ambulance trips might bring
the patient to centers housing ex-
pensive test equipment. For
example, Magnetic Image Reso-
nance Machines and other
expensive technologies are now
centrally located to generate enough
revenues to support the test facility.
Finally, discharged patients who are
not fully recovered might require
ambulance ser vices if they are sent
to another facility to complete recov-
ery or home, where they will receive
in-home health care. A short ambu-
lance ride may move a patient from
a $2,000 per -day bed to a $500 per -
day bed. EMT provides complete
patient transport services, from the
most technically sophisticated criti-
cal care transport to more basic
services.
Private ambulance services
may continue to expand more
quickly than the industry as a whole.
Municipalities can reduce or elimi-
nate the cost of ambulance services
by contracting with a private com-
pany. Private ambulance
companies can gamer economies of
scale by serving several communi-
ties, justifying investments in
computer software and systems to
improve collections from third -party
sources — Medicare, Medicaid and
private insurance carriers. Service
levels and response times improve
as larger companies can invest in
more efficient dispatching systems
and improved training. Over time.
municipal subsidies to private ambu-
lance companies tend to tall as they
become more efficient and retum
some of the savings to the commu-
nity to solidify their local
4
relationships.
Value -Added Services
About two-thirds of EMTs rev-
enues are generated by providing
exclusive emergency services over
specific geographic areas. Ad-
vanced We support ambulances
contain many of the drugs and de-
vices found in an emergency room
plus advanced communications to
talk to both the dispatch center and
the local hospital. While an ambu-
lance is traveling to an emergency
room, physicians may give direc-
tions on administering treatment and
drugs to the patient.
Over the past several years, the
average revenue per emergency trip
has been increasing. Local govern-
ments are requiring more
sophisticated vehicles, faster re-
sponse times (often within eight
minutes 90% of the time) and more
highly trained employees to utilize
available technology. Costs rise fur-
ther as . oncems over AIDS and
other blood pathogens increase the
need for equipment to protect para-
medics and for procedures for
disposal of used equipment.
The basic rite support (BLS)
business leverages off the
company's infrastructure required to
maintain advanced life support.
BLS transports patients between
facilities for additional treatmeant,
tests, or to discharge to another
care facility. These ambulances
have fewer drugs and less technol-
ogy, but use the same maintenance
facilities and dispatching terminals.
Critical care units transport critically
ill patients, who, under federal regu-
lations. must receive the same level
of care whether in a critical care unit
or in the ambu`ance. Although it is
currently only about 3-5% of the
business. BLS is the fastest growing
service.
AMERICAN MEDICAL RESPONSE
SHOULD OUTPACE INDUSTRY
GROWTH
In addition to benefiting from
industry growth, EMT is expanding
through acquisitions. Since going
public, the company has acquired o:
signed a letter of intent for an esti-
mated $79.3 million in annual
revenues, about 40% of the esti-
mated current revenue. The
company's acquisitions year to date
have already exceeded its budgeted
plans through the end of 1993, and
we expect further acquisitions that
would be additive to earnings. The
company is currently negotiating an
acquisition that could add over $50
million in sales. In 1994 we expect
acquisitions of $55 million in annual
revenues. All acquisitions except
one have been of larger competitors
that create central locations support-
ing further local expansion.
Longer term, the company
should begin to acquire smaller pro-
viders. EMT wou'd benefit from
reductions in both corporate and op-
erating overhead. Typically, the
physical plant of a small acquisition
will close and all dispatching and
maintenance functions will be
handled from a central location. Ef-
fective deployment of an ambulance
fleet does not require strategically
located garages. The most efficient
dispatching system (flexible deploy-
ment) requires ambulances, when
on call, to be on the street.
The Industry Is Moving Toward
Consolidation
Capital requiraments are in-
creasing. Localities are requiring
more rapid response times and
more sophisticated ambulances. A
fully loaded emergency services am-
bulance now costs about $100,000
($50,000 for the vehicle alone), and
an ambulance to transport critical -
care patients is $250.000. This
compares to $50,000 for a more ba-
sic unit. To improve response
times, ambulance service compa-
r'ss must either increase the size of
the tleet or invest in more sophisti-
cated dispatching technologies.
Because of its size, American Medi-
cal Response can negotiate volume
discounts on equipment.
Revenues
Percent Change
Kidder, Peabody & Co.
Incorporated
American Medical Response, Inc.
Table 3
Earnings Model
(in thousands except per share aamountr)
1991 1992 1993E 1994E
$94.104 S106,433 5183,000 $236.900
28.6% 13.1% 719% 295%
Expenses:
Salaries and Benefits 545,614 553.364 88,900 114,700
Percentage of Revenues 485% 50.1% 48.6% 48.4%
Uncompensated care 22.262 24,397 43,400 56,200
Percentage of Revenues 23.7% 22.9% 23.7% 23.7%
Depreciation 2,772 3.066 5,800 7,500
Percentage of Revenues 2.9% 2.9% 32% 3.2%
Other 513,717 $15,217 26,200 33.400
Percentage of Revenues 14.6% 14.3% 143% 14.1%
Total expenses 584,365 $96.044 5164,300 5211,800
Earnings from operations S9,739 $10,389 518,700 S25,100
Operating Margins 10.3% 9.8% 102% 10.6%
Non -Operating Expenses
amortization of intangibles $927 5561 $1,400 $2,000
Interest expense. net S1,156 5747 S1,500 $1.600
Earnings before income taxes 57.656 59.081 515,800 521.500
3.201 4.089 6.900 9.400
Tax Rate 41.8% 45.0% 43.7% 43.7%
Net earnings 54.455 54,992 $8.900 512.100
Percentage of Sales 4.7% 4 7% 4.9% 5.1%
Pro forma net earnings (1) 54,306 55.670 58,900 512.160
Net earnings per common share 50.57 50.67 50.80 51.00
Net earnings per common share before Amort. 50.69 50.74 50.92 51.16
Weighted average common shares outstanding 7,576 8,447 11,150 12,150
(1) includes certain adjustments reflecting the move from an S coproration
5
Kidder, Peabody & Co.
incorporated
To finance this growth, entre-
preneurs must invest additional
capital or personally guarantee bank
loans. even to finance accounts re-
ceivables. A publicly held company
has greater access to capital and
can borrow at significantly lower
rates.
By selling to a larger ambulance
company, entrepreneurs reduce
their personal debt load, and get
cash to diversify assets, stock to
maintain an equity interest and debt
from the company that generates
income. The equity position is now
in a larger company with profes-
sional financial management and is
much less reliant on any one local
contract or business relationship. A
larger competitor may be more
adept at reacting to any changes
brought about by health care reform.
The entrepreneur can concentrate
on his strengths, running operations,
and pass off onerous accounting,
insurance, systems development
and finance responsibilities. .
There are significant barriers to
expanding into new markets and
new barriers are being added.
Larger competitors that wart to so-
lidify their competitive position often
suggest additions to municipal con-
tracts. These contracts are now
more likely to specify bonding re-
quirements and more difficult
performance criteria. Bonding may
be difficult, if not impossible, for
small companies to obtain.
American Medical Response's
Acquisition Strategy
EMT currently evaluates com-
panies with significant emergency
services businesses, dominant mar-
ket share, and a Tong -term
relationship with local communities.
The basic criteria include:
• Dominant market share,
ranging from 65% to 95-100%, in-
cludes no emergency services..
• '. high proportion of sales
genera,ed through providing high
value-added services. Over 70% of
calls may come from the local 911
6
service. and over 50% of calls re-
quires paramedics_
• Exclusive contracts for
emergency services over specific
geographic areas.
• More advanced equipment
and employee trairing than the local
competition.
• Profitable, established op-
erations with long histories in their
communities. American Medical
Response's current operators aver-
age about 40 years of service in
their communities.
Acquisitions are antidilutive to
earnings, and they are even more
attractive on a cash flow basis. Sell-
ers receive a combination of stock
(500-60%), cash (20%-25%), and
seller debt (20%-25%) structured to
fit their needs. The company re-
cently completed its first all stock
transaction (a pooling). The retum
on equity on a trailing basis is about
10%, but it could move closer to
16%, given a higher level of as-
sumed and seller debt. The PIE
ratios on trailing earnings is 8 to 10
times, below the companys publicly
traded multiple.
Using equity to finance acquisi-
tions generates significant
commitment by the former entrepre-
neurs to increase EMTs profitability
and market value without compro-
mising quality. Once the sale is
complete. the former small business
owners view the stock price as a
vehicle for increasing wealth, par-
ticularly as they no longer gamer the
cash flow from their former business
and receive modest salaries. In
contrast. other potential acquirers
may offer a comparable price, but
often offer subordinated debt, limit-
ing upside potential. Other
acquirers may not have EMTs
depth of operating management.
Increasing Profitability Through
Rising Economies of Scale
One of EMTs initial acquisitions
has developed an advanced logisti-
cal system that improves
performance and cuts capital and
operating expenses. Using propri-
etary software. sophisticated
satellite telemetry, and computer
algorithms, the company's ambu-
lance dispatching systems efficiently
locate ambulances throughout the
service areas and dispatch them
within 30 seconds. As the company
grows, acquired companies will ben-
efit by upgrading their existing
technology to the level appropriate
for the call volume. Going forward.
operations should continue to im-
prove as an expanding revenue
base would support the develop-
ment system improvements.
By more effectively posting am-
bulances throughout the service
area, the company reduces the
number of ambulances and crews
on the street at any one time without
increasing response times. The
cost savings of elimina ng a single
ambulance are $100,000 for an ALS
unit plus $300,000 in annual operat-
ing costs. A basic life support unit
costs about $50.000, plus another
$250,000 annually to keep on the
road. In the California market, the
company operates up to 80 emer-
gency ambulances, 15 less than it
would otherwise need.
The company can leverage cer-
tain fixed costs over a larger
revenue base, lowering these costs
as a percentage of sales. Costs of
continuing education for emergency
medical technicians and paramedics
are spread over a larger employee
base. The program is further en-
hanced as it can draw on a broader
range of experience than other am-
bulance companies. Computer
software development, fleet mainte-
nance, human resources and
insurance are also prime beneficia-
ries. The company now self -insures
for claims within certain ranges.
This saves agents' commissions of
$1 million or more annually and fo-
cuses management's attention on
improving the company's safety
record. With increased purchasing
power, the company faces lower
costs for ambulances, as well as for
eTh
T
•
(,)
American Medical !temente, Inc.
Table 4
Quarterly Earning;
(In thousands, except per share amounts)
Three Months Ended Three Months Ended Three Months Ended
March June Sept Dec. Tots/ Match lune Sept Dec. Total Much lune Sept Dec. Taal
1992 1992 1992 1992 1992 1993E 1993E 1993E 1993E 1993E 1994E 1994E 1994E 1994E 1994E
Total Revenue $25.227 526,277 526,834 528,095 5106,433 511,729 $42,090 545,094 554,087 5183,000 552,482 556,982 561,482 $65,952 5236.900
Perc:nt Change 65.41% 60.18% 6&05% 92.51% 71.919E 25.71% 35.3894 36.3496 21.94% 29.45%
Expenses
Salaries andtxne6ts 512,716 512.664 513,162 514,822 553,364 521,157 $20,602 521,442 525,699 588.900 $25,410 527,589 529,768 531,932 $114,700
Percent of Sales 50.495 48.296 49.0% 52.8% 50.196 50.7% 48.9% 47.6% 47.5% 48.6% 48.4% 48.496 48.4% 48.4% 48.4%
Uncompensated care 5,705 6,281 6,239 6,172 24,397 9,180 9,553 10,686 13,981 43,400 12.450 13,518 14,586 15,646 56,200
Percent of Sales 22.6% 23.9% 23.3% 22.096 22.9% 22.0% 22.7% 23.7% 25.8% 23.7% 23.7% 23.7% 23.7% 23.7% 23.7%
Other 54,689 54,519 54,829 54,807 18,844 8,095 7,468 8,136 59,700 33,400 10,236 10,111 11,047 511,506 42,900
Percent of Sales ILIA 51,57( IL& 1L& 17.11 17.71 12.41 17.71 ILA 11.9!& ILA 1A 12.21. DM 52.451 1$,17
Taal expenses 52121¢ 52].464 ,524.230 525.801 596.605 5.111.132 ,S) 1623 14Q2¢i S.t/311 5165.70Q 111.42Z es__1.218 jijJQQ =Q$1 S213.=
Earnings from operations 52.117 52.813 52,604 82,294 59,828 53.297 54,467 54,830 54,706 517.300 54,385 55,764 56.082 56,869 523.100
Interest expense, net 5247 5258 5149 $93 5747 5300 5400 5400 5400 51,500 5325 5425 5425 5425 51,600
Farnings before income taxes 51.870 UM ILO =I 52. j 52.997 ELStfa ,59.554 , 4j)j SLUM SIM $3.334 53.Li2 HAI 521500
Income taxes 17_41 $LQ44 SL242 5321 11.214 51.2 2 1SL715 51935 SL 11 54.444 11.211 52.332 52.421 51121 59.40Q
Net earnings 51,127 51,489 $753 51,623 $4,992 51,738 52,291 52,495 $2,376 58,900 52,287 53.008 53,187 53.619 512.100
EPS
Common shares out.
50.14 50.20 50.17 50.16 50.67 50.16 50.20 50.21 50.22 50.80 50.20 50.25 $0.26 50.29 51.00
7,576 7,576 8,770 9.866 8,447 10,800 11,335 11,692 10,773 11,150 11,510 12,045 12001 12,644 12.150
Kidder, Peabody & Co.
l�.., 4-p“rAt,t!
drugs and other consumables.
A SOLID REVENUE BASE
The company has the charac-
teristics of a regulated utility where
they are the sole provider. Locali-
ties grant ambulance companies
rights to service a particular area.
EMTs operating agreements. unlace
about 50% of the largest ambulance
companies. provide for exclusive
operating rights over a specific geo-
graphic region. Given the
importance of emergency service,
EMTs long history of service (often
over 40 years) and the political risks
attendant with changing vendors.
there is a bias to maintain relation-
ships if the ambulance company is
meeting performance criteria and
remains price competitive.
Stable Payment Stream
Underpricing an entrenched
competitor is difficult. Net income
as a percentage of sales is only 4-
5%. The current provider knows the
pricing structure needed to maintain
profrtabnity and has already invested
in a dispatching center and equip-
ment. His collection of past data on
traffic patterns and accident records
is proprietary information required to
maximize eff..ciency. A new bidder
would have to factor in the costs of
a rapid investment program to be
fully operational in a short period of
time. Conversely. the current pro-
vider would be aggrt.ssive to protect
his investment. An established
competitor may benefit from econo-
mies of scale by servicing several
localities with service contracts ex-
piring at different times. A new
competitor would have to absorb
losses with the expectation of bid-
ding away future contracts from the
established competitor.
Payments are made by Medi-
care (an estimated 29% of
revenues), Medicaid (an estimated
8%), third -party insurers (an esti-
mated 28%) and private individuals
(an estimated 55%). Since local
8
governments set prices. Medicare
does not independently evaluate
rates, paying about 80% of the aver-
age area price. Private insurers and
individual citizens pay the full rate.
and Medicaid (which covers some
elderly and AFDC) pays the least.
Individuals often submit the charges
to an insurance company for pay-
ment. Uncompensated care
represented a write-off of 22.9% of
sales in 1992. When compared to
the portion paid by individuals, the
bad -debt ratio rises to 59%.
Pricing Should Rise With Costs
Emergency ambulance charges
do not come under intense review
by insurers as the $350-$450 per
emergency trip and $150-$200 per
nonemergency trip are usually
dwarfed by other medical charges.
Insurers can get greater cost sav-
ings by concentrating on other parts
of the medical establishment.
Because localities set but do not
pay the costs, ambulance compa-
nies find it easier to pass on cost
increases. Contracts have cost -of-
t -wing adjustments and may be
reopened if OSHA regulations. local
govemment requirements or certain
cost factors change. Localities may
subsidize ambulance services if th'
have a large popu:ation of uninsured
citizens who cannot afford to pay for
ambulance services. As EMT only
acquires companies with a long-
term history of serving specific
communities, these operating com-
panies have built up a long history of
dealing fairy while providing one of
a municipality's three vital services,
making rate adjustments less diffi-
cult.
For nonemergency service, pric-
ing is much more aggressive as it is
set by negotiations with individual
hospitals, clinics, HMOs and nursing
homes. Hospitals and other facili-
ties see cost as the most important
factor. However, EMT's ability to
supply a hospital or care group with
al its transportation needs on a
timely basis gives it a competitive
advantage over small competitors
that just provide nonemergency
transport services. and have smaller
fleets and less sophisticated dis-
patching systems.
HEALTH CARE REFORM
CREATES UNCERTAINTY
While it is too early to predict
what form health care reform win
take, concerns about costs could
hurt the overall profitability of health
care companies. However. it is pos-
sible that ambulance companies
may not be dealt with as harshly as
other health care providers. Ambu-
lance companies do not generate a
retum on sales that would attract
scrutiny. EMTs return on sales is
only about 5.0% and this could be
above the industry averages. A cut
in prices that would remove at prof-
its would drive some operators out
of business, but would not provide a
significant reduction in health care
costs.
If health care is extended to
those currently uncovered, EMT
could cut prices substantially without
reducing profitability. In 1993. we
-pect uncompensated care to
edch 23.7% of revenues. This is
significantly higher than the percent-
age for heaith care providers and
compares to 7% for hospitals. The
vast majority of this Toss is because
ambulance services are provided to
all, regardless of ability to pay.
EMT could do well in a health
care environment dominated by
large buying groups (i.e., managed
competition). Because of its domi-
nance in certain key markets, its
ability to service broad geographic
areas and its broad range of ser-
vices, EMT can service a buying
group's entire menu of transporta-
tion needs.
LEGAL LIABILITY HAS NOT
BEEN A SIGNIFICANT ISSUE
Ambulance drivers benefit from
r•
P'1
American Medical Response, Inc.
Table 5
Combined Balance Sheets
(in thousands)
Kidder, Peabody & Co.
Incorporated
December 31.
1991 1992 1993E 1994E
Current assets:
Cash and cash equivalents 52,530 514,134 32,140 52.723
Short term investments 925 260 260 260
Atxotmtsreceivable 29.132 32,121 50,057 67,968
Allowance for tmcompensated care 10-15Q 10.779 16.798 22.808
Net 518,982 521.342 533.259 545.160
Receivable from affiliated party 332 0 0 0
•
Advances so stockholders 641 0 0 0
Inventories 718 827 1,289 1,750
Prepaid expanses 1,658 1.803 3.81: 5.177
Deferred income taxes Q 1280 7.222 2.$44
Total currant assets 525,786 $42,648 $47,983 S64.909
Property and equipment, at cost: 18,482 21.308 38.090 51,366
Less, acctunulated depreciation lad 11.282 12.082 24.1$2
Net property and equipment 8.814 10.026 21.008 26,784
Other assets
Goodwill 450 11,251 20,514 37,404
Acc. Amort. 51 98 1,498 3.498
399 11.153 19.016 33,906
Covenants not to compete. net 1,009 735 1.145 1.555
Other $SSi 1.987 4497 5,562
Total assets 536.858 566,549 593.249 S132,717
1,
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 2.889 3,258 5,077 6,894
Accrued compensation. benefits and taxes 3431 4,725 7,363 9.998
Accrued expenses 1372 2,528 3.940 5349
Ltcome taxes payable 2,420 2,104 3.550 4,837
Deferred income taxes 1.457 0 0 0
Current maturities of long-term debt 4.717 4.421 36$. 3-641
Total current liabilities $16,486 517,036 523.616 530.719
Long-term debt, excluding current maturities
Deferred income taxes
Other liabilities
Total liabilities
7,179 8.372 16,372 16.372
911 4,240 7,222 9.840
¢2 1.144 1.783 2A21
525.199 530.792 548.993 S59.351
Stockholders' equity:
Common stock 90 103 103 113
Additional paid -in capital 266 21,267 20,867 37,867
Retained earnings 11353 14,387 23,287 35,386
Note receivable from officer f1Q) Q Q Q
Total stockholders' equity 511.659 535.757 544.256 573366
Commitments and contingencies
Total liabilities and stockholders equity 536.858 566.549 123,212 S132.717 9
Kidder, Peabody & C't .
I nc,IT, „r.it.'i
S350,000 -
S300.000
$250.000
S200,000
, S 150.000
a $100,000
$50,000
SO
1990
American Medical Response Inc.
Chart 1
Components of Revenue Growth
— R Subsequent Acquisitions
0 Initial Four Companies
1991
the Good Samaritan Rules, which
appear to limit liability_ To collect
damages, injured parties must prove
gross negligence. Also. paramedics
administer drugs while in communi-
cation with a doctor, under whose
license the paramedic is operating.
However, given the litigious nature
of our society and the increasing
sophistication of ambulance equip-
ment and personnel, we expect this
doctrine to continue to be chal-
lenged.
THOUGH RECENTLY FORMED,
EMT HAS EXCEEDED EXPECTA-
TIONS
The company was formed in
February 1992 for the specific pur-
pose of acquiring ambulance
companies. Concurrent with the
public offering, the company pur-
chased four ambulance companies
for $45.414,750. The consideration
paid was $10,195,000 plus
10
1992
1993E
4,143,500 shares of stock valued a'
$8.50 per share, the IPO price. The
four initial companies wera: Re-
gional Ambulance serving Alemeda
and Contra Costa Counties, includ-
ing the City of Oakland: Vanguard
Ambulance servicing San Jose.
Santa Clara and Santa Cruz Coun-
ties; New Haven Ambulance located
in Connecticut; and Professional
Ambulance Service, serving
Wilmington, Delaware. EMT, com-
bining its financial strength and its
local presence, recently signed a
contract to service Atlantic City.
N.J., on December 9, 1992, and an-
other for Aurora, Colorado outside
of Denver, signed only recently.
Acquisitions are being com-
pleted more rapidly than expected.
The company has already exceeded
its acquisition plans for all of 1993.
Acquisitions include:
• Mobile Medic based in Gulfport.
Mississippi (November 4. 1992).
• Ambulance Service Company of
Denver, Colorado (December 23.
1994E
1995E
1992).
• Buck Medical Services in Port-
land, Oregon (January 11, 1993).
s A-1 Ambulance, adjacent to the
company's Denver operations, serv-
ing Boulder, Colorado Springs, and
Longmont (April 27, 1993).
• Bridgeport Ambulance Service
(letter of intent signed June 2,
1993).
• Randle-Eastem Ambulance
Service of Miami (June 1. 1993).
• Reed Ambulance, also serving
the Denver area (letter of intent an-
nounced June 18, 1993).
CONTINUED EARNINGS
GROWTH EXPECTED
We anticipate revenue growth of
over 70% in 1993 based on internal
growth and acquisitions already
completed or announced. Esti-
mated 1994 revenue growth of
25-30% is based on internal growth
plus the acquisition of $55 million of
revenues. Since November 199Z
EMT acquired companies that could
generate $68 rni1 on of amuaized
revenues. Individual companies are
expected to grow revenues 10%-
11%
0%11% annually. These anticipated
acquisitions, plus internal growth.
should support EPS growth from
$0.67 in 1992 to an estimated $0.60
in 1993 and $1.00 in 1994.
Ambulance companies have
been expandng illy over
the past several years. Together,
the four founding companies of
American Medical Response gener-
ated annual revenue growth of 23%
from 1989 to 1992. We are antici-
pating internal company growth of
10%-12.5% over the next several
years. We attribute about 5 per-
centage points of this growth to an
increase in the number of ambu-
lance trips and the level of medical
intervention in certain of these trips.
Another 5 percentage points repre-
sent annual price increases as the
company will face higher personnel
costs as agreed to in a recent union
agreement Through EMT compa-
nies bidding for ambulance
contracts in contiguous areas, rev-
enues could rise another 2.5%
We anticipate a modest rise in
net margins over time. The
company's goal is to increase net
margins from the 4-5% range to 5-
6%. When a company is first
acquired. benefits should accrue
within sbc months as EMT central-
izes certain Overhead functions and
installs advanced dispatching sys-
tems. These benefits become
apparent in 6.12 months. In the
shod term, this may be partially of. -
set as the company adds corporate
staff to help absorb acquisitions. As
the company matures, corporate
expenses should rise Tess quickly
than sales.
We assume that price increases
wit closely match wage increases.
Kidder, Peabody & Co.
Incorporated
EMTs Califomia employees are
urionized and have recently agreed
to a three-year contract: a 6% raise
this year. 5% next year, and 4% the
year after. Price increases, particu-
larly when related to wage hires,
can whipsaw operating margins for
a shod period of time. Ambulance
companies cannot raise prices unti
they begin to experience increased
costs. Therefore. during the price
review process. margins may be de-
pressed. Once it is approved, the
company is afowed to price even
more aggressively for several
months to make up for the loss of
past revenues. After the second
inrdrna pericxi, prices fall to the
agreed-upon levels.
DJIA (6/30/93):
S&P (6/30/93):
Todd M. Berko
(212) 510-3727
3521.34
451.06
11
Kidder, Peabody & Co.
Incorporated
Editor. Ester Tapia Production: Elena 8. Wig
The information contained in this report has been Wen from 'redeem! ststatkal services and other sots whish we deem reliable. We do not
represent that itis accurate or Complete and should not be relied upon as such. Any opinions expressed herein rafted our judgment at this date
and are subject! dnnye.
Additional information on the seaaitles mentioned a available. now. Peabody d Co. lncorporared (Its parent or subsidiary thereof) or its
employees may from thea time hold shares or operons on any Issue included In this report
This report has been issued in the United Kingdom through Kidder, Peabody & Co. Ltd.. a mentor of The Securities and Fusses Authority and is
not intended tar private customers In the United Kingdom. It has been approved on behalf of Kidder. Peabody & Co. Ltd. by Kidder, Peabody &
Co. Incorporated. an affiliated company registered as a broker-dealer in the United States.
No part of this report may be reproduced In wry manner without the written permission of Kidder. Peabody & Co. Incorporated.
Coprri j W a 1953 Kidder. Peebody a Co. Incorporated.
KIDDER, PEABODY a CO. INCORPORATED - 10 IANOVER SOUARE, NEW YORK, NY 10005
12
RESEARCH FLASH
ktivcsi, Inc 280 i :r.?roti N1rct1 il.,rltii;tl. c:r trlt)a
:JO )S251+21
Kurt 11. Kammerer
AMERICAN MEDICAL RESPONSE, INC.
Largest and Leading EMS Consolidator Running Alread of Schedule
Prix:
52 -Werk Range:
Traded.
Market cap.:
Shares Out:
Fiscal Ycar:
S 19'/s
S 19'/a -S8'/.
NYSE -EMT
$211.8 Million
10.795 Million
December
Mvmt co -managed Ila onering 14 [lir within the last three years.
'Trading range since WO on Augu4 5, 1992
Earnings Per Share
1994 Est:
1993 Est.:
1992 Act:
1991 Act:
Investment Rating Reiterated: I3ny (1)
S1.10
$0.85
$0.67
$0.57
VINE. ht#x...ti+.
(202) 434-1706
June 22, 1993
P/E
17.8x
23.0x
29.2x
34.4x
With As two annartxmants over the past three business days, American Medical Response, Inc. (AMR) has continued
to demonstrate an ability to execute its founding corporuc strategic plan of leading the emergency medical services industry
cansolid:tion. This past Friday, AMR announced that it has signed a Letter of Intent to acquire Road Ambulances, Inc.,
headquartered in Denver, Colorado. Reel's 1992 revenue from existing operations was approximately S8 million. While terms
of the proposed acquisition were not disclosed, historically AMR's acquisitions have leen priced at 8x -10x the acquired
company's atter-tax income. Yesterday, AMR disclosed that it has reached a preliminary understanding concerning thc
acquisition of 911 Emergency Services of Modesto (Modesto), a California -baster company which had 1992 revenues in excess
of S50 million. The completion of the Modesto transaction is subject to customary due diligence.
11' AMR suxssfully closes the Real transaction, it will have effectively scoured its position as the largest private provider
of EMS services in the Denver metropolitan arca. To date, AMR has acquired three operators in Colorado, whose total
revenues for 1992 were approximately S25.3 trillion. Additionally, the company utas awarded a ncw two ycar municipal
contract to provide exclusive EMS service for Aurora, the slate's third largest city, with gross revenues of an estimated $2.7
million per year anticipated.
Although tae arc more than enthusiastic about the prospects of AMR's latest negotiations in California, investors need
to remain cogni• •ant of the extremely complex nature of the transaction. There arc nutncrous issues to be resolved before the
tans: Bion is consummated, and as always, timing is difficult to predict. In our opinion, it is unlikely that any more than
a modestly positive impact on fiscal 1993 would result from this prosposed transaction should it occur before the end of thc
year. However, if it were to close before the end of 1993, we believe our projections for 1994 would prove to be conservative.
Investors should note that since its IPO, AMR has acquired five private EMS companies (with two LOIS pending and
one "understanding" pending) that when combined had approximately S58.1 million in revenues (over S60 million pcnding)
during 1992. Remanbcr too. AMR has so far closed every LOl announced. We estimate that approximately S15 million more
in acquired annualized revenue would enable the company to acct our 1993 revenue projection of S202 million. Given that
over half of fiscal 19;'3 lies ahctd of us, and that AMR's acquisition program is seemingly gaining momentum, we encourage
investors to remain focused on the exciting long-term prospects for AMR. We arc maintaining our twelve -to -eighteen month
price target of 525 per share (29x our FY '93 EPS estimate of 085. and 22x our FY '94 EPS estimate of $ I.10). We reiterate
our purchase recommendation for long-term smell -cap investors seeking aipital appreciation.
. hIditiunai inrfbrrnatiurt int teen rrnnelated securities is assailable un retinal.
71a
information herein has been obtained from sur,, cotisidet'd rel,:d.1;, bin is not guaranteed, and it, Ioga cr with all estimate. and forecasts, is subject
t0 ' ai.g, NittIOUL report does not pUipo.1 to be a complete amtlysis of the security. issuer or industry, and is not an offer or a solicitation deems
to buy or scp any sc uritis. Advent, 1,a. employees may Wee rn.'ummended these securities to certain inoeatuts prior to this publication. Mvest, Inc. may
nuke a market in and Advert. Inc. or its employees may maintain position in, or buy tee sell these securities or related optima Any OTC -traded securities or
'kat -U.S. companies nta4ion d in this repot may not be .1;.u.d for sale m all Wates Consult your Account Executive. 0 1993 Advert. Inc
Total revenue
Co- 'eased Consolidated Income Statement
(S in thousands)
(Fiscal Year ends December 31)
1221 1222 1993E 1994E
S 94,104 $106,433 S202,379 $270,600
Salary At benefit expense 45,613 53,364 100,981 135,300
% of revenue 48.47% 50.14% 49.90% 50.00%
Uncompensated care expense 22,262 24,397 45,623 60,209
% of revenue 23.66% 22.92% 22.54% 22.25%
Other 13,717 15,217 30,694 40,996
% of revenue 14.58% 14.30% 15.17% 15.15%
Depreciation 2,772 3,066 5,822 8.118
% of revenue 125% 2.88% 2,iy, 3.00%
Total operating expenses 84,364 96,014 183,119 244,622
Earnings from operations
Operating margin
9.740 10.389 19,260 25,978
10.35% 9.76% 9.52% 9.60%
Non-operating expenses:
interest expense, nct 1,156 747 1,000 1,500
Amortization of intangibles 927 5.0, 1.600 2.000
Total ttott-operating expenses 2,083 1,308 2,600 3,500
Pre-tax earnings
Pre-tax margin
7,657 9,081 16,660 22,478
8.14% 8.53% 8.23% 8.31%
Income taxes 3,201 4,089 6,997 9,441
Tax rate 41.80% 45.03°/Q 42.00% 42.00%
Nct earnings 4,456 4,992 9,663 13,037
Nct margin 4.74% 4.69% 4.77% 4.82%
Tax adjustment
Pro tonna net income
Pro forma EPS
Wtd avg. sits. out.
:JL: t.
150 17801 — 4,306 5,670 9,663 13,037
S0.57 S0.67 $0.85 S1.10
7,576 8,447 11.400 11,900
..ta .,.. • arra
a ao, a.. ya.a++
.tee1 sies 01,040
.-• f w Part OR
.' 1 I ;
• a
I' j14'ti1wJ rnsi
Si
ff II FF 'I� ff �1Ir
..........
a.l�d II1f1.11C.111 II ,11 16 1W�t f .. SII h1r�i uU� ....... -.: .,II�,'
t �.�1 � PoILJ,L�.IIILIurllWll��.�:l,I(..
Chart courtesy of Bloomberg L.P.
r
Ladenburg,Thalmann &Co. Inc.
Investment Research
Fsmblished 1876
Member, all principal exchanges
Company Report
Update
American Medical Response, Inc.
(EMT - NYSE)
Rating: BUY
Price 52 -Week EPS (FY December)
5/11/93 Range 1992!! 1993E
5171/2 519 5/8 -38 1/4 30.67 50.80
DMA: 34459
Previous: 50.80
Consensus: N/M
S&P 500: 444
Investment Summary and Conclusion
American Medical Response reported excellent
QI EPS of 50.16, exceeding our estimate by
50.01. We believe that this unique company, the
leading and only publicly traded provider of
emergency and scheduled medical transport
services, will continue to grow rapidly as it leads
the way in the growth of privatization of the
industry. Industry sources currently estimate that
almost 50%, or S2.5 billion, of the $55 billion
spent on medical transport was provided by
private industry.
We reiterate our full year 1993 EPS estimate of
$0.80-50.85; if the rate of acquisition continues,
we expect to see further acceleration in growth,
and we will update our estimates. At its current
price, EMT sells for 21.1x the midpoint of our
50.80-50.85 1993 earnings per share range and
17x the midpoint of our preliminary 1994
estimate of 31.00-51.05. We continue to rate
the stock a BUY.
1991E
51.00
S 1.00
Nancy Moyer
(212) 872-1383
May 12, 1993
Quarterly Expectation
PIE 2Q Endin�un�
1993E 1991E Current Year Ago Div/Yld
21.9x 17,5x 50.18 30.20 Nil
Consensus: N/M
Approximate Reporting Date: July 1993
z
1s
1s
3oQ�
S
szs
31
199:
1993
T']]�� r, f,
110-_�U17-0o_O110.00 0-.0aootlo00o00000-0-0-
Technical Opinion —From its low in March, EMT has made
sequentially higher highs and lows, which is technically bullish.
Overhead supply around 19 5/8 appears to be the current target.
— Robert B. Ritter
Chart Courtesy of Bridge Information Systems, Inc
2
1
Ladenburg, Thalmann & Co. Inc.
FY December 1993 1992_ _ % Change
— .'
Revenues — 537.7 5252 49.4%
NetEamings 51.6 S1.I12) 51.3%
EPS 5016 50.14(2) 14.3%
Shares Outstandia _ 10A 7.6 37.3%
(I) Numbers in millions except EPS.
(2) Net earnings and earnings per share for 1992 are pro forma amounts reflecting
certain adjustments made to reflect income taxes that would have been payable if
one of the company's subsidiaries had been subject to corporate income taxes on
an OnRoir.R basis
Source: Company filings.
The company's acquisition program is ahead of schedule. Since EMT's initial public offering in August 1992,
four beachhead acquisitions have been closed. In 1992, the company acquired Mobile Medic Ambulance Service,
Inc., in Gulfport, Mississippi, and Ambulance Service Company in Denver, Colorado. The total expense for these
acquisitions was 53.2 million in cash, 51.8 million in subordinated promissory notes and 611,268 shares of common
stock.
In the first quarter of 1993, American Medical Response completed two acquisitions: Buck Medical Services, Inc.,
headquartered in Portland, Oregon, for 55.5 million in c. sh and 125,085 shares of common stock and A-1 Ambulance
Services, headquartered in Boulder, Colorado, for $2.1 million in cash and 306,250 shares of common stock. The
two had 1992 revenues of 515 million and 58.5 million, respectively. A fifth acquisition, Randle -Eastern Atnbulance
Service in Miami, Florida, is pending; we expect closure soon. The price is expected to be 391,459 shares of common
stock. Randle -Eastern had estimated 1992 revenues of $15 million, and it controls 60-70% of Dade county medical
transport. The company answers 911 calls in concert with the fire department, but its ambulances perform the actu:.l
transport. Unlike the others, the Miami acquisition will he a pooling of interest; as a result, we anticipate a restatement
of first quarter results to accommodate increased revenues (in the 515 million range), increased net income and
increased shares outstanding. The net effect will likely add 50.01 to earnings per share.
For the quarter, EMT's internal revenue growth acce:crated to 9.5% from 8.5% in the prior quar.er as a result of
increased transports and price increases. Salaries and benefits, as a percent of revenues, fell slightly in the period
from 50.4% to 50.3% as a result of favorable settlement of union negotiations, lowersalary expenses in newly acquired
properties, offset by additions to corporate salaries and benefits. The company currently has 2,200 employees.
Uncompen ated care fell slightly from 22.6% to 22.0% of revenues as a result of more effective billing and collection
procedures and lower levels of uncompensated care in newly acquired husinesses. Other expenses, which includes a
laundry list of items, rose from 15.1% of revenues to 15.8%, primarily as a result of increased corporate overhead.
Pretax margin rose to 7.8% vs. 7.4% last year. On a pro -forma basis, the tax rate rose from 42.2% to 43.5%, which
kept net after tax margin flat at 4.3%. Days' sales outstanding fell 14.3%, from 105 days to 90, as new management
implemented better collection procedures.
The company is maintaining a revenue run rate of about S185 million; we anticipate that by the second half of 1993,
the run rate will ramp up to more than 5200 million. Cash decreased during the quarter to 58.I million from 521.3
million at December 31, 1992 as a result of cash used for acquisitions and the early repayment of certain indebtedness.
We believe there are many lock -on acquisition candidates in the S5 million revenue range available to strengthen
regional operations. Current widespread uncertainty about the future of health-care reform is encouraging small
entrepreneurs to join forces with a larger market contender, better able to negotiate in a managed care environment.
The combined California operation, American Medical Response West, has a GPS (Global Positioning Satellite)
state-of-the-art dispatch system up and running. To ensure uninterrupted ambulance utilization, the prior computer
aided system is running parallel. When management is confident that the new system will operate perfectly, the
American Medical Response, Inc.
Iadenburg, Thalmann & Co. Inc. 3
111.1i 11
computer aided system win be sent to Colorado. to manage. dispatch &c Denver, Colorado Sins Ikaukkt and
Longmont. The computer aided system that had been used by part of American Medical R's o nse. West bcfora the
merger of the two California coni,sanies is now operational in New Havvn.
Amen. -an Mescal Reslnxtsc continues to build an infrasuucttue to marine its rapidly growing operations. Iota
a iidon of a corporate attorney. a chief operating officer. an au4 zor, a safety and risk management officer andsuppon
staff will nccr shale adding to corporate space. The added staffs, is expccird to add about SS00.000 to expenses
for the yea:.
The company has received a commitment from a group of banks fora S30 minion unsecured revolvingcredit fbeflity.
The lending group, which is kdby Fleet Financial Group, also includes Continental Bank. N.A. and Pacific Westcort
Bank. EMT expects to use the credit facility to consolidate existing debt. to finance future acquisitions. and for
working capital. The facility bears interest at the prime rate or LIBOR phrs 23%.
If proposed healthcare isoforms expand access for part or all of the currently uninsured. American Medical Response
should benefit, even if rates are capped. Ambulance services are such a small pan of the national health cue bill that
we do not anticipate they will be singled out for specific price caps, However. we do anticipate that managed
competition will encourage discounting for volume in the provision of non -emergency transport (30% of 1943
revenues). This should be more than offset by increased volume.
American Medical Response, Inc.
Ladenburg.Thalmann &CoInc.
Director of Research
Frank J. Prezelski, CFA (212) 940-0136
Associate Director of
Research: Robert B. Ritter (212) 872- 872-1444
Research Analysts
Jyoti Aggarwala: (212) 940-0181
Specialty Retail/Apparel Marmfacturirg
Barry Bryant, CFA: (212) 872-1604
Retail
Frederic P. Cogen, CFA: (212) 872-1620
Technology
Thomas D. Walsh: (212) 872-1592
Assistant
Louis Ehrenkrantz: (212) 872-1706
Special Situations
H. Erich Heinemann: (212) 940-0250
Economist
Rita Lavin: (212) 940-0251
Associate
Roger H. Lipton: (212) 940-0256
Food Service/Franchising
Nancy Moyer. (212) 872-1383
Health Care
Donald H. Newman, CFA: (212) 872-1648
Special Situations
Frank J. Prezelski, CFA: (212) 940-0136
Capital Goods
Robert B. Ritter: (212) 872-1444
Technical Analyst
Thomas M. Ryan: (212) 940-0217
Gaming
Barry Sabgal: (212) 940-0I44
Energy/Gas Distribution Utilities
Eugene Starr: (212) 872-1542
Technology Consultant
Ashish R.Thadhani: (212) 872-1550
Defense/Aerospace
Stanley J. Goldring: (212) 872-1316
David Morris, CFA: (212) 872-1417
Alan M. Silverman, CFA: (212) 872-1527
KG Securities Division
Investment Research
Director of Institutional Equities
Edward J. Shopkorn (212) 940-0281
Institutional Sales
William Agee
Gail L. Flanagan
Roger H. Lipton
John C. Moore, 111
Donald 11. Newman, CFA
Gene Pennell
Michael Redden
Barry Sahgal
George Thomson
Institutional Trading
(Listed)
(Listed)
(OTC)
Richard E. Meyer
Timothy S. Brackett
Richie Markowitz
Corporate Relations
Suzanne Webster
Research Publications
Senior Editor: Sara E. Bannin
Production
Editor: Kristync K. Singer
Production
Assistant: Radha Sukhu
(212) 940-0157
(212) 872-1674
(212) 940-0256
(212)872-1405
(212) 872-1648
(212)872-1304
(212) 940-0227
(212) 940-0144
(212) 872-1737
(212) 940-0118
(212) 940-0118
(212) 940-0183
(212) 872-1476
(212) 339-8889
(212)872-1462
(212) 872-1421
tadeotirg, Thalmann & Co. Inc. is a member of the New Yore Stock Escharge, Inc. and other principal escrons« and a registered U S Broker -Dealer. Ratko an advised Chau this analysis
report is caned solely for informational purposes and i ata lobe coratnrd as an offsv to sell or tic aoitciunon of an offer to buy. The Information contained herein is based on sources which we
believe to be .liable but u not guamntoad by is as being accurate and dors not purport to be s complete statement or ,unary of the evadable data. Any opinions expressed herein a re suremrnts
of our judgment a of the date of publication and ate anbjon to change without nonce. Reproduction withow wink", permission a prohibited The firm, rot officer, di mcior , employees and
customers may laves position. long or short. in de securities referred a heron, and other related socunue, and from time to time may rn vase or drrrase such position The firm (or persona
related thereto) may nape a market in the securities mentioned herein, and may from time to time perform investment banking or other samc s for. or sollct investment banking « other basins,
tram, and may have other velatiorahipa ,nth any :onpany mentioned in this report.
Tit closirg price of American Medical Response, ire. a as 01 May 11, 1991
Additional Information 1, mailable to clients upon written regimen.
Copyright ®1993: Ladenbrrrg Thabnann A Co. Inc
t05-93:16
4
-T
American Medical Response, Inc.
67 Batter march Street
Boston, MA 02110
['hone: (617) 261-1600 - Facsimile: '617) 261-1610
Letter to Shareholders
September 1993
Dear Fellow Shareholder:
We are delighted to report record financial results for the second quarter ended June 30,
1993. Total revenue for the second quarter was S44.8 million compared to $29.6 million
for the same period in 1992, an increase of approximately 52%. Net earnings for the
quarter were S2.4 million. or $0.22 per share, as compared to $1.4 million. or $0.18 per
share, in the same period a year ago. an increase of more than 71% in net earnings.
These record results speak for themselves and reflect the success of our business strategy
and commitment. The increase in revenue and earnings compared with 1992 pro forma
results were due primarily to the incremental revenue provided by acquisitions. additional
service contracts which were awarded in late 1992 and a company -wide increase in the
number of emergency and non-emergen.:y transports.
In addition to this excellent performance. a number of other positive events took place
during the quarter. We are particularly proud to welcome three new outstanding providers
to American's partnership of entrepreneurs. American acquired A- I Ambulance Services,
located in Boulder, CO in April: Reed Ambulance Service. Inc.. located in Denver, CO in
June: and Randle -Eastern Ambulance. located in Miami. FL. also in June. The Company
also began providing exclusive "911" emergency response service to the residents of
Aurora. CO on June 1. With these acquisitions in the Colorado marketplace, we arc now
in position to consolidate certain operational elements and bring greater efficiencies to the
market. as we have done in Northern California.
Since the end of the quarter. American completed the acquisition of Bridgeport Ambulance
Service. Inc. in Bridgeport. CT. Bridgeport's lung -standing reputation and location make
it an excellent complement to our New Haven. CT facility.
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Phone: 617/261-1600 - Fax: 617/ 261-1610
FOR IMMEINATE RELEASE
Contact: James E. McGrath
Director
617/261-1600
or
Ronald M. Levenson
Senior Vice President &
Chief Accounting Officer
617/261-1600
AMERICAN MEDICAL RESPONSEANNOUNCES RECENT DEVELOPMENTS
Boston, MA -- September 23, 1993 -- American Medical Response, Inc. ( NYSE: EMT ), the
nation's leading provider of ambulance services, announced today that it has signed a Letter of
Intent to acquire Life Medical Industries, Inc., headquartered in Stockton, California. Life
Medical, which serves the San Joaquin County area, had revenues of approximately 54.5
million in 1992. Specific terms of the proposed acquisition were not disclosed.
The completion of the transaction is subject to, among other things, negotiation of definitive
agreements and the completion of customary due diligence.
"In our strategic review of the industry, we came to the conclusion that a business
combination would help us continue our growth by providing important additional
managerial, financial and operational resources," said Louis K. Meyer, Chief Executive
Officer of Life Mcdical Industries, Inc. "With American as a partner, we will continue to be
able to provide the kind of quality service that we have delivered to the citizens of San
Joaquin County since 1967. We're simply delighted to join the American team."
"We are excited about the opportunity to add Life Medical Industries to our expanding service
base in Califomia," commented Paul M. Verrochi, Chairman, Chief Executive Officer and
President of American Medical Response, Inc. "This is another example of an industry leader
joining our team. Lou Meyer, who is President of the California Ambulance Association and
a member of the state's Emergency Medical Services Commission, and his partners, Michael
Nilssen and JoAnn Hodge, have together built an outstanding organization based on quality
first."
-- continued --
Separately, the Company said that on September 21, 1993, it was notified by the Denver
Regional Office of the Federal Trade Commission ("FTC") that the FTC is conducting a
preliminary inquiry of the facts and circumstances concerning the Company's recent
acquisition of Reed Ambulances, Inc. to determine whether the Reed acquisition in the
Denver metropolitan area complied with federal antitrust laws. The FTC has requested that
the Company provide certain information to it and the Company is currently evaluating the
request and preparing its response. During the first six months of 1993, Reed had revenues of
approximately $4.8 million.
American Medical Response is the Ieading provider of emergency and non -emergency
ambulance services in the United States. The Company currently provides ambulance
services in Northern California, South Central Connecticut, Northern Delaware and Southern
New Jersey, Southern and Central Mississippi, Portland, Oregon and surrounding areas,
Central Colorado and Dade County, Florida. The Company's growth strategy is focused on
acquiring new businesses, expanding existing operations, improving the quality and efficiency
of operations, and promoting and capitalizing on tho expertise of the operating executives of
its providers.
#
n
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Phone: 617/261-1600 - Fax: 617/ 261-1610
FOR IMMEDIATE REL.F.ASF,
Contact: James E. McGrath
Director
617/261-1600
or
Ronald M. Levenson
Senior Vice President &
Chief Accounting Officer
617/261-1600
AMERICAN AIEDICALBESPONSE ANNOUNCES
INCREASE IN CREDIT LINE TO S50 MILLION
Boston, MA — September 22, 1993 -- American Medical Response, Inc. (NYSE: EMT), the
nation's leading provider of ambulance services, announced today that it has received a
commitment from its existing lenders to increase their credit line from $30 million to $50
million. The facility, led by Fleet Bank of Massachusetts, N.A., also includes Continental
Bank, N.A. and Pacific Western Bank.
American intends to use the credit facility to finance acquisitions and for general working
capital purposes. The credit facility, which bears interest at the prime rate, is anticipated to be
closed shortly.
"We are delighted that our lenders have elected to increase the Company's credit line. Our
relationship with this outstanding group of institutions has proven extremely rewarding,'' said
Paul M. Verrochi, Chairman, Chief Executive Officer and President of American Medical
Response, Inc. "This additional capital will help us to build upon our existing business by
enabling us to continue our acquisition programs and further improve our current operations."
Leo R. Breitman, Chairman and Chief Executive Officer of Fleet Bank of Massachusetts, N.A.,
commented, "Our relationship with American has been a truly positive one, and we look
forward to building upon this relationship as American develops and expands their business."
-- continued --
- 2 -
American Medical Response is the leading provider of emergency and non -emergency
ambulance services in the United States. The Company currently provides ambulance services
in Northern California, South Central Connecticut, Northern Delaware and Southern New
Jersey, Southern and Central Mississippi, Portland, Oregon and surrounding areas, Central
Colorado and Dade County, Florida. The Company's growth strategy is focused on acquiring
new businesses, expanding existing operations, improving the quality and efficiency of
operations, and promoting and capitalizing on the expertise of the operating executives of its
providers.
# # #
f
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Phone: 617/261-1600 - Fax: 617/ 261-1610
FOR IMMEDIATE RELEASE
Contact: Ronald M. Levenson or Robert C. Hubbell
Senior Vice President & Edelman Worldwide
Chief Accounting Officer 212/704-8255
617/261-1600
AMERICAN MEDICAL R PONSE. INC.
FILE; FOR PUBLIC OFFERING
Boston, MA -- August 13, 1993 -- American Medical Response, Inc. ( NYSE: EMT )
announced today the filing with the Securities and Exchange Commission of a registration
statement relating to the public offering of 2,750,000 shares of common stock. Of the
2,750,000 shares to be offered, 2,000,000 shares will be issued and sold by the Company and
750,000 shares will be sold by Selling Stockholders. Of the 2,750,000 shares to be offered,
2,200,000 shares will be offered initially to U.S. persons by the U.S. underwriters and
550,000 shares will be offered initially to non -U.S. persons by the International Managers.
Certain of the Selling Stockholders have granted the underwriters an option to purchase an
additional 412,500 shares to cover over -allotments. The net proceeds of the sale of shares by
the Company will be used for general corporate purposes, including acquisitions and the
reduction of borrowings under the Company's revolving line of credit.
The U.S. offering will be managed by Lehman Brothers, Kidder, Peabody & Co. and Advest,
Inc., and the international offering will be led by Lehman Brothers International (Europe),
Kidder, Peabody International Limited and Advest, Inc.
American Medical Response is the leading provider of emergency and non -emergency
ambulance services in the United States. The Company currently provides ambulance
services in Northem California, South Central Connecticut, Northern Delaware and Southern
New Jersey, Southern and Central Mississippi, Portland, Oregon and surrounding areas,
Central Colorado and Dade County, Florida. The Company's growth strategy is focused on
acquiring new businesses, expanding existing operations, improving the quality and efficiency
of operations, and promoting and capitalizing on the expertise of the operating executives of
its providers.
-- continued --
a
- 2 -
A registration statement relating to these securities has been filed with the Securities and
Exchange Commission but has not yet become effective. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement becomes effective.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy,
nor shall there be any sale of these securities in any state in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the securities laws of any
such state.
A copy of a preliminary prospectus relating to these securities may be obtained from the
Prospectus Department, Lehman Brothers, Inc., 34 Hubert Street, 3rd Floor, New York, New
York 10017.
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Phone: 617/261-1600 • Fax: 617/ 261-1610
FOR IMMEDIATE RELEASE
Contact: Ronald M. Levenson or Robert C. Hubbell
Senior Vice President & Edelman Worldwide
Chief Accounting Officer 212/704-8255
6I7261-1600
AMERICAN MEDICAL_RESPONSE REPORTS INCREASED
SECOND QUARTER EARNINGS
— Revenue, Earnings, and EPS Reach Record Levels --
Boston, MA -- August 5, 1993 -- American Medical Response, Inc. ( NYSE: EMT) announced
today total revenue of $44.8 million for the second quarter of 1993 versus $29.6 million for the
same quarter of 1992, an increase of 51%. Net earnings for the quarter were $2.4 million as
compared with pro forma net earnings of $1.4 million, an increase of 71% from the 1992 second
quarter. Earnings per share were $0.22 as compared with pro forma earnings per share of $0.18
for the same quarter a year ago based on 11,035,618 weighted average shares outstanding versus
7,967,563 weighted average shares outstanding during the prior period. The increase in the
weighted average number of shares outstanding results from the Company's initial public
offering in August of 1992 and shares issued in connection with acquisitions.
Total revenue for the six months ended June 30, 1993 were $86.2 million versus $58.3 million
for the same period of 1992, an increase of 48%. Net earnings for the six months ended June 30,
1993 were $4.1 million as compared with pro forma net earnings of $2.4 million, an increase of
71%. Earnings per share were S0.38 as compared with pro forma earnings per share of $0.30 for
the same period a year ago based on 10,916,042 weighted average shares outstanding versus
7,967,563 weighted average shares outstanding during the prior period.
"Our acquisitions of beachhead operations completed since our initial public offering have been
a major factor in our earnings results," commented Paul M. Verrochi, Chairman and Chief
Executive Officer of American Medical Response, Inc. "An increased numb.7 transports by
all of our providers during the second quarter also contributed to the increases. During the
second quarter, we also successfully completed the renegotiation of two of our California
-- continued --
-t
T
- 2 -
provider contracts, and the Company has continued its acquisition program, with the recent
completion of our first 'lock -on' acquisition, Bridgeport Ambulance Service, Inc. of Bridgeport,
Connecticut."
Mr. Verrochi continued, "As our Company has expanded, we have taken important steps during
the second quarter to strengthen our management team and operational capabilities. Paul T.
Shirley, formerly Chief Executive Officer of our subsidiary, AMR West, was appointed Chief
Operating Officer for American Medical Response, Inc. Also, Robert W. Trinkleback, formerly
a Corporate Safety Manager with Federal Express, Inc. was named Corporate Director of Safety
and Health. We feel confident that these appointments will further strengthen our team as we
build for the future."
Mr. Verrochi further commented on the preliminary understanding related to the possible
acquisition of a large California-based ambulance service provider, previously announced in the
second quarter, "We continue to caution our investors and analysts from drawing any
conclusions on this complex transaction, and anticipate that more information will be available
over the next few months."
American Medical Response is the leading provider of emergency and non -emergency
ambulance services in the United States. It currently serves an aggregate population of over six
million people in California, Colorado, Connecticut, Delaware, Florida, Mississippi, New Jersey,
Oregon and Washington. In 1992, American Medical Response responded to more than 390,000
Uansports in response to calls for its services. Through the consolidation of local service
providers, American intends to expand and build its service areas and maintain its position as the
country's leading ambulance service provider.
FINANCIAL TABLE, NEXT PAGE
AMERICAN MEDICAL RESPONSE, INC.
Financial Highlights
(in thousands, except per share amounts)'
Three months ended Six months ended
June 30. June 30.
1993 19922 129.3. 1992.2
Total revenue. S 44.778 S 29.553 S 86.190 S 58.343
Operating expenses:
Salaries and benefits 21,630 14,387 42,279 29,114
Uncompensated care 9,852 7,083 19,116 13,659
Other 7,319 4,334 14,090 8,946
Depreciation... 1,194 923 2,363 1,752
Amortization of intangibles344 127 659 273
Total operating expenses
40139 26.854 78307 53.744
Earnings from operations 4,439 2,704 7,683 4,599
Interest expense, net. 203 261 433 532
Earnings before income taxes 4,236 2,443 7,250 4,067
income taxes. 1.841 1.025. 3.147 1.716
Net earnings $ 2.395 $ 1,413 $ 4.103, $ 2.351
Net earnings per common share S-222 $ 0.18 $ 0.38 $ 0.30
Weighted average shares outstanding 11.036 7.963 10.916 , 7.968
1Amounts for all periods include the results of Randle -Eastern Ambulance Service, Inc. acquired in June 1993 and
accounted for as a pooling -of -interests.
2Net earnings and earnings per share for 1992 arc pro forma amounts reflecting certain adjustments made to reflect
income taxes that would have been payable if one of the Company's subsidiaries had been subject to corporate
income taxes on an ongoing basis.
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Phone: 617261-1600 - Fax: 617/ 261-1610
FOR IMMEDIATE RELEASE
Contact Dominic J. Puopolo or Robert C. Hubbell
Executive Vice President & CFO Edelman Worldwide
617/261-1600 212/704-8103
AMERICAN MEDICAL RESPONSE, LNC. APPOINTS
ROBERT W. TRINKLEBACK CORPORATE DIRECTOR OF
SAFETY AND HEALTH
Boston, Mass. — July 19, 1993 -- American Medical Response, Inc. (NYSE: EMT) today
announced that Robert W. Trinkleback, CSP has been appointed Corporate Director of Safety
and Health. Mr. Trinkleback had most recently been with Federal Express, Inc., where, as
Corporate Safety Manager, he designed and administered corporate safety, health and
environmental programs and policies.
Mr. Trinkleback, 35 years old, brings extensive senior level experience to American Medical
Response, Inc. During his eight-year tenure at Federal Express, Mr. Trinkleback developed and
implemented safety programs to reduce vehicle accidents, address environmental and industrial
hygiene concerns, and minimi?e workers compensation claims. Prior to Federal Express, Mr.
Trinkleback was Manager of Safety and Risk Management for Retail Express, Inc., and prior to
that was a Safety Engineering Representative for Aetna Casualty and Surety Company.
Mr. Trinldeback is a graduate of West Virginia University, where he also received a Master's
Degree in Industrial Safety Management. He is a Certified Safety Professional (CSP) and is an
active member in the American Society of Safety Engineers. National Safety Council, and the
National Association of Environmental Professionals. Mr. Trinkleback is also a former certified
EMT in the state of New Jersey.
Paul M. Verrochi, Chairman, CEO and President of American Medical Response, Inc.
commented, "We are extremely pleased to welcome Robert Trinkleback as Corporate Director of
Safety and Health. His extensive experience in building safety programs in a wide variety of
areas for businesses with similar transportation modalities will be invaluable to us as we expand
the scope of our activities through additional acquisitions."
"1 am very excited to be joining American Medical Response, Inc., because they clearly
recognize that safety and health management programs are the key determinant of insurance
claims. There are substantial synergies and benefits to be realized through bringing national
programs to the various locations," Mr. Trinkleback added.
-- continued --
— 2 --
American
American Medical Response is the leading provider of emergency and non -emergency pre-
hospital care in the ambulance services industry. It currently serves an aggregate population of
over six million people in California, Colorado, Connecticut, Delaware, Florida, Mississippi,
New Jersey, Oregon and Washington. American Medical Response responded to more than
450,000 total emergency service calls during 1992. Through the consolidation of local service
providers, American intends to expand and build its service areas and maintain its position as the
country's leading ambulance service provider.
# # #
f
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Phone: 617/261-1600 - Fax: 617/ 261-1610
FOR IMMEDIATE RELEASE
Contact James E. McGrath or Robert C. Hubbell
Director Edelman Worldwide
617/261-1600 212/704-8255
AMERIC N MEDICAL• RESPONSE
COMPLETES CONNECTICUT ACQUISITION
Boston, MA — July 16, 1993 -- American Medical Response, Inc. ( NYSE: EMT ) announced
today that it has closed the acquisition of Bridgeport Ambulance Service, Inc., headquartered
in Bridgeport, Connecticut. Bridgeport Ambulance, which serves the city of Bridgeport and
its surrounding communities, had revenues of approximately $5.1 million in 1992. Specific
terms of the acquisition were not disclosed.
"Our existing beachhead operation in New Haven provides us the opportunity to realize
significant synergies at Bridgeport Ambulance. In the long run, we believe that these
synergies will benefit both the Bridgeport community and our patients," commented Paul M.
Verrochi, Chairman and Chief Executive Officer of American Medic.31 Response. "Over the
past 26 years, Bridgeport Ambulance and its owner, Joe Lansing, have built an outstanding
record of service, one which we intend to build upon."
American Medical Response is the leading provider of emergency and non -emergency pre-
hospital care in the ambulance services industry. It currently serves an aggregate population
of over six million people in California, Colorado, Connecticut, Delaware, Florida,
Mississippi, New Jersey, Oregon and Washington. American Medical Response responded to
more than 450,000 total emergency service calls during 1992. Through the consolidation of
local service providers, American intends to expand and build its service areas and maintain
its position as the country's leading ambulance service provider.
# # #
r
American Medical Response, Inc.
67 Batterymarch Street, Suite 300
Boston, MA 02110
Phone: 617/261-I600 - Fax: 617/ 261-1610
FOR INIIMIED A E SE
Contact: James E. McGrath or Robert C. Hubbell
Director Edelman Worldwide
617/261-1600 212/704-8255
AMERICAN MEDICAL_RESPONSE CLOSES
PREVIOUSLY ANNOUNCED ACQUISITION
Boston, MA — July 7, 1993 -- American Medical Response, Inc. ( NYSE: EMT ) announced
today that it has closed the acquisition of Reed Ambulances, Inc., headquartered in Denver,
Colorado. Reed's 1992 revenues were approximately $9 million. Specific terms of the
acquisition were not disclosed.
"The business combination of Reed with our two other Colorado service providers — A-1 and
Ambulance Service Company — should enable us to improve service levels while holding
down costs, all to the benefit of the citizens of Denver and its outlying communities,"
commented Paul M. Verrochi, Chairman and Chief Executive Officer of American Medical
Response.
American Medical Response is the leading provider of emergency and non -emergency pre-
hospital care in the ambulance services industry. It currently serves an aggregate population
of over six million people in California, Colorado, Connecticut, Delaware, Florida,
Mississippi, New Jersey, Oregon and Washington. American Medical Response responded to
more than 450,000 total emergency service calls during 1992. Through the consolidation of
local service providers, American intends to expand and build its service areas and maintain
its position as the country's leading ambulance service provider.
American Medical Response, Inc.
67 Batterymarch Street, Suite 300
Boston, MA 02110
Phone: 617261-1600 - Fax: 617/ 261-1610
FOR IMMED A REELEA. E
Contact James E. McGrath or Matthew J. Harrington
Director Edelman Worldwide
617/261-1600 212/704-8103
American MedicalResponse Reaches Preliminary
Understanding with California Service Provider
Boston, MA — June 22, 1993 — American Medical Response, Inc. ( NYSE: EMT) today
announced that it has reached a preliminary understanding concerning the acquisition of a
California-based company which had 1992 revenues in excess of $50 million.
The completion of the transaction is subject to customary due diligence.
"This transaction is extremely complex, and our due diligence is only now beginning. While
potentially an outstanding fit with our present California operations, there are also many
complications which need to be addressed before the transaction can be consummated," said
Paul M. Verrochi, Chairman and Chief Executive Officer of American Medical Response, Inc.
American Medical Response is the leading provider of emergency and non -emergency pre-
hospital care in the ambulance services industry, and is the only publicly owned ambulance
service company in the United States. It currently services an aggregate population of more
than six million people in California, Colorado, Connecticut, Delaware, Florida, Mississippi,
New Jersey, Oregon and Washington. American Medical Response intends to penetrate new
areas of the country by expanding its established regions and consolidating operations.
# # #
American Medical Response, Inc.
67 Batterymarch Street, Suite 300
Boston, MA 02110
Phone: 617/261-1600 - Fax: 617/ 261-1610
FOR IMMEDIATE RELEASE
Contact: James E. McGrath or Matthew J. Harrington
Director Edelman Worldwide
617/261-1600 212/704-8103
,'AMERICAN MEDICAL RESPONSE APPOINTS
PAUL T. SHIRLEY AS CHIEF OPERATING OFFICER
Boston, MA — June 3, 1993 -- American Medical Response, Inc. ( NYSE: EMT) today
announced that Paul T. Shirley has been appointed Chief Operating Officer, a newly created
position. Mr. Shirley had most recently been Chief Executive Officer of American Medical
Response West, the largest subsidiary of the parent.
As Chief Operating Officer, Mr. Shirley will be responsible for directing the national
consolidation of American's nine current operating units. Mr. Shirley will report directly to
Paul M. Verrochi, Chairman and Chief Executive Officer of American Medical Response, Inc.
Mr. Shirley, 53 years old, has been a leader and pioneer in the ambulance service business for
over 30 years. Prior to the formation of American Medical Response, Mr. Shirley was
President and Chief Executive Officer of Vanguard Ambulance Services and its predecessor,
Santa Cruz Ambulance Service, since 1963.
"Because of our extraordinary growth, it is time to focus on the challenge of consolidation
itself, and to further develop the infrastructure and programs necessary to bring our Company
to the next level of performance. This is the first of several key additions to our top-level
corporate management team which we will be making over the coming months," commented
Paul M. Verrochi, Chairman and Chief Executive Officer of American Medical Response, Inc.
"Since our Initial Public Offering last year, Paul Shirley has demonstrated time and again his
exceptional leadership abilities. He has managed and directed the successful consolidation of
our two large existing California providers; he has been the chief architect and builder of our
key Colorado strategy, where we have already made two acquisitions and obtained a
significant new municipal contract; and he has been a key player in bringing other companies
and their leaders into our growing network of providers."
"I am excited about the opportunity to utilize my experience at the corporate level,"
commented Mr. Shirley. "We will be working to improve management techniques in certain
areas, such as purchasing and accounts receivable, as well as developing new quality
programs, coordinating the development of technology systems, and improving management
techniques. I look forward to this important set of challenges."
-- continued —
Mr. Shirley is also active in public affairs. He is currently a member of the California
Ambulance Association, of which he was President from 1968 to 1969. He served as a
member of the Santa Cruz County Planning Commission from 1965 to 1969; as a member of
the State of California Narcotic Addict Evaluation Authority from 1971 to 1974; and as a
member of the Board of Directors of Federal Prison Industries, Inc. from 1982 to 1991. Mr.
Shirley has also served as a member of the Santa Cruz County Emergency Medical Care
Commission and the State of California Emergency Medical Service Advisory Committee.
American Medical Response is the leading provider of emergency and non -emergency pre-
hospital care in the ambulance services industry, and is the only publicly owned ambulance
service company in the United States. It currently serves an aggregate population of more
than 6 million people in California, Colorado, Connecticut, Delaware, Florida, Mississippi,
New Jersey, Oregon and Washington. American Medical Response responded to more than
450,000 emergency service calls during 1992. Through strategic acquisitions, American
Medical Response intends to r ,...: new areas of the country by expanding its established
regions and consolidating operations
# # #
American Medical Response, Inc.
67 Batterymarch Street, Suite 300
Boston, MA 02110
Phone: 617/261-1600 - Fax: 617/ 261-1610
FOR IMMEDIATE RELEASE
Contact: James E. McGrath or Matthew J. Harrington
Director Edelman Worldwide
617/261-1600 212/704-8103
:.ui
1 . 3r110111 : $ t 1 .r : • ti:
SECONDISHINECUCIELSER3EICLEROYIDERLEININEESDLORADO
MUNICIPAL CONTRACT: AND COMPLETES MIAMI ACQUISITION]
Boston, MA — June 2, 1993 — American Medical Response, Inc. ( NYSE: EMT ) today
announced that it has signed a Letter of Intent to acquire Bridgeport Ambulance Service,
Inc., headquartered in Bridgeport, Connecticut; that it has been awarded an exclusive
contract to provide emergency ambulance services in Aurora, Colorado; and that it
successfully closed the previously -announced acquisition of Randle-Eastem Ambulance,
headquartered in Miami, Florida.
Sign Letter of Intent
Bridgeport Ambulance, which serves the city of Bridgeport and its surrounding
communities, had revenues of approximately $5.1 million in 1992. "Bridgeport
Ambulance is a highly regarded provider of emergency medical services. They have a
long-standing and successful record of community commitment." said Paul M. Verrochi,
Chairman and Chief Executive Officer of American Medical Response, Inc. "We already
have a substantial presence in Connecticut through our New Haven provider, and we
believe that this addition will result in a terrific business combination."
"We are confident that the combination of our company with American Medical Response
will produce significant benefits for our patients and the Bridgeport community as a
whole," Joseph D. Lansing, President of Bridgeport Ambulance Service, Inc., said.
"American is a perfect fit to continue providing the kind of quality service we've delivered
since 1966."
The completion of the transaction is subject to negotiation and execution of definitive
agreements and the completion of customary due diligence. Specific terms of the proposed
acquisition were not disclosed.
— continued —
7
-2_
, ' warded Denver Contract
The Company also announced that it has recently been awarded a new municipal contract
to provide exclusive emergency medical transportation services for the community of
Aurora, Colorado, the third largest city in Colorado with a population of 232,000. This
contract, which has an initial two-year term, was awarded to American's subsidiary
Ambulance Service Company in Denver. The Company began providing service
yesterday, June 1st. The Company estimates gross revenues at $2.7 million per year with
approximately 9500 transports per year, and expects possible additional revenues from
hospitals and nursing homes.
Carl Unrein, CEO of American's subsidiary Ambulance Service Company, commented,
"We are delighted to add Aurora to our expanding service area, and believe wecan
improve the standards of delivered care and response times in the community."
Completes Florida Acquisition
American Medical Response also announced that it has successfully completed its
previously announced acquisition of Randle -Eastern Ambulance, headquartered in Miami,
Florida. Randle -Eastern, which serves the Dade County area, had 1992 revenues of
approximately $17 million. The acquisition was accounted for on a pooling -of -interests
basis.
"During our due diligence process, we came to the conclusion that Randle -Eastern
represents a terrific base for future expansion in the important Florida market. This is a
first-class operation with a strong management team that can use American's additional
resources to further build its territory," commented Mr. Verrochi.
Robert L. Garner, President of Randle -Eastern Ambulance, commented, "We are excited
about being a part of American Medical Response. I am convinced that joining forces with
them will benefit both our patients and our company over the long-term."
American Medical Response is the leading provider of emergency and non -emergency pre-
hospital care in the ambulance services industry, and is the only publicly owned ambulance
service company in the United States. It currently serves an aggregate population of more
than 6 million people in California, Colorado, Connecticut, Delaware, Florida, Mississippi,
New Jersey, Oregon and Washington. American Medical Response responded to more
than 450,000 emergency service calls during 1992. Through strategic acquisitions,
American Medical Response intends to penetrate new areas of the country by expanding its
established regions a.id consolidating operations.
# # #
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Telephone: (617)261-1600 - Facsimile: (617) 261-1610
Paul M. Verroclu
Chairman, President and Chief Executive Officer
Paul M. Verrochi, 44, has spent his career prior to the formation of American Medical
Response, Inc. starting, building, and managing two highly successful quality service
companies. In 1972, Mr. Verrochi founded Omni Building Services, a janitorial services firm
which he built from inception to more than 10,000 employees over a 14 -year period. When
Omni was sold to ADT Limited in 1984, he continued to manage the business for an
additional two years.
In 1987, Mr. Verrochi created American Environmental Group, Inc. through the merger and
subsequent consolidation of several small asbestos removal concerns. In 1989, the Company
was merged with Allwaste, Inc., a national publicly -held environmental corporation.
Beginning in 1991, Mr. Verrochi created a business plan to consolidate the ambulance
services business. American Medical Response, Inc. was formed in February 1992 with that
express aim, and in a short period of time has become the pre-eminent force in its field. As
with Omni and American Environmental group, the Company competes on the basis of
quality in a fragmented industry where economies of scale and synergies can be translated
into profit and into building further competitive barriers to entry.
During his tenure at Omni/ADT and American Environmental Group/Aliwaste, Mr. Verrochi
completed over 30 acquisitions.
Mr. Verrochi received his B.S. degree from the United States Merchant Marine Academy at
Kings Point, New York.
1
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
Paul T. Shirley
Director, Chief Operating Officer and Executive Vice President
Paul T. Shirley, 53, is Chief Operating Officer, Executive Vice President and a Director of
American Medical Response, Inc. He has been in the ambulance business since 1963, when
he began serving as President of Vanguard Ambulance Services (formerly PacMed), one of
the founding companies of American Medical Response, Inc. Until recently assuming the
position as Chief Operating Officer, Mr. Shirley was Chief Executive Officer of AMR West,
the Company's largest subsidiary.
Mr. Shirley has extensive experience in both the management and acquisition of ambulance
services, having completed several acquisitions to form Vanguard. As Chief Operating
Officer, he is responsible for the integration and consolidation of the Company's newly -
acquired businesses, and he also plays an active role in corporate strategy and acquisition
planning.
Mr. Shirley has been the President of the California Ambulance Association and remains
active in both that organization and the American Ambulance Association. His record of
public service includes having been appointed by the President of the United States to the
Board of Directors of Federal Prison Industries, Inc. and by the Governor of California to the
Narcotic Addict Evaluation Authority. He is also active in other civic affairs.
I
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
Dominic J. Puopolo
Executive Vice President, Chief Financial Officer and Treasurer
Dominic J. Puopolo, 50, has been Executive Vice President, Chief Financial Officer,
Treasurer and a Director of American Medical Response, Inc. since its inception in February
of 1992. Mr. Puopolo is an original founder of the Company. He is responsible for the
Company's financial policies and procedures, acquisition program and strategic planning.
In 1987, Mr. Puopolo co-founded American Environmental Group, which was created
through the acquisition, merger and consolidation of several asbestos abatement service
companies located in New England. In 1989 American Environmental Group merged with
Aliwaste, Inc. a national, publicly -held, environmental service company. Mr. Puopolo
continued to serve as Vice President and Chief Financial Officer of that division through
1990.
From 1983 to 1987, he was Executive Vice President and Chief Financial Officer of Omni
Building Services, Inc., a janitorial services firm. The company merged with ADT, Ltd. in
1984, and he continued to serve as Chief Financial Officer of ADT Maintenance Service,
Inc: s Northeast Region. Mr. Puopolo was responsible for the company's financial policies
and the acquisition program.
Mr. Puopolo received a Bachelor of Science degree from Northeastern University and a
Masters of Business Administration from Suffolk University. Mr. Puopolo is a Certified
Public Accountant. He is a member of the American Institute of Certified Public
Accountants, Inc., Massachusetts Society of Certified Public Accountants, Inc., and the
National Association of Accountants.
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
Michael J. McClymont
Senior Vice President
Michael J. McClymont, 50, is Senior Vice President of American Medical Response, Inc. He
has spent his entire career in service industries. Prior to joining American Medical Response,
Inc., Mr. McClymont worked exclusively on operational and financial analysis of acquisitions
at Exel Holdings, Ltd.
In 1989, Mr. McClymont was President and Chief Operating Officer of Mycor Services, a
food and vending service company. From 1988 to 1989, he•was President of Food Concepts,
Inc., an indirect subsidiary of ADT. From 1985 to 1988, Mr. McClymont served as Vice
President of business development for ADT Maintenance Services where he was responsible
for numerous service company acquisitions.
From 1984 to 1985, Mr. McClymont served as a regional =lager for Canteen Services
where he managed P&L operations in the greater New York area. From 1979 to 1984, he
served as a Vice President for vending operations at ARA Services with full P&L
responsibility for all vending services located in the Northeast.
Mr. McClymont received both his B.S. and M.B.A. degrees from Manhattan College in
Riverdale, New York.
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
Ronald M. Levenson
Senior Vice President and Chief Accounting Officer
Ronald M. Levenson, 36, is Senior Vice President, Chief Accounting Officer and Assistant
Secretary of American Medical Response, Inc. From 1985 to September of 1992, he was a
Senior Manager at KPMG Peat Marwick, a public accounting firm, where he had been
employed since 1979.
While at Peat Marwick, Mr. Levenson specialized in providing professional accounting and
auditing services to publicly held companies. He is experienced in working with initial and
secondary offering.. of common stock, mergers and acquisitions and leveraged buyouts.
Mr. Levenson is also a former lecturer in accounting at the Boston University School of Law
and Northeastern University.
Mr. Levenson received his B.A. degree from Northeastern University. He is a Certified
Public Accountant and a member of the American Institute of Certified Public Accountants
and the Massachusetts Society of Certified Public Accountants.
American Medical Response, Inc.
67 Batter,march Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
William E '1 r" Rim
Executive Vice President, Director
William E. Riggs, 51, is Executive Vice President and Director of American Medical
Response, Inc. as well as Chief Executive Officer of American Medical Response West.
Through his 29 year tenure in the ambulance service business, Mr. Riggs has come to be
recognized as one of the "founding fathers" of the modern ambulance industry, building
Regional Ambulance into the largest and most respected ambulance service provider in
California.
Mr. Riggs has also played a leadership role in developing and pioneering the emergency
medical service systems for Alameda and Contra Costa counties. He has served as a member
of the emergency Medical Care Committee for Alameda county. In addition, he has served on
the Governor's State Task Force on Earthquake Preparedness and was appointed to the State
Legislature Joint Commission on Police, Fire and Medical Services. He has also served as a
Director of the American Association and past president of the California Ambulance
Association.
American Medical Response, Inc.
67 Batteryinarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
Joseph R. Paolella
Executive Vice President, Director
Joseph R. Paolella, 42, is Executive Vice President and a Director of American Medical
Response, Inc. Mr. Paolella has been in the ambulance services business since 1975. He is
currently President, Chief Executive Officer and Director of New Haven Ambulance Service
Inc., one of the founding companies of American Medical Response, Inc. His responsibilities
include managing corporate operations, financial planning, administrative services and public
affairs.
Mr. Paolella currently serves as Chairman of the Government Affairs Committee oldie
American Ambulance Association, the national trade association of the ambulance industry.
This coLunittee is responsible for representing industry positions on EMS laws and
regulations promulgated by Congress and the Health Care Finance Administration. He was a
founding Director of the Connecticut Ambulance Association and served as its President for
eight years. He was also a member of the Connecticut Advisory Committee on Emergency
Medical Services.
Mr Paolella received the Outstanding Achievement Award in emergency medical services in
1988 given by the State of Connecticut Department of Health Services. He was also the
recipient of the J. Walter Shaeffer Memorial Award for Excellence presented by the American
Ambulance Association in 1990.
Mr. Paolella received his B.A. degree from Georgetown University.
1
American Medical Response, Inc.
67 Batteryrnarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
James E. McGrath
Director
James E. McGrath, 38, is a recognized expert in the fields of corporate development and
finance. Over his career, he has been a founding principal of, or early investor in, over 50
companies, many of which have become publicly -held. He has been involved in venture
capital, leveraged acquisitions, joint ventures, limited partnerships, and many other financial
vehicles. Mr. McGrath is also currently Chairman of the Board of Directors of Perceptron,
Inc. (OTC - PRCP), a leading imaging solutions corporation.
From 1987 through 1989, he was Managing Director and a partner at William E. Simon &
Sons, Inc., where he was responsible for investing in and overseeing more than one hundred
million dollars of private investments in many industries. Prior to that, Mr. McGrath was a
Corporate Senior Vice President of E.F. Hutton & Company, Inc., where, among other
responsibilities, he was President of the venture capital division and head of the firm's
merchant banking activities, which together represented approximately $150 million of
investments.
Previously, he was Chairman and CEO of McLaughlin, Inc., a large private Western
construction firm. In that capacity, he helped build the Stoneway Concrete division into the
largest and most profitable ready -mix concrete company in the Pacific Northwest, principally
through acquisition and consolidation. He began his career at Bain & Company, a large
strategic planning and consulting firm.
Mr. McGrath received his A.B. degree from Harvard College and his M.B.A. degree from the
Harvard '3usiness School.
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
Michael A. Baker
Director
Michael A. Baker, 47, is President of Notre Capital Ventures, Ltd. and a recognized expert in
the field of mergers and acquisitions and in the formation of new organizations utilizing
reorganization accounting. Mr. Baker is both a lawyer and CPA. He was involved in the
acquisition of over 500 companies while serving as Associate General Counsel of Browning-
Ferris Industries, Inc. Mr. Baker was a founder of Allwaste, Inc.; ENSR Corporation; Sanifill,
Inc.; and American Medical Response, Inc. Mr. Baker also helped establish and direct the
acquisition programs at each of those companies, which in aggregate have produced more
than one hundred acquisitions.
Mr. Baker is a frequent lecturer at legal conferences and industry meetings on the topic of
business planning and mergers and acquisitions. Mr. Baker was a faculty member at the
University of Houston Law Center from 1971 until 1985.
Mr. Baker received both his Juris Doctorate, summa cum laude, and his Bachelor of Business
Adminstration, cum laude, from the University of Houston.
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: (617) 261-1610
David B. Hammond
Director
David B. Hammond, 48, is a well-regarded expert both in developing sophisticated financial
systems and controls, and arranging large and complex financial transactions.
Mr. Hammond is currently Deputy Chairman of ADT Limited and•has been on ADT's board
of directors since September 1984. From 1981 to 1984, he was a director of Hawley Group
PLC, the predecessor company of ADT. From 1973 to 1980, Mr. Hammond was employed
by Thorn -EMI plc in various senior financial positions including Financial and commercial
Director of the Entertainment Division. Previous to that, he was employed by both Touche
Ross & Co. and Arthur Andersen & Co. Mr. Hammond is a Fellow of the Institute of
Chartered Accountants, and a Fellow of the United Kingdom Institute of Taxation.
Over his career, Mr. Hammond has also served on numerous boards of directors in many
different countries.
American Medical Response, Inc.
67 Batterymarch Street
Boston, MA 02110
Telephone: (617) 261-1600 - Facsimile: 1,617) 261-1610
John Larkin Thompson
Director
John L. Thompson, 62, is currently of Counsel to the Foston law firm of Nutter, McClennen
and Fish. In September of 1992, he retired as President and CEO of Blue Cross and Blue
Shield of Massachusetts, the largest health insurer in Massachusetts with a premium volume
in 1991 of $3.2 billion. He served as President and CEO of the company from 1987 to 1992.
Prior to that he was President and CEO of Blue Shield of Massachusetts from 1970 to 1987
when the company merged with Blue Cross of Massachusetts.
Previously, Mr. Thompson was an attorney with the Boston law firm of Palmer & Dodge.
During the past 20 years, Mr. Thompson has been a member of various health related and
civic organizations, including the National Advisory Council on Health Care technology
Assessment; the Health Insurance Benefits Council; the Advisory Panel on National Health
Insurance, Subcommittee on Health, Committee on Ways and Means, U.S. House of
Representatives; and, as Vice Chairman, Advisory Board of Emergency Medical Services,
Commonwealth of Massachusetts.
He currently serves as the Chairman of the Boston Public Library Foundation and previously
served as the Chairman of the Untied Way of Massachusetts Bay, Chairman of the Greater
Boston Chamber of Commerce, and as Chairman of the New England Aquarium.
Mr. Thompson also serves as a Director of Blue Cross and Blue Shield of Massachusetts and
as a Director of EG&G, Inc. of Wellesley, a diversified technical manufacturing company.
Mr. Thompson received his B.S. degree from Villonova University; his M.S. degree from
Columbia University Graduate School of Business; and his law degree from Boston
University School of Law.
American Medical Response, Inc.
1992 Annual Report
Prv,.•ir)irr i 1.
nrre/e-nce/ .)Irr)irrr/ .Cervi, r.. /0 Our (•,rnrertneri/ir.,... 11 "hr» /: very Second (•1,11,110
r
American Medical Response, Inc. is the nation's premier
provider of emergency and non- _, . , pre -hospital care and
other general ambulance services. The Company is the leader in
an exciting and rapidly growing industry which is nearly $5
billion in size.
American was formed on August 5, 1992 through the merg-
er of Regional Ambulance. Inc. (Fremont. California). Vanguard
Ambulance Services (San Jose, California), New Haven Ambu-
lance Service, Inc. (New Haven. Connecticut) and Professional
Ambulance Service, Inc. (Wilmington. Delaware). Since
August, •1 a additional service providers have joined our grow-
ing family of companies: Mobile Medic Ambulance Service, Inc.
(Gulfport. Mississippi), Ambulance Service Company (Denver,
Colorado), and Buck Medical Services, Inc. (Portland, Oregon).
By the end of 1992, American served an aggregate popula-
tion of more than five million people and responded to more than
400,000 calls. Through strategic acquisitions. American intends
to penetrate new areas of the country while expanding its services
in established regions.
fa,
S106.4
1
94.1
73.1
56.0
39.3
Financial Highlights
(in thousands. except per share amounts)
Total Revenue
Year -ended
December 31.
1992 1991
S106,433 $94.104
Net Earnings (pro forma) $ 5,670 S 4.306
Earnings Per Share (pro forma) S 0.67 S 0.57
\,'eightet1 Average Shares Outstanding 8,447 7,57E
Total Revenue
88 89 90 91 92
Net Ea g. (pro forma/
55.7
4.3
2.1
1.6
.9
88 89 90 91 92
Earning% 1'er Share (pro forma)
S.67
.57
.28
.22
.12
88 89 90 91 92
1
r
Letter to The Shareholders
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In addition to the utntinued growth and success of our
four founding companies. w e have augmented our growth by
acquiring "beachhead facilities" in new regions and also by
expanding our services into areas that are contiguous to com-
munities we currently serve. In November, we completed our
first acquisition. Mobile Medic Ambulance Service of Gulfport.
Mississippi. in December. we completed the acquisition of
:Ambulance Service Company in Denver,
Colorado. In January 1993, we completed
the acquisition of Huck Medical Services.
Lased in Portland, Oregon.
The first concrete example of our
progress in expanding services into areas
adjacent to those we currently serve is the
recent contract awarded to our Delaware
operation. In December, we signed a three-
year. approximately S4 million contract
with the municipality of Atlantic City. New
Jersey.
Internally. the consolidation and
streamlining of functions in the San Fran-
cisco Bay Area continues b} Regional
Ambulance and Vanguard Ambulance, two
of the "founding companies-. Now known
as American Medical Response West. these
two companies are largely housed under
one roof.
Bu..ine w Strategy
Our business strategy is based on
acquiring operations that share several
common winning elements. We believe the
following elements will become the stan-
dards against which other companies will be
measured:
The ere
Amsric
predicat
belief that
acquisition program at a fat ()rabic rate. We also have estab-
lished an insurance program that has consolidated our insur-
ance coverage on a national Iwai.
Community Commitment
As an industry leader, we recognize our obligation to set
an example. \Ve take our role as community citizens seriously.
During 1993 we will be making a significant
financial contribution to the communities we
serve. 1 am pleased to announce that each of
■ t ton or our current locations will be ,naking a con-
tribution to support their local public school
systems. Together we can make a difference
in helping address our nation's critical public
education problem.
Over the next six months, we will be
announcing further details of the innovative
and unique educational program we intend
to create. We hope our commitment will
serve as a challenge to other corporations to
join us in this important endeavor.
an weir
ed on our
and off
of amb
the quality
Delaney
COM pan la
entergene
utencs
• and the
y services
they prey
be snhanc
consol
A Our operations are committed to
providing exceptional quality service.
Our services are provided primarily by paramedics.
recipients of the highest level of medical CC iilicatiun in
the ambulance industry.
A Our providers manage -911 " response in their respective
areas and enjoy significant market share positions.
♦ Our operations feature the industry's most technologically
advanced dispatch and operating systems.
A Our providers are deeply rooted within their
respective communities.
We also are consolidating and streamlining certain func-
tions at the corporate level. such as banking and insurace.
.American has received a cornmittnent from a group of batiks
for a S30 million unsecured revolving credit facility. The Com-
pany intends to use the credit facility to consolidate existing
debt. to finance future acquisitions and for general working
capital purposes. The lending group is led by the Fleet Finan-
cial Group. This centralized credit facility should protide suffi-
cient cash availability for the foreseeable lustre to continue „ur
Ids could
ed through
Idation.
LookingAbcad
American's performance always has
been driven by the need to contain costs
associated with delivering superior emer-
gency and non -emergency health care.
We welcome the Clinton Administration's
emphasis on containing costs. We believe
that the President's pledge to broaden
access to health care. particularly for the
uninsured and underinsured, could prove
beneficial for the Company. in addition, we
are proud that the Administration's ideas
echo American's strategy of producing cost
efficiencies.
In sum. we believe that in the short time
since August we have made significant strides toward achieving
our initial objectives- in recognizing this success. it is important to
thank .\,nerican's employees for their dedication. Together. we
look forward to building upon this Inundation and achieving
continued success and growth in 1993.
\\'e appreciate your commitment as shareholders and
your continued interest in American Medical Response. \Ve
Zook forward to returning this trust as every member dour
hard-working team contributes to improving the delivery of
emergency and non -emergency ambulance service throughout
the United States.
Sincerely,
Paul M. \'errochi
( /iuirnurrr.
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.1 '.curly Si Billion Industry
\mbt.,ance s_rvice expenditures total
nearly S5 billion annually. While this may
seem small in the context of the nearly SI
trillion health-care industry. pre -hospital
medical care is as vital as police and lire
departments to the health and well-being of
ever- community member.
Moreover, the size of the ambulance
industry. measured in Meal value of services.
is continuing to grow as the demand and
need for enhanced services increases. The
private sector. in which American partici-
pates. has been growing at over ION, annual-
ly during the last decade. in this now large
business. there are over 2.100 private
providers of ambulance services. As a result.
the opportunities for consolidation are enor-
mous since less than 2°44 of these providers
generate annual revenue of over $20 million.
As the only publicly traded company exclu-
sively devoted to pre -hospital medical carr
— organized and operating on a national
scale — American is e <ceptionally w. -ll -
positioned to capitalize 00 the industr's
need to provide a uniformly high level of
service and deliver savings through cost
efficiencies.
The ambulance industry's growth i•
driven by the Iollowing factors:
A The aging of America — .1s people li%e
longer. they have an increasing need
for medically complex movement not
only between home and hospital. but also 1.etateen
hospital and long-term care fat hits• or nursing flames -
h Growth of outpatient -este facilities Cse oItilese
facilities alien necessitates an ambulance trip to and
from another location.
fps adnrin..Jn:!e✓.r ,.1 L•eJh � . i/ Iw aver.
rr.•1114.4 pbvfevfnl mcSwa/ rgruprnrnf, r.•
1..nJ1rl..n '.aprfalarriwI..
A The growth of in-. • health care -- 141-hnnle I are
enables many patients - •-e.eive treatment at 1101411 cl 1,1
though they arc sail! quite ill. Olsen they require ambu-
lance ser-vites upon di,chare,e from the 110.pn:d
A Greater sp(( ialinuion of hospitals .uu1 m.,1lagt•rl ( are -
\1.Irll specialty medical procedures .arc perfo1m141 in
tela cr hnspil.ds Iv>uiting in increas.d 11)1.1-114/5pit.li Ir.uis-
port..11so, many 1 \lOs rvqunc tkat :m(c st..I h....ul>-
ai 1'1 Ling p.Itiellt 1111151 L1 MA115110rtld 10.. ttlell11,1. 1'
Laspit:Il
lion "1.4 ptuyidcr•s
ser'i(c p1 al hied. st
financial t'nrlditiwl.
each .and every ant
A An increased emphasis on higher
levels of medical care at the accident
scene — (:ornmunities are more fre-
quently demanding higher levels of
carr in the pre -hospital setting.
A 1 ArAvretl response -time thresholds —
larly intervention can potentially
curtail costly medical procedures.
shorten recovery lime. and ultimately
lower overall individual health-care
costs.
• Taken together. these factors drive-
what
rivewhat American believes is sustainable and
non-cyclical growth. The Company expects
that these factors will continue to be impor-
tant because ambulance ser•i.es are
absolutely vital and. unlike some other
areas of health care. are not generally
viewed as discretionary.
In .addition. many municipalities
which have traditionally operated their
own emergency nodical response systems
are under increased pressure to control
costs. Among the alternatives a-•ail.able is
the use of private sector providers. Many
small rnunicip.ditics are recognizing t 11.0.
by banding together and entering into a
single contract. they can achieve better
service at a lower overall cost.
In this changing arena. the awarding
of ex, lusi( a municipal contracts typically is
hasea1 111,1 only on cost c(n511 lerat4041,.. but
more importantly on a quantitative eyalua-
response 11101. medical track record. level o1.
.1f1 expertise. quality of management. and
American is (tell positioned to compete 00
of these criteria.
.Im€riran - .It Thr Firer/rant
Ainvri(.ol is .11 the lorel10111 Of .1 dynamic and changing
inclustn. Pram !ht. Co111p.all'5 ill(eptian. its goal has been to
Le the nation's leading pi owlder of high quality emergency and
non-vinergen(5 pre -hospital (art. .15 all industry leadel. the
04.111 lis �i1,n in; ail nl.lrumcnt.il ink1 in lily development of
a1111f11I-1)l gll.11 ill .Ind 111I.Is111e1111111 sta11•1.1 Ips.
5
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l 1cin.•11Z,•101 inr4ih.11 0 ,11111.:.,11-.,:,<!-r/11.1a1;..,-,011,„
nt, !Me/ 110. 111111..,! .111 11,1nmuIIII nn :::�,.-� -111, d !n
• 1111 , r, . .11, 1.:.:,• \11c..n' 1 , 1
1:.11-;.11:1
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19,111 :LW dlil„!1 1111
l ; c /1n.d,wu•,t! Supr11L'ri14
111.y.1., . ,
6
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1..111 ..a1.-1111. 11.0 1.111` ,.1,1‘.•111 1. 1111 1.11 _v.l ,.1-11.•111 011c1.1t...1
.11, ,k1!11.111.11111. .1.1111c11101;1,IcI 1111111.1 \.'1111..1%Icr11
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1.1 +.<. \1L11n,n1..Ih IhO .,>tcln<u1n-
y,:11. - 111 -1.111.•1, .11 111. nf, 11. < 111 .lmuL.ti» 11.,-11 {,.1.0, ,111
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)"1 i1<1,i111 11, 11c11111„.. I;... 11�c 1111•
111 1, 11 1_< 111.11111 1111111-
i
•
•
A Partner..hip.ef Entrepreneur..
American's management team is seasoned and experi-
enced. The founding partners and the individuals who have
joined the team through acquisition are well-respected
industry leaders who have made important contributions to
their profession and in their comtnunities. Identifying and
encouraging the development of managers co:.unitted to the
growth and enhancement of ambulance services is an impor-
tant priority for American.
Corporate Growth Strategy
American's disciplined corporate growth is based on a
three -pronged strategy: target suitable regions of the country
and acquire providers to serve as regional headquarters
known as "beachhead facilities"; expand services in these
areas through additional "lock -on' acquisitions contiguous to
the beachhead facilities; and grow internally by providing
additional services and streamlining operations.
In many respects. American's acquisition criteria mirror
the qualities desired by municipalities when awarding a con-
tract. In selecting the appropriate emergency care provider,
cost is by no means the only consideration. A provider's crack
record —in the areas of quality. delivery and efficiency of
service — is of paramount importance.
Nene/fitting front a Changing
('.S. Health Care E'neir.rnn:ent
During the first months (lithe Clint ,n Adrninistration,
a new outline of the legislative and regulatory direction fir
the L.S. health-care system will become evident. American
believes it can benefit over the long term from the Presidents
dedication to addressing national health-care concerns. The
issues on the national agenda are consistent with those faced
by ambulance service providers: how to deliver the best ser-
vice to all people while ensuring the highest quality of care.
American believes that concepts such as managed competi-
tion and global budgeting are parallel wi:h American's corpo-
rate objective of achieving efficiencies through cost
containment and consolidation.
Ambulance Services are provided without consideration
of a patient's ability to pay. I:.cI 'sive contracts. subsidies.
permission to increase prices and other measures have been
.ntrotluced by local governments to ease the burden of
uncompensated care on private providers. American believes
the introduction of some form of national health-care plan —
one that increases access to health care and thereby reduces
the level of uncompensated care — could benefit American.
as well as consumers.
F.. !R Via•. (14.1()pnrfiny (f(/hrr.,tIMR v.,. with
rirnrm,.tn:• Parra•r Skiff -Sown mJ !)a..&
7
Oar Ce,nmunitieo Come Firrt
American's providers have been important members of their
communities for many -years. Buck Medical Services and Ambu-
lance Service Company are the oldest. commencing operations in
1913 and 1920. respectively.
Together with police and fire departments, American pro-
vides the essential ingredients of a community's emergency
response capabilities. The Company greatly values the trust placed
in it by its communities. American's service providers actively par-
ticipate in community volunteer programs that include health fairs.
local school education and career programs.
American's profitability is the reward for delivering the high-
est quality ser -ice in the most efficient manner. The Company's
commitment is to return the trust and confidence of the communi-
ties it serves with every emergency and non -emergency response.
B
.�rnrri vu i earpl rvnr.. rvpuiari.v intntihi:r orbm/-
rbif brn to the . ball(nrxo and nvankr,'ft& rnrrr-
!rrn y m. dmvl 11, 7•04,
American Medical Response's Current Service Areas
American ,ilalirull?Ggpw&Y lar
Selected btn.ncial Data 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 •
independent AuditorsReport 13
Consolidated Balance Sheets 14
Consolidated Statements of Earnings 15
Consolidated Statements of Stockholders' Equity 16
Consolidated Statements of Cash Flows 17
Notes to Consolidated Financial Statements 18
6
r
S I�et�d Flri'�sloial.Data-:
(in tbwuan i.. except pee Ayr amounts)
Earning. Data:
Total revenue.
1992"' 1991 1990 1989 1988
S106,433 S94.104 573:148 556.027 S39.320
Operating expenses:
Salaries and benefits 53,364 45.614 36.012 28.037 20.431
Uncompensated care 24,397 22.262 16,413 11,485 7.660
Other 15,217 13,717 11,947 9,563 6.999
Depreciation 3,066 2,772 2.518 1.977 1,033
Total operating expenses 96,044 84.365 66.890 51,062 36,123
Earnings from operations ... 10.389 9.739 6.258 4.965 3.197
Nonoperating expenses:
Interest expense. net 747 1,156 1.170 1.076 626
Amortization of intangibles 561 927 1,313__921 951
Total,nonoperating expenses 1,308_ 2,083 2.483 _ _ _ _ ---097-------1:577.
Earnings before income taxes 9,081 7,656 3,775 2.968 1.620
Income taxes 4,089 3.201 1,556 1.190 ..__ -__623
Net earnings $ 4,992 S 4,455 $ 2.219 S 1,778 $ 997
Pro forma net earnings(2) S 5,670 S 4,306 $ 2.091 S 1,631 $ 889
Pro forma net earnings per common share S .67 S .57 $ .28 $ .22 S .12
Weighted average common shares outstanding 8.447 7.576 7,576 7.576 7,576
Blance, Sheet Data:
Working capital $ 25,612 $ 9,300 $ 6.688 $ 6,674 $ 3,505
8.814 7.687 6.285 3.442
Property
tpe�and equipment, net ts 66,5 9 36,858 30,059 26.185 16,568
Long -term -debt. net of current maturities 8,372 7.179 8.392 9,010 5,493
Stockholders' equity 35,757 11.659 7,901 6,217 4,439
(1) lncludv for moult' olelleb lr Medic timbulancr Sash, inc. (acquired on November 4, 1992) and Ambulance Stroke Company (acquired on Dc.wnI rr2i,
1992) from for elate of aequioition.a Ser note 2 to the eon di4rtedfenancial oiatrrnrnta.
(2) Certain ar ja.tmente hare Iven made to net earning.. to reflect ineame ta.te.. that ..rah► bare pend pr yaile by one 41,5e Company:, my ealr.idaanu tbat ma. an
S corporation fo^ federal income tax purpmw during the prri,ab prorated. See note 4 to thr anr,rnbilated financial.•tatemente.
10
•
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Year Ended December 31. 1992
Compared to the Year Ended December 31. 1991
Overview
The Company's net earnings on a pro forma basis amount-
ed to $5.7 million or S.67 per share for the year ended Decem-
ber 31. 1992. as compared with pro forma net earnings 01'54.3
million or 5.57 per share for 1991. The improvement in pro
forma net earnings results from increased transports,
increased rates. an increase in fixed government subsidies, an
upgrade of basic life support services to paramedic services,
a reduction in net interest expense. and a reduction in the pro
forma effective tax rate. The increase in pro forma earnings ,
per share results from the increase in net earnings, which is
partly offset by an increase in the weighted average number
of shares outstanding resulting from the initial public offering
and shares issued in connection with the acquisitions.
Rr.,aa t., of Operation..
The Company's total revenue amounted to 5106.4 million
for the year ended December 31, 1992 as compared with
$94.1 million for 1991. an increase of 512.3 tnillion or 13%.
The increase in total revenue results from approximately
16,000 more ambulance transports in 1992 as compared with
1991. rate increases received in certain areas, an upgrade of
basic life support services to paramedic services and an
increase in fixed government subsidies. The acquisitions
discussed in note 2 to the consolidated financial statements
contributed approximately 52 million to total revenue for
1992.
Salaries and benefits expense amounted to 553.4 million
for 1992 as compared with $45.6 million for 1991, an increase
of'57.8 million or 17%. As a percentage of total revenue,
salaries and benefits increased to 50.1% for 1992 from 48.5%
in 1991. The increase was primarily the result of higher
staffing levels required to satisfy contractual obligations for
faster response times in certain areas, the changing mix to
paramedic from EMT personnel in order to provide enhanced
paramedic services. generally higher labor costs due to wage
increases. and the addition of corporate salaries and benefits
which did not exist in the prior year.
Uncompensated care expense amounted to 524.4 million
for 1992 as compared with 522.3 million for 1991, an increase
of $2.1 million or 9.6%. As a percentage of total revenue.
uncompensated care was 22.9% and 23.6% for the years
ended December 31, 1992 and 1991, respectively. The dollar
increase in uncompensated care expense results primarily
from the growth in the Company's business.
Other operating expenses were 515.2 million for 1992 as
compared with 513.7 million for 1991. an increase 01'51.5
million or 10.9%. The increase in other operating expenses
was a result of the growth of total revenues and the addition
of corporate expenses which did not exist in the prioryear.
However. as a percentage of total revenue. other operating
expenses remained consistent at 14.3% for 1992 .,s compared
to 14.6% for 1991.
Depreciation expense increased by 5294.000 for 1992 as
compared to 1991. The increase was attributable to new
vehicle purchases and depreciation expense related to the
property and equipment acquired in connection with the
purchase of Mobile Medic Ambulance Service. Inc. As a
percentage of total revenue, depreciation expense remained
consistent at 29% for both 1992 and 1991.
Net interest expense decreased by 5409,000 for 1992 as
_ompared to 1991. This decrease was the result of the contin-
ued decline in botrming rates, the decline in the average
amount of debt outstanding. and an increase in investment
income derived from the remaining net proceeds of the initial
public offering.
Amortization of intangibles decreased by 3366.000 for
1992 as compared to 1991 because of certain goodwill
amounts becoming fully amortized in 1991. Amortization of
intangibles will increase in the future as a result of goodwill
recorded in connection with the Company's acquisitions.
Prior to the merger with the Company, one of the Prede-
cessor Companies was taxed as an S corporation. As an
S corporation. income tares were not required to be provided
in this subsidiary's financial statements. In August 1992,
concurrent with the merger. this S corporation status was
terminated and the method of accounting for tax purposes
changed from the cash to the accrual method. Deferred
income tax expense for the year ended December 31, 1992,
includes 5780.000 attributable to this termination of S corpo-
ration status.
Pro forma income tax expense for theyears ended Decem-
ber 31. I992. 1991 and 1990 are tax amounts which would
have been recorded had this subsidiary been a C corporation
during those years. lithe subsidiary fiad been subject to
corporate income taxes on an ongoing basis. income tax
exp, •nse would have been $3.4 million for 1992 and 1991.
The effective tart rate for 1992 was 37.5% as compared with
43.7% for 1991. The decline in the effective tax rate results
from a favorable resolution of an IRS examination for which
amounts had previously been expensed in the Company'.:
financial statements. combined with a decrease in amounts
which are not deductible for tax purposes.
Li tuiddy and Capita! Retnart ,
in August, 1992. the Company completed its it: $ial public
offering of 3 million shares of common stock at a price of
58.50 per share. The proceeds, net of underwriting discounts
and expenses of the offering. were approximately $2:.5 mil-
lion. Concurrent with the completion of the initial public
offering. the Company paid approximately $10.2 million to
the stockholders of the Predecessor Companies and issued an
aggregate 4.1 million shares of common stock in connection
with the acquisition by merger of those companies with
American. On September 3. 1992, the Company sold an
additional 300.000 shares of common stock pursuant to an
over -allotment option granted to the underwriters in connec-
tion with the Company's initial public offering. The proceeds,
net of underwriting discounts. were 52.4 million.
Working capital at December3l, 1992 amounted to 525.6
million as compared to $9.3 million at December 31. 1991. an
increase <4516.3 million. This increase results primarily from
the remaining net proceeds received from the Company's
initial public offering, after paying the cash portion of the
purchase price for the acquisition of the Predecessor Compa-
nies. repayment of certain indebtedness and cash paid for
subsequent acquisitions. In addition, working capital vas
enhanced as cash generated from operations exceeded cash
requirements.
Cash and cash equivalents and short-term investments
were S14.4 million at December 31. 1992 as compared with
53.5 million at December 31. 1991. an increase of 510.9 mil-
lion. Net cash generated fly operations during 1992 was 55.1
million.
11
--t
The Company had additions to vehicles and other operat-
ing equipment of $2.2 million. For these additions. thc Com-
pany paid $1A million in cash while $.8 million was financed
by notes and capital lease obligations.
At December 31, 1992, the Company had total outstanding
debt of $12.8 million. compared with $11.9 million at Decem-
ber 31, 1991. The increase was a result of debt issued and
assumed in connection with the acquisitions of Mobile Medic
Ambulance Service and Ambulance Service Company, the
financing of vehicles and other equipment, and debt issued by
one of the Company's subsidiaries to repurchase common
stock of the Predecessor Company. These increases were
offset by debt repayments of 55.7 million.
Certain debt obligations of the Company's subsidiaries
were personally guaranteed by the former stockholders of the
subsidiaries prior to the acquisitions. At December 31, 1992.
the outstanding amount of such indebtedness was approxi-
mately 56.0 minion. The Company has agreed to use its best
efforts to have .c personal guarantees released and to pay or
refinance such indebtedness in the event that the guarantees
cannot be released.
In connection with the mergers discussed in note 2 to the
consolidated financial statements. certain operating entities
changed from the cash to the accrual method of accounting
for tax purposes. The resulting difference in taxable income
is being recognized for tax purposes over a four year period
beginning with the current year. This change resulted in an
increase in current income tax expense for 1992 and a
decrease in the deferred tax liability as of December 31, 1992,
as compared with December 31, 1991. The taxes expected to
be payable in subs_quent years are included as a component
of non-current deferred income tax liabilities.
During 1992. the Company acquired two providers of
emergency and non -emergency pre -hospital care. On
November 4. 1992. the Company acquired Mobile Medic
Ambulance Service. Inc. located. in Gulfport. Mississippi. and
on December 23, 1992, the Company acquired Ambulance
Service Company located in Denver. Colorado. The total
paid for these acquisitions was 53.2 million in cash.
51.780.000 in subordinated promissory notes and 611,268
shares of the Company's common stock.
On January 11. 1993. the Company acquired Buck Med-
ical Services. Inc.. a provider of emergency and non -emer-
gency pre -hospital care, located in Portland. Oregon. The
purchase price consisted of 55.5 million in cash and 125,085
shares of the Company's common stock.
Current financial resources and anticipated funds generat-
ed by operations are expected to be adequate to meet the
Company's operating cash requirements in the foreseeable
future. The Company plans to use a combination of cash and
securities in connection with its acquisition program. The
Company has an effective Shelf Registration Statement on file
with the Securities and Exchange Commission covering
2.000,000 shares of common stock. of which 1.263.647 shares
remain available after the acquisition of Buck Medical Ser-
vices. Inc.. fix issuance in connection with the acquisition of
other businesses by the Company. The Company has
received a commitment from a group of banks for a S30 mil-
lion credit facility to refinance certain existing indebtedness.
for acquisitions and working capital purposes. in the event
that the Company is unable to secure this financing or a suit-
able financing alternative. or that acquisition candidates are
reluctant to accept the Company's securities. the Company's
growth strategy could be adversely affected.
12
Certain health care reforms are presently being considered
.0 the federal level. The Company is unable to predict the
impact any health care reform will have on its operations.
Year Ended December 31. 1991
Compared to the Year Ended December 31. 1990
Overview
The Company's net earnings on a pro forma basis amount-
ed to 54.3 million or 5.57 per share for the year ended
December 31, 1991, as compared with pro forma net earn-
ings of 52.1 million or $ 28 per share for 1990. The improve-
ment in pro forma net earnings results from increased trans-
ports. increased rates, an upgrade of basic life support
services to paramedic services, and a reduction in the pro
forma cffe; tive tax rate. The increase in pro forma earnings
per share results from the increase in net earnings.
Re. into of Operation..
The Company's total revenue amounted to 594.1 million
for the year ended December 31. 1991 as compared with
573.1 million for 1990. an increase of $21.0 million or 28.7%.
The increase in total revenue results from approximately
28.000 more ambulance transports in 1991 as compared with
190. The increase in transports was due primarily to
increased transports provided in an expanded area of Alame-
da County where the City of Oakland was included for a full
year in 1991 as compared to a six month period in 1990.
Enhanced paramedic services and general rate increases also
resulted in higher average revenues per transport.
Salaries and benefits expense amounted to $45.6 million
for 1991 as compared with 536.0 million for 1990, an increase
of 59.6 million or 26.7%. As a percentage of total revenue,
salaries and benefits decreased to 48.5% for 1991 from 49.2%
in 1990. The dollar increase was primarily the result of the
heneral growth of the Company's business and generally
igher labor costs due to wage increases.
Uncompensated care expense amounted to 522.3 million
for 1991 as compared with $16.4 million for 1990, an increase
of 55.8 million or 35.6%. As a percentage of total revenue,
uncompensated care increased to 23.6% for 1991 from 22.4%
For 1990. The increase results primarily from a significant
change in patient demographics resulting from the provision
of services in the Oakland. California area for a full year in
1991 compared to a six month period in 1990.
Depreciation expense increased to $2.8 million for 1991
from $2.5 million for 1990. an increase of 5.3 million or
10.1%.
Other expenses were S13.7 million for 1991 as compared
with S 11.9 million for 1990. an increase of $1.8 million or
14.8%. As a percentage of total revenue. other expenses
decreased to 14.6% from 16.3%.
Amortization of intangibles decreased to S.9 million in
1991 from 51.3 million in 1990, a decrease of $.4 million or
Net interest expense decreased by 514,000 for 1991 as
compared to 1990. This decrease was the result of the general
decline in borrowing rates.
i
t
Independent Auditors' Report
The Board of Directors
American Medical Response. Inc.•
We have audited the accompanying consolidated balance sheets of American Medical Response, Inc. and subsidiaries (the_
'Company") as of December 31, 1992 and 1991. and the related consolidated statements of carbings, stockholders' equity, and .
cash flows for each of the years in the three yerr period ended December 31, 1992. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial state -
menu based on our audits. •
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan
and perform the audit to obtain . eaaonable assurance about whether the financial statements age free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial.statements. An
audit also includes assessing the accounting principles used and significant estimates made by management. as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. .
In our opinion. the consolidated Financial statements referred to above present fairly. in all material respects. the financial
position of American Medical Response, Inc. and subsidiaries as of December 31, 1992 and 1991rand the results of their opera •
-
tions and their cash flows for each of the years in the three-year period ended December 31, I992, in conformity with generally
accepted accounting principles.
Boston. Massachusetts
February 25. 1993
14*k 6- RAAA,Jui
13
Consolidatsd;8afsttcs a hysts
American Medical Ri.pnrde, hit -
fin e6.w.wn,L. except .dun dimwit,./
December 51,
1992 1991
Asset*
Current assets:
Cash and cash equivalents 814,134 $ 2,530
Short term investments 260 925
Accounts receivable, less t*iiowance for uncompensated care of
$10.779 and $10,150 at December 31, 1992 and 1991. respectively 21,342 18.982
Advances to stockholders and affiliated parties — 973
Inventories 827 718
Prepaid expenses and other receivables 1,805 1.658
Deferred income taxes _ _4,._,....._..__._ _
Total current assets 2423.048 25,786
Property and equipment, net . 10,026 _8,814
Noncurrent assets:
Cost in excess of net assets acquired. net 11.153 399
Covenants not to compete. net 735 1.009
Other - .1,987 -______ 850
Total noncurrent assets 13,875 .__ 2.258
Total assets $66,549 $36,858
Llabtlltlaa and Stoekholdara' Equity
Current liabilities:
Accounts payable $ 3,258 $ 2.889
Accrued compensation. benefits and taxes 4,725 3,631
Accrued expenses 2,528 1.372
Income .axes payable 2,10-1 2,420
Deferred income taxes — 1,457
Current maturities of debt 4,121.. 4,7)'
Total current liabilities ,.1.7X6._. 16,486
Noncurrent liabilities:
Long-term debt 8,372 7,179
Deferred income taxes 4,240 911
Other liabilities 1,144 623
Total noncurrent liabilities 13,756 _ ___8,713
Total liabilities _30,792_ _ 25,199
Stockholders' equity:
Preferred stock. $.01 par value, 500.003 shares authorized. nnne issued
Common stock. $.01 par value. 25,000.000 shares authorized.
10.292.369 shares issued and outstanding at 1)ecem' 31. 1992 103 —
Commou stock, predecessor companies — 90
Additional paid -in capital 21,267 266
Retained earnings 1-1,387 11,353
Notes receivable from stockholders — (50)
Total stockholders' equity 35.757 11,659
Cornmitrn'mts and contingencies
Total liabilities and stockholders' equity 566,5-19 536.858
Ste accomptnyi',g note: i, ron..Gdatedfinal/ad .datrnrutt..
14
a
•
•
Conselldatsd-8tatsnntttts.: o1=°Barntnps---.
Anzeriran.tln)fra: Re.ronoe, !nr-
(a9 hondanar, arrrpf prr..i.arr amount -4
Total revenue
llzrm/er 31,
1992 1991 1990
S106,433 $94,104 $73.148
Operating expenses:
Salaries and benefits 53,364 45,614 36.012
Uncompensated care 24,397 22.262 16,413
Other 15,217 13.717 11,947,
Depreciation 3,066_ 2,772 ___ 2,518
Total operating expenses 966044 _ -__ 84,3615 — 66.R�0
Earnings from operations 10,389 9,739 __5.255
Nonoperating expenses:
Interest expense. net 747 1.156 1;170
Amortization of intangibles 561 927 1AI3
Total nonoperating expenses -_1ri08_—_—_083--2.483--
Earn ings
.483Earnings
before income taxes 9,081 - 7,656 3,775
Income taxes 4,089 3,20I 1,556
Net earnings $ 4,992 $ 4,455 $ 2,219
Pro Forma Data (unaudlted—a.a nota 4)
Historical net earnings
Pro forma income taxes (benefit)
$ 4,992 $ 4,455 -S 2.219
__ (678) _ 149__ 128.
Pro forma net earnings $ 5,670 $ 4,306 $ 2,091
Pro forma net earnings per common share
Weighted average common shares outstandin,
See nm mpanying nota. to rondo(,SafrJJwvm a1..?atrnirnts.
$ 0.67 $ 0.57 $ 0.28
8,447 7,576 7,576
r
:Cvnsolldtrtod Stat-orrtnnto of Stockholdur! •Equ$ty
Americas Medical Rt, pon..r,
(in t6xavmL)
Common
Stork Additional Tufa!
Common Stork Pmkte.wr Pain! -in Retained Notew Stackboiderr'
Sbarm Amount Compania, Capital F.trnings Reetivable Equity
Balance et December 31, 1999 - $ - $ 91 $ 272$ 5,854 $ - S 6.217
Note receivable from officer for - -
purchase of common stock - - - - - (60) (60)
Distributions to stockholders - - - - (475) - (475)
Net earnings - .. _ - 2.219 - 2.219
Bel.nc. at D.c.mb.r 31.1990 - - 91 - 272- 7,598 (60) 7,9017
Repayment of note receivable - - - - - 10 '10
Stock. repurchase - - (1) (6) (700) - (707)
Net earnings - - - - 4,455 -4.455
Delano* et December 31. 1991 - - 90 266 11,353 (50) .1 659
Repurchase and retirement of
common stock - Regional - - (1) (12) (1.803) - (1,816)
Initial issuance of common stock 2.730 27 - 48 - (1) 74
Repurchase and retirement of
common stock (510) (5) - (9) - - (14)
Distribution to stockholders -
Professional (155) - (155)
Issuance of stock 3.000 30 - 21,435 - - 21.465
Distribution of cash portion of
purchase price for acquisition
of Predecessor Companies - - - (10,195) - - (10,195)
Distribution of stock portion of
purchase price for acquisition
and elimination of Predecessor
Companies' stock 4,143 42 (89) .47 - - -
Repayment of notes receivable - - - _ - 51 51
Issuance of common stock 300 3 - 2,369 - - 2,372
Stock options exercised 18 - - 127 - - 127
Tax benefit from exercise of
stock options - - - 70 - - 70
Issuance of stork in connection
with acquisitions 611 6 - 7,121 - - 7,127
Net earnings ' -. _ -.. - - 4,992 -
--- -,- -
D 4 7)2
Balance at .c.mb.r 31, 1992 10.292 $103 S - -- S 21.267 -_-- $14,387 � -----$35.757
See aawt ranyeng note, to toomolittated i aneial etatemenL..
16
COn.O,/ldsitsd Statements of "Cash -Flows.
rlmeeit•,rrt.1ft4e dRar.aca.lm•.
(ia th000e ut.)
December il.
Cash flows from operating activities: 1992 1991 1990
Net earnings $ 4,992 $ 4.455 $ 2.219
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 3,066 2.772 2.518,
Amortization of intangible assets 56! 927 :,313
Deferred income taxes (2,365) 1,002 784
Changes in assets and liabilities. net of acquisitions: -
.Accounts receivable 124 (5,561) (1,522)
Other current assets (11) (503) " 68
Other assets (1.101) 418 (1.043)
Accounts payable and accrued expenses (382) 265 891
Accrued compensation. benefits and taxes 347 1,439 582 "
Income taxesable
Pay (626) 705 (727)
Other liabilities
-_--.•_2 _-.. • .. _._.._ _(.l.q_...__._r--- . __
Net cash rovided by operating activities -5-129- 5•763 5.b31
Cash flows from investing activities:
Acquisition of Predecessor Companies (10,195)
Acquisitions, net of cash acquired (1.785) - -
Purchase of short term investments - (930) (ire 7)
Proceeds from sale of short term investments 665 634 73
Purchase of property and equipment. net (1,408) (3.585) (1.516)
Purchase of stock and covenant not to compete - (375) --
Repayment of advances to related panics 332
Net cash used for investing activities __ ... _.__.. i -..___.___O
$ (12,39!) (4,056) _..__. (2,220)
Cash flows from financing activities:
Proceeds front issuance of common stock 23,911
Repurchase and retirement of common stock (314)
Proceeds from exercise of stock options 127 - -
Proceeds from borrowings 316 2.906 1,492
Repayment ..fborrowings (5,149) (3.868) (3,642)
Principal islyuients on capital lease obligations (562) (127) (172)
Net advances to stockholders 6-11 (300) 66
Distribution to stockholders (155) - (475)
Repayment of notes receivable for stock 51 10 -
Net cash provided by (used for) financing activities 18,866 - (1,379)__ _ _ (2,751)
Incre..se in cash and cash equivalents 11,604 328 580
Cash and cash equivalents at beginning of year 2,530 2.202____Lap
Cash and cash equivalents at end ofyear $ 14,134 S 2,530 . $ 2.202
Supplemental disclosure of cash flow in!".rmation:
Cash paid du.-ing the year for:
Interest $ 1.084 $ 1.338 $ 1,389
Income taxes S 7,026 $ 1,240 $ 1.095
Supplemental schedule of non-cash transactiorx:
Issuance of debt and equipment for repurchase of
Predecessor Company common stock S 1,516 S 332 S -
Issuance of debt for non -compete agreement $ 240 $ 3-40 S -
Issuance of debt for equipment purchases $ 79! $ 579 5 2,361
Property acquired under capital lease S 38 $ 189 $ 471
Acquisitions:
Assets acquired S 17.037 S - S —
Liabilities assumed and issued (6,710)
Common stock issued (7,127)
Cash paid 3,200
Less cash acquired (1,415)
Net cash paid for acquisitions S 1,785
See aa:vnpanytngnote: fn ,;,r,.•nL,tlie,, ire.rn.Y.r(.'taten,nrt...
17
P4otiss to ConaotidatSd Ftnsncist Statiom.nts
American ilfedi vl Re pon..r, Inc.
Lk rminr 51, 1992, 1991 and !9S e
(1) Summary of Significant Accounting PoIlei••
PrincYplwof C.rn olidation
The consolidated financial statements include the accounts
of American Medical Response. Inc. ("American" or the
"Company") and its subsidiaries; American Medical Response
- West, formerly Vanguard Ambulance Services ("AMR
West"), Regional Ambulance. Inc. ("Regional'). New Haven
Ambulance Service, Inc. ("New Haven"). Professional Ambu-
lance Service, Inc. ("Professional'), Mobile Medic Ambu-
lance Service, Inc. ("Mobile Medic") and Ambulance Service
Company ("Ambulance Service). All intercompany balances
and transactions have been eliminated in consolidation.
Recta wificatans
Certain amounts for the prir'r periods have been reclassi-
fied to conform with the current period presentation.
Cab and Ca.b Egui,+alrnL.
For purposes of the statement of cash flows, the Company
considers all highly liquid instruments with an original matu-
rity of three months or less to be cash equivalents.
Short Term inec tments
Short • :i -m investments consist primarily of marketable
equity securities which are stated at lower of cost or market.
Account., Receivable and Nit Revenue
Accounts receivable and net revenue are reported at the
estimated net billable amounts due from patients. third -party
payort and others for services rendered. net of contractual
adjustments, which represent the difference between gross
billable charges and the portion of those charges allowable by
third -party payors.
tJnr.vnpcn.•ated Care
Uncompensated care results when ambulance service is
provided to patients for which the Company receives no reim-
bursement. The Company expects payment tor its charges
each time ambulance transportation is provided.
In,rntorie.•
Inventories consist primarily of medic:.) supplies and are
stated at the lower of cost (first -in. first -out) or market
Preperty and Equipment
Property and equipment are stated at cost. Property and
equipment under capital leases are stared at th' present value
of minimum lease payments at the inception of the lease.
Depr:•-iation and amortization are provided using the
straigh•-lin, method over the estimated useful lives of proper-
ty and equipment. Property and equipment held under capi-
tal leases and leasehold improvements are amortized over the
shorter of the lease tern: or estimated useful life of the asse..
Amortization ofass"ts subject to capital leases is included in
depreciation expense.
18
Coot in E ce.y of Net it.. eL. Acquired
Cost in excess of net assets acquired is amortized straight-
line over the period of expected benefit, but not in excess of
twenty-five years. Accumulated amortization amounted to
$98,000 and S51.000 at December 31. 1992 and 1991. respec-
tively.
aivenant., Not To Compete
Covenants not to compete are amortized using the straight-
line method over the term of the agreements.
Income Tau.
Income taxes are provided based upon provisions of State•
ment of Financial Accounting Standards No. 109. "Account-
ing for Income Taxes", which requires recognition of deferred
income taxes under the asset and liability method.
Under the asset and liability method, deferred income
taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable
to future years to,lifferences between the financial statement
carrying amounts : nd the tax bases of existing assets and
liabilities. The effect on the deferred taxes of changes in the
tax rates is recognized in income in the period that includes
the enactment date.
Earning., Per Share
Earnings per share are computed based on the weighted
average number of shares outstanding plus common stock
equivalents related to stork options and warrants. if such
common stock equivalents cause dilution in earnings per
share in excess of 3%.
Earnings per share fur all periods prior to the initial public
offering have been computer! based on weighted average
shares outstanding of 7,5%6,089 whirl, consist of (i) 2,220,001
!ounders'shares outstanding prior tom, the initial public offer-
ing, (ii) 4,143,500 shares iss':ed in connection with the merger
described in note 2. (iii) 1,199,4 12 shares to reflect on a pro
forma basis the sale of a sufficient number of shares to pro-
vide funds to pay the $10,195,000 cash portion of the pur-
chase price of the merger, and (iv) 13,176 shares considered
as outstanding as a result of the application of the treasury
stock method to certain outstanding options.
(2) Reorganization and Acquisitions
The J!ergcr ane) Rr,rrgaar-ahvn
In August, 1992. concurrent with the initial public offering
of the Company's common stock, the Company acquired by
merger lour ambulance service providers. Region sl, AMR
Rest, New f Leven and Professional (the "Predecessor Com-
panies"). Put Quant to the terms of rhe merger agreements
with eacF. of the Predecessor Companit s, the Company paid a
total of S10,195.600 in cash and 4.143.500 shares of common
stock for such companies as set .ort}; below.
Regional - The Company acquired by merger all of the out-
standing shares of `l-giona) for S2.830,000 to cash and
Notes to Coneolldated Financial Statemanis
American ,1lediral R, .i..e. I, .
1.991,859 shares of common stock. The Company also
entered into a live -year non -competition agreement and a
three-year employment contract with one of the stockholders
and appointed such stockholder to the Company's board of
directors.
AMR West - The Company acquired by merger all of the
outstanding shares of AMR West for S3,800,000 in cash as d
1.503,160 shares of common stock. An additional 100,000
shares of common stock will be paid in the event that
AMR West obtains a particular contract for emergency
ambulance services by March 1994. The Company also
entered into five-year non -competition agreements and three-
year employment agreements with two stockholders and
appointed one of the stockholders to the Company's board of
directors.
New Haven - The Company acquired by merger all of the
outstanding shares of New Haven for 52.940,000 in cash and
634.145 shares of common stock. The Company also entered
into five-year non -competition agreements with two stock-
holders. a three-year employment contract with one stock-
holder and appointed such stockholder to the Company's
board of directors.
Professional - The Company acquired by merger all of the
outstanding shares of Professional for $625,000 in cash and
214.336 shares of common stock. The Company also entered
into five-year non -competition agreements and three-year
employment contracts with the two stockholders of Profes-
sional.
The consolidated operations of American subsequent to
the transaction are substantially identical to the combined
operations of the individual Predecessor Companies prior to
the transaction. Additionally, as a result of the mergers, the
owners of the Predecessor Companies are significant stock-
holders of American. Accordingly, the aforementioned
mergers were accounted for as a combination of the Prede-
cessor Companies and American at historical cost. The
assets and liabilities are presented at their historical values
aid stockholders' equity has not been adjusted as a result of
the mergers.
Acgau.itarn.,
During 1992; the Company- also acquired two providers of
emergency and non -emergency pre -hospital care. On Novem-
ber 4. 1992. the Company acquired Mobile Medi Ambulance
Service, Inc., located in Gulfport. Mississippi and on Decem-
ber 25. 1992, the Company acquired Ambulance Service
Company. located in Denver. Colorado.
The total paid consisted of 53.2 million in cash. S1.780,000
in subordinated promissory notes and 611.268 shares (lithe
Company's common stock.
The acquisitions have been accounted for as purchases
and. accordingly, their results of operations have been includ-
ed in the consolidated financial statements from their date of
acquisition. The excess of the purchase price and expenses
associated with the acquisitions over the estimated fair value
of the net assets acquired has been recorded as goodwilL
The following unaudited pro forma results of operations
give effect to the acquisitions as if the transactions had •
occurred at the beginning of 1991. Such pro forma financial
information reflects certain adjustments including amortizes -
tion of goodwill. income tax effects. and the increase in the
weighted average shares outstanding. This pro forma infor-
mation does not necessarily reflect the results of operations
which would have occurred had the acquisitions taken place
at the beginning of 1991 and is not necessarily indicative of
results which may be obtained in the future (in thousands,
except per share amounts):
Total revenue
Earnings before income tares
Net earnings
Pro forma net earnings
Pro forma earnings per share
(3) Property end Equipment
1992 1991
(u tail --
S12-1,731 $110.345
10,416 - 7.767
5,571 4,335
6,167 4,206
.69 .51
I'roprrl y aad Equipmee(
Property and equipment consist of the following at Decem-
ber 31 (in thousands):
Vehicles
Land. buildings
and leasehold improvements
Equipment
Furniture and fixtures
Less accumulated depreciation
Net propene and equipment
1992 _... 1991
512,181 $10,110
1,25-1 1,204
5,478 5.357
2,395 _ _ 1.811
21,308 ! 18,482
13.282 9.668
$10,026 $8.314
(pearling Ita.v..
The Company is obligated under a number of non -cance-
lable operating leases for premises and equipment expiring in
various years through the year 2000. Total reit expense
amounted to S2.351,000, $2.095,000 and S1,t,g4,000 for the
years ended December 31, 1992, 1991 and 1990, respectively.
19
Minimum future rentals under non -cancelable operating leases
(including leases with related parties discussed in Note 8) as of
December 31 are as follows (in thousa:.ds):
1993
1994
1995
1996
1997
Thereafter
To'al minimum lease pavmeata
(4) Income T
Amount
The provision for Federal and state income taxes for the
years ended December 31 consists of the following (ir. thou-
sands):
1992_ 1991 1990
52.119 Current:
1,904 Federal S 5,267 51,701 5 573
1.631 State -1,187 498 191
1.308 6.45.1---2,19-9----7-71_-_--- _---- _
972 Deferred:
1.660 Federal (1.811) 734 611
State ____(g4) ____1268 .173_
59594 (2i65Z
3 .002 __, 784
Total $ 4,089 $3.201 51,556
For the year ended December 31, 1992, income tax benefits
of 570,000 were allocated to additional paid -in capital for tax
benefits associated with the exercise of non-qualified stock
options.
The following table reconciles the Federal statutory income
tax rate and the Company's effective income tax rate for the
years ended December 31:
The components of the deferred tax asses and liabilities as
of December 31 are as follows (in thousands):
Deferred tax assets:
Allowance for uncompensated care
Accrued expenses and other liabilities
Other
Deferred tax liabilities:
Cash to accrual amounting
Intangible assets
Property and equipment
Change in arco; rating method
Other
Net deferred tax asset (liability)
'992 1991
54,409 51.588
2,112 -
57
6,578 1.588
- 3.045
107 -
841 635
5,552 82
38 _ 194
(6438)
S 40 5(2.368)
At December 31. the net deferred tax asset (liability) con-
sists ()idle following (in thousands):
1992 1991
Deferred tax asset (liability) -current 54,280 5(1,457)
Deferred tax asset (liability) - long term (4,240) _ (911)
Net deferred income tax asset (liability) S 40 S(2.368)
Included in the gross deferred tax assets and liabilities are
deferred tax (benefits) and deferred tar expense of 5(438.000)
and $395,000 respectively, relating to allowances for uncom-
pensated care and a change in accounting method, recorded
as a result of the acquisitions of Mobile Medic and Ambulance
Service.
20
Provision for income taxes
at Federal statutory rate
State taxes, net of Federal benefit
Amortization of goodwill
Subchapter $ earnings
Change in tax status
Other. net
1992--._.-1991 1990_
34.0 % 34.0 % 34.0%
5.9 • 7.0 6.7
.2 1.3 3.2
(.7) (2.1) (3.4)
8.6 - -
(3=0)— 11.6 .7
45.0% 41.8% 41.2%
Change un Tar Accounting .f eebod
In connection with the mergers discussed in note 2 to the
consolidated financial statements, certain operating entities
changed from the cash to the accrual method of accounting
for tax purpot• a. Th. resulting difference in taxable income
is being recogn. .or tax purposes over a four-year period
beginning with the current year.
Change in Tac Stara.+
Prior to the merger with the Company. one of the Predeces-
sor Companies was taxed as an S corporation. As an S corpo-
ration, income taxes were not required to be provided in this
subsidiary's financial statements. In August 1992. conct.rrent
with the merger. this S corporation status terminated and the
method of accounting for tax purposes changed from the cash
to the accrual method. Deferred income tax expense for the
tear ended December 31. 1992, includes 5780,000 attributable
to this termination of S corporation status. Pro forma income
tax expense for the years ended December 31. 1992, 1991 and
1990, are tax amounts which would have been recorded had
this subsidiary been a C corporation during those years.
r
Notes._to Consolidated Financial Stat•metnts
American .Ile li v! lG.,p,-nre, Iec.
(5) Debt
Long-term debt and capital lease obligations consist of the
following at December 31 (in thousands):
Demand notes payable.
unsecured. interest rates ranging
from 675% to 7.5%
Demand notes payable.
secured. bearing interest at 10%
Demand notes payable to principal
stockholder. bearing interest
at prime plus 2%
Notes payable. secured. interest
rates ranging from 6% to 16.5%.
payable in installments.
maturing through 1998
Notes payable to former owners
and individuals. interest rates
ranging from 6% to 996. payable
in installments. maturing
through 2007
Subordinated notes payable
to stockholder and former
owners. bearing interest at 796
and 7.5%. maturing through 1996
Capital lease obligations
Less current maturities
1992 1991
S 273
236
S 228
5,954
3,382
1.780
1,449
12,793
4,421
94
7.500
2,436
1.357
11.896
4,717
Long-term debt. excluding
current maturities S8,372 57,179
Annual maturities of long-term debt and future minimum
lease payments under capital leases as of December 31, 1992
are as follows (in thousands):
1993
1994
1995
!996
1997
Thereafter
Total payments
Less: amounts representing interest
Total obligations ander capital leases
Long-term Capital
debt leases
S 3.685
3.641
1.888
6-13
220
1.267
SI1.344
S 880
616
299
107
18
1.920
471
S1.449
(6) Capital Stock and Additional paid -In Capital
Pnfcrrrd Stock
The Company is authorized to issue up to 500.000 sharp
of preferred stock. S.01 par value, of which no shares are
issued or outstanding. The Company's board of directors' is
authorized to provide for the issuance of the preferred stock
in series, to establish the number of shares to be included in
each such series, and the qualifications, limitations or restric-
tions thereof. This includes any voting rights. preemptive
rights, conversion privileges and liquidation rights which
shall be superior to the common stock.
Ce,nnwn Stack
The Company is authorized to issue 25,000.000 shares of'
common stock, S.01 par value. of which 10.292.369 shares
were issued and outstanding at December 31, 1992.
The Company has an effective Shelf Registration State-
ment on file with the Securities and Exchange Commission
coveting 2.000,000 shares of common stock, of which
1,388,732 shares remain available at December 31. 1992 for
issuance in connection with the acquisition of other business-
es by the Company.
In August, 1992, the Company completed an initial public
offering of common stock and issued 3.000.000 share's of such
stock at a price of 58.50 per share. The proceeds, net of
underwriting discounts and expenses of the offering. were
approximately S21,465,000. Concurrent with the completion
of the public offering. the Company paid $10.195,000 to the
stockholders of Regional, AMR West, New Haven, and Pro-
fessional and issued an aggregate.4,143.500 shares of common
stock in connection with the acquisition by merger of those
companies by American. On September 3, 1992, the Compa-
ny sold an additional 300.000 shares of common stock pur-
suant to an overallotment option granted to the underwriters
in connection with the initial public offering. The proceeds
from this overallotment. net of underwriting discounts, were
52.371.500.
In connection with the initial public offering, the Company
issued warrants to the underwriters to purchase an additional
300,000 shares of the Company's common stock at an exercise
price of $10.20 per share for 150,000 shares and 512.00 per
share for 150.000 shares. Such warrants expire on August 5,
1997.
During the period February 21. 1992 to May 22, 1992, the
Company issued 2,730.001 shares of common stock to its
founders at a price of 5.0273 per share. On July 17, 1992.
the Company repurchased and retired 510.000 shares of
founders common stock at the original purchase price of
5.3273 per share fora total of $13,923.
21
r
The Company was incorporated on February 21. 1992.
On June 8. 1992. the Company was reorganized as a
Delaware corporation. Pursuant to the reorganization. each
of the outstanding shares of the Massachusetts corporation
was converted into 2,928.71 shares of common stock. result-
ing in 2,730.001 shares outstanding on that date. All fi,.ancial
information and share and per share information with respect
to the Company's stock have been restated to reflect the
shares issued in the reorganization.
Cenunon Stock - Predeeemor Companitr
Ail of the outstanding shares of common stock of the Pre-
decessor Companies were acquired by American in connec-
tion with the merger and reorganization.
In Janua.y 1992, prior to the merger of Regional with
American. Regional repurchased 1.600 shares of its common
stock from two former employees for a total of $1,816.000. In
addition, Regional entered into five year non -competition
agreements with the former employees for $240,000.
During 1991. Regional repurchased 800 shares of' its stock
from former shareholders. A charge to retained earnings of
$700,000 was recorded as a result of this transaction.
(7) Commitments and Contingencies
Third -Party Rate Adjrmtnmtn and Rrirnae
A significant portion of the Company's net revenue is
derived under Federal and state third -party reimbursement
programs. These revenues are based. in part, on cost reim-
bursement principles and are subject to audit and retroactive
adjustment by the respective third -party fiscal intermediaries.
In the opinion of management. retroactive adjustments, if any,
would not be material to the financial position or results of
operations of the Company_
Legal Proceeding..
The Company is party to various legal actions arising in
the ordinary course of business_ In management's opinion,
the ultimate disposition of these matters will not have a mater-
ial adverse effect on the Company's financial position.
Letter., of Credit
The Company has outstanding letters of credit of 5784.000
to secure payments of certain insurance policies. Such letters
of credit expire in February 1993.
(8) Related Party Transaction.
Indemnification eigntmeaL•
In connection with the merger and reorganization
discussed it note 2. certain related parties have agreed to
indemnify the Company up to a maximum of 51.750.000 for
losses the Company may incur if one of its former insurers is
unable to refund unearned premiums and pay pending claims.
!ea.dng Tran..acti✓ra.
The Company leases various facilities from related parties.
The leases on these properties expire at various times through
the year 2000. Total rent expense paid to related parties
amounted to $990,000.51,020.000 and 5661.000 for the years
ended December 31, 1992, 1991 and 1990, respectively.
Loam, and Caob Advance"
Loans and advances outstanding to related parties amount-
ed to SO and $973.000 at December 31, 1992 and 1991,
respectively.
Notes payable to related parties amounted to SO and
S94.000 at December 31. 1992 and 1991, respectively.
Gru:ranty
The Company has guaranteed a 52.500,000 loan owed by a .
related party to a bank. This loan is secured by one of the
Company's operating facilities that it leases from a related
party, bears interest at prime plus I% and is'callable by the
bank on or after May 1994. The related party has agreed to
indemnify the Company in the event the Company is required
to pay any amounts under the guaranty.
C ontractua/Ag•rementr
The Company purchases vehicles and repair parts from a
related party. Vehicles purchased from related parties
amounted to S143,000. 5306,000 and $153,000 for the yr .: rs
ended December 31. 1992, 1991 and 1990. respectively.
Repair parts purchased from related parties and included in
expense amounted to $168,000. $159,000 and 5175.000,
respectively. Accounts payable included 520,000 and 582,000
at December 31, 1992 and 1991. respectively. due to these
related parties.
(9) Stock Option Plans
/992 414 y hlarntnr Plan
The Company's 1992 Equity Incentive Plan (the "Equity
Incentive Plan' was adopted on June 8, 1992 and provides
for the grant of a variety of stock and stock -based awards and
related benefits. The Equity Incentive Plan permits the
granting of options that qualify as incentive stock options and
non-qualified options. The option exercise price ',leach
option shall be determined by the Board of Directors, but in
the case of it.centive stock options shall not be less than 100%
of the fair market value of the shares on the date of grant
(110% in the case of incentive stock options granted to an
individual with stockholdings in excess of certain limits).
Subject to adjustment for stock splits and similar events,
the total number of shares of Common Stock that can be
issued under the Equity Incentive Plan is 800.000 shares.
4
M
Notaa to Consolidated Financial 8tatarisoflta
Anuriran.11e.4.al R�•r nw. tn..
/992 Stock Option I'Ltn for iS 'n-F,mpl _u ee Director..
The Company's 1992 Stock Option Plan for Non -Employ-
ee Directors (the "Director Option Plan") was adopted on
June 8. 1992. Pursuant to the Director Option Plan. begin-
ning on the date of the first annual meeting of stockholders
after the date of the initial public offering, each director who
is not an employee of the Company or one of its subsidiaries
and neither is a holder of five percent or more of the Compa-
ny's Common Stock nor was a stockholder of the Company
prior to completion of the initial public offering will receive,
on the date of his or her first election as director. an option to
purchase 7.500 shares of Common Stock. Thereafter, each
director will be granted. at each annual meeting at which such
director is elected or reelected, so long as he or she remains
an eligible director, an option to acquire an additional 7,500
shares of Common Stock.
The exercise price of such'options will be the fair market
value of the Common Stock on the date of grant. Each option
will be non -transferable except upon death, will expire 10
years after the date of grant and will become exercisable on
the first anniversary of the date of grant.
Stock Option sic ti 'ity
A summary of stock option activity for the year ended
December 31 follows:
Number
of Options
Outstanding
at December 31. 1991 -
Granted 303,100
Exercised (17.600)
Cancelled _ -
Outstanding
at December 31, 1992 285,500 S5.00 - 12.375
Exercisable
at December =1, 1992 60.875
Optive. Price
Range
S -
5.00 -12.375
5.00 - 8.500
(10) Employee Benefit Plans
1992 Employee Stork Pwrbase Plan
The 1992 Employee Stock Purchase Plan (the -Employee
Stock Purchase Plan") was adopted by the Board of Direc-
tors of the Company and approved by the stockholders on
June 8. 1992. The Employee Stock Purchase Plate is
designed to enable eligible employees to purchase shares of
Common Stock at a discount on a periodic' basis through
payroll deductions. All employees with at least six months of
continuous service, other than employees owning 5% or more
of the combined voting power of all classes of stock of the
Company, are eligible to participate. Purchases will occur at
the end of option periods. each of six months' duration. The
first such option period began January 1, 1993.
The purchase price of Common Stock under the Employ-
ee Stock Purchase Plan is 85% of the lesser of the value of
the Common Stock at the beginning of an option period and
the value of the Common Stock at the end of the option peri-
od. Participants may elect under the Employee Stock Pur-
chase Plan, prior to each option period, to have from 2% to
10% of their pay withheld and applied to the purchase of
shares at the end of the option period. However. the
Employee Stock Purchase Plan imposes a maximum of
S 10.000 on the amount that may be withheld from any par-
ticipant in any option period.
Subject to adjustment for stock splits and similar events, a
total of 100,000 shares of Common Stock has been reserved
for issuance under the Employee Stock Purchase Plan. None
of these shares has been issued to date.
Rdcrcment Plano
Two of the Company's subsidiaries have defined contribu-
tion 401(k) plans for the benefit of their employees. Full-time
employees with one year of service and 1.000 hours are eligi-
ble to participate. The total plan expense for the years ended
December 31, 1992, 1991 and 1990 was $450,000, S242,000
and S359.000, respectively.
Four of the Company's subsidiaries have profit sharing
plans which cover substantially all of their employees. Con-
tributions into the trust funds of the plans are discretionary,
and the companies have the right to amend. modify or termi-
nate the plans. but in no event will any portion of the contri-
butions paid revert to the companies. The total profit sharing
plan expense for the- years ended December 31, 1992, 1991
and 1990 was 5115.000, 5109,000 and 533.000, respectively.
23
r
3
(11) Ouartarly Financial Data (Unaudited)
The Company's summary financial data
(in thousands except per share amounts):
Total revenue
Total operating expenses
Earnings front operations
Earnings before income taxes
Net earnings
Pro forma net earnings
Pro forma earnings per common share
Weighted average common shares outstanding
Total revenue
Total operating expenses
Earnings from operations
Earnings before income taxes
Net earnings
Pro forma net earnings
Pro forma earnings per common share
Weighted average common shares outstanding
(12) Subsequent Event•
for the years ended December 31. 1992 and 1991 by quarter is as follows
Year auk /inrtn1rr 31, 1992
4th Quarter 3rd Quarter 2nd Quarter Iia Quarter
S28.095
25,640
2,455
2.201
L623
1.623
0.16
9.888
526.834
24.097
2.737,
2.455
753
1.482
0.17'
8.770
526.277
23.331
2,946
2.355
1,489
1.485
0.20
7.576
$25,227
22.97b
2.251
1,870
1.127
1.080
0.14
7.576.
Year ended lktrradrr 51. 1991
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
S26.043
23,010
3.033
2.530
1,488
1.415
0.19
7,576
$24.705
22.011
2.694
2.174
1.259
1.232
0.16
7.576
522.231
20.142
2.089
1465
926
908
0.12
7.576
$21,125
19.202
1.923
1.387
782
751
0.10
7,576
rlequrtitttnr
On January 11. 1993. the Company acquired Buck Medical Services, Inc. located in Portland. Oregon. The purchase price
consisted of S5.500.000 in cash and 125,085 shares of the Company's common stock. The acquisition has been accounted for as a
purchase. and the excess of the purchase price and expenses associated' with the acquisition over the estimated fair value of the
net assets has been recorded as goodwill.
The following unaudited pro forma summary give -fleet to the acquisition as if it had occurred on December 31, 1992 with
respect to the pro forma balance sheet and as ;1 44. .action (along with the acquisition of Mobile Medic and Ambulance Ser-
vice) had occurred at the beginning of 1991. Such 1.ro forma financial information reflects certain adjustments including amorti-
zation of goodwill, income tax effects, and the increase in the weighted average shares outstanding. This pro forma information
does not necessarily reflect the results of operations which would have occurred had the acquisition taken place at the beginning
of 1991 and not necessarily indicative of results which may be obtained in the future (in thousands. except per share amounts):
Balance Sheet:
Total assets
Total liabilities
Total stockholders' equity
Total liabilities and stockholders' equity
Statements of Earnings:
Total revenue
Earnings before income taxes
Net earnings
Pro forma net earnings
Pro forma earnings per share
1992
, umwddi'!rd/
S72.655
34,739
37,916
S72.6.55
1992 1991
b.n.,a.ti/rah
5143.070 5124.282
10,588 8,055
5,860 4,568
6.402 4.268
.70 .51
Credit Facility
In February 1993. the Company received a cornmitment from a group of banks fora 530 million revolving credit facility to
refinance existing indebtedness, for acquisitions and working capital purposes.
24
Cor.porat.` Information'
Directors
PAUL M. VERROCIII
Chairman of the hoard
MICHAEL A. BAKER
DAVID B. HAMMOND
Deputy Chairman
ADT Limited
JAMES E. McGRATH
Chairman and Chief Executive Officer
Fairfax Capital Partners. Inc.
JOSEPH R. P,AOLELLA
DOMINIC J. PUOPOLO
W. EARL RIGGS
PAULT. SHIRI.EY
JOHN LARKIN TIHOMPSON
President Emeritus
Blue Cross Blue Shield
of Massachusetts
Officers
PAUL M. VERROCI iI
Chairman of the Board.
Chief Executive Officer and Prcsident
DOMINIC J. PUOPOLO
Executive Vice President, Chief
Financial Officer and Treasurer
JOSEPH R. PAOLELLA
Executive Vice President
W. EARL RIGGS
Executive Vice President
PAULT. SIIIRLEY
Executive Vice President
RONALD M. LEVENSON
Senior Vice President anal
Chief Accounting Officer
MICHAEL J. McCLYMONT
Senior Vice President
JOHN K. RESTER
Senior Vice President
Rsywnat Company °Kleets
STEPHEN C. DONOHOE
President and Chief Executive Officer
Professional Ambulance Service. Inc.
Wilmington. DE
JOSEPH R. PAOLELLA
President and Chief Executive Officer
New Haven Ambulance Service. Inc.
New Haven, CE
JOHN K. RESTER
President and Chief Executive Officer
Mobile Medic Ambulance Service, Inc.
Gulfport. MS
W. EARL RIGGS
Chief Operating Officer
AMR West
San Jose, CA
PAULT. SHIRLEY
Chief Executive Officer
AMR West
San Jose, CA
D. TRACE SKEEN
President and Chief Executive Officer
Buck Medical Services, Inc.
Portland. OR
CARL UNREIN
President and Chief Executive Officer
Ambulance Service Company
Denver. CO
Shareholder Information
Transit Agent
Bank of Boston
Boston, MA
independent Auditors;
KPMG Peat Marwick
Boston. MA
senors Counsel:
Ropes & Gray
Boston, MA
Stock information:
Common Stock is traded on the
New York Stock Exchange under
the symbol "EMT"
Anneal Matitinv
Thursday. May 13, 1993
at 2:00 pm
Bank of Boston
100 Federal Street
Floor One Auditorium
Beaton. MA 02105 -
Etnetavo Ofbaee
67 Batterymarch Street
Boston. MA 02110
617-261-1600
Fent 14K
A copy oldie American Medical Response,
Inc. Form 10-K will be ay.,ilable to stock-
holders of record at no charge upon writ. .
ten request to its Investor Relations'
Department at 67 Batterymarch Street.
Boston, MA 02110
Market for the Registrant's Common Equity
and Related stockholder Matta: .
The Company's Common Stock has
been traded on the New York Stock
Exchange since August 5, 1992 under the symbol "EMT'. Prior to Anglia' 5, 1992. the
date of the Company's initial public offering,
no established public trading market existed
for the Company's Common Stock. The fol-
lowing table sets forth the high and low sales
prices for the Common Stock for the fiscal
quarters, or portions thereof, specified:
High Lim
August 5, 1992 through
September 30, 1992 11 ir2
8irz
Quarter ended
December 31, 1992 19 ss 93/4
On April 2, 1993. the last sale price
of the Common Stock on the New York
Stock Exchange was 516 3r4. As of March
19. 1993 there were 366 holders of record
of Common Stock.
The Company has not paid any cash'
dividends on the Common Stock in the past
and aloes not plan to pay any cash dividends
on the Common Stock in the foreseeable
future. The Company's Board of Directors
intends. for the foreseeable future, to retain
earnings to finance the expansion of the
Company's business. but expects to review
its dividend policy regularly. In the foresee-
able future. the Company expects to obtain a
credit facility that will restrict the
Company's ability to pay dividends.
5.
AMERICAN.MEDICAL kESPONSE. INQ. •
American Medical Response. Inc.
67 13atteryrnarch Street
Boston, MA 02110
617-261-1600
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N o Total (4) $ $ $ $
sr 5 (1) The Company and the Selling Stockholders have agreed to indemnify the U.S. Underwriters and the International
E . Managers against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting".
C ns
r (2) Before deducting estimated expenses of the Offerings of S550,000 payable by the Company.
C V V
E E ; (3) The Company will receive $1,998,000 upon exercise of warrants held by a Selling Stockholder concurrent with the
cy consummation of the Offerings. "Proceeds to Selling Stockholders" has not been adjusted to reflect payment of such
amount.
(4) Certain Selling Stockholders have granted the U.S. Underwriters and the International Managers a 30 -day option to
purchase up to 412,500 additional shares of Common Stock solely to cover overallotmcnts, if any. If such options are
exercised in full, the total "Price to Public", "Underwriting Discounts and Commissions" and "Proceeds to Selling
Stockholders" will be $ $and $ respectively. Set "Underwriting".
PROSPECTUS
Subject to Completion, dated August 31, 1993
2,750,000 Shares
wit tiV40411sMki141101111111,744:1;011F1V1k10210
Common Stock
Of the 2,750,000 shares of Common Stock offered hereby, 2,000,000 shares are being sold by American Medical
Response, Inc. (the "Company") and 750,000 shares are being sold by certain selling stockholders (the "Selling
Stockholders"). The Company will not receive any proceeds from the sale of the shares being sold by the Selling Stockholders.
See "Principal and Selling Stockholders".
Of the 2,750,000 shares offered hereby, 2,200,000 shares are being offered initially in the United States by the U.S.
Underwriters and 550,000 shares are being offered initially outside the United States by the International Managers (subject
to transfers between the U.S. Underwriters and the International Managers). Such offerings are referred to collectively as the
"Offerings". The offering price and underwriting discounts and commissions per share are identical for both Offerings. See
"Underwriting".
The Company's Common Stock is traded on the New York Stock Exchange ( the "NYSE") under the symbol "EMT".
The closing pnce of the Company's Common Stock on the NYSE on August 27, 1993 was $201/4 per share. See "Price Rance
of Common Stock".
For information containing certain factors relating to the Offerings, see "Investment Considerations".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions (1) Company (2)(3) Stockholders (3)
Per Share $ $ $ $
C0 V
O
Oy
E c
0 N
- .2 at
r V to
. so ~ The shares of Common Stock offered by this Prospectus are offered by the U.S. Underwriters subject to pnor sale, to
0 �0.. 0 withdrawal, cancellation or modification of the offer without notice, to delivery to and acceptance by the U.S. Underwriters
. "4' and to certain further conditions. It is expected that delivery of the shares of Common Stock will be made at the offices of
v S . Lehman Brothers Inc., New York, New York on or about , 1993.
L V —
Y O O
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LEHMAN BROTHERS
1993
KIDDER, PEABODY & CO.
NeORPOILATF.I)
ADVEST, INC.
:%rnerican Medical Response. Inc. ;c Fremont. California dispatch center utilizes modern
technologies and a Global Positioning Satellite system to Irs.eisr in rtndnilcnce deployment.
The above rnap area oreruieu•.: show the Mention of Loth emer_eney calls and arnhulanees.
Providing Emergency Medical
Services to Our Communities...
lVhen Every Second Counts.
The administration of high quality care,
using advanced life support equipment, is
vital long before hospital arrival.
IN CONNECTION WITH THESE OFFERINGS. THE U.S. UNDERWRITERS AND THE IN-
TERNATIONAL MANAGERS MAY OVER -ALLOT OR EFFECT TRANSACTIONS WHICH STABI-
LIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS ;•LAY BE EFFECTED ON TIIE NEW YORK STOCK EXCHANGE, IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
OFFERS AND SALES OF TIIE COMMON STOCK IN TILE UNITED KINGDOM. AND
ADVERTISEMENTS THEREIN IN CONNECTION THEREWITH, ARE SUBJECT TO CERTAIN
RESTRICTIONS. SEE "UNDERWRITING".
AVAILABLE INFORMATION
The Company is subject to thc informational requirements of thc Securities Exchange Act of 1934. as
amended (the "Exchange Act"). and in accordant: therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports. proxy statements and other information
filed by the Company may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street. N.W.. Room 1024. Washington. D.C. 20549 and at the Commission's
Regional offices at 7 World Trade Center. 13th Floor, New York, New York 10648 and Northwestern Atrium
Center. 500 West Madison Street. Suite 1400. Chicago, Illinois 60661. Copies of such materials may be
obtained at prescribed rates upon request from thc Public Reference Scction of the Commission at 450 Fifth
Street. N.W.. Washington. D.C. 20449. The Companys Common Stock is listed on the New York Stock
Exchange and reports. proxy statements and other information concerning the Company may be inspected and
copied at the offices of the New York Stock Exclvinge. 20 Broad Street. New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following d.::aments previously filed by the Company with the Commission pursuant to the
Exchange Act are hereby int-ornorated by reference:
(1) The Companys Annual Report on Form 10-K for the year ended December 31. 1992. including the
portions of the Company's Proxy Statement dated March 11, 1993 relating to its 1993 Annual
Meeting of Shareholders. as amended by the amendment to the Form 10-K on Form 10-K/A dated
June 11. 1993.
(2) The Company's Quarterly Reports on Form I0 -Q for the quarters ended March 31 and June 30.
1993.
The Companys Current Reports on Forst 8-K dated November 18. 1992. January 6. 1993. January
25. 1993. as amended by the Company's Current Report on Form 8 dated February 2. 1993. and
June 29. 1993.
(4) The description of the Common Stock in the Company's Registration Statement on Form 8-A (No.
1-11196). as amended.
All reports and other documents filed by the Company pursuant to Section 13(a). 13(c). 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination of these Offerings shall be
incorporated by rcferen.e into this Prospectus and shall be deemed to be a part of this Prospectus from the
date of filing of such repoits and documents. Any statement contained herein or in a document incorporated
by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed. except as so modified or superseded. to constitute a part of this Prospectus.
The Company will provide. upon request. without charge to each person to whom a copy of this
Prospectus has been delivered. a copy of any or all of the documents which have been or may be incorporated
in this Prospectus by reference. other than certain exhibits to such documents. Requests for such copies should
be directed to: American Medical Response. Inc.. 67 Batten march Street. Boston. Massachusetts 02110
(telephone: (617) .61-1600).
(3)
•
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the information and fi,. ,r,cial statements and notes
thereto appearing elsewhere in this Prospectus or incorporated by reference herein. Except as otherwise
indicated. all information in this Prospectus assumes no exercise of the over -allotment notion3 granted to the
U.S. Underwriters and the International Managers. Unless otherwise indicated. all references to the "Com-
pany" herein include American Medical Response, Inc. and its subsidiaries.
For information concerning certain factors relating to the Offerings, see "Investment Considerations".
The Company
American Medical Response. Inc. (the "Company") is the leading provider of emergency and non-
emergency ambulance services in the United States. The Company currently provides ambulance services in
Northern California (Alameda, Contra Costa. Santa Clara and Santa Cruz Counties). South Central
Connecticut (the greater New Haven and Bridgeport area), Northern Delaware and Southern New Jersey,
Southern and Central Mississippi. Portland, Oregon and surrounding areas. Central Colorado and Dade
County, Florida.
The Company provir!es emergency pre -hospital medical care and ambulance services to patients in
response to "911" emergency medical calls. Additionally. the Company provides non -emergency ambulance
services to patients during transfer to and from health care facilities and r.:sidcnces and nonmedical transport
services to thc handicapped and thc elderly. The Company completed approximately 390.000 and 294,000
transports in response to calls for its services during 1992 and the first six months of 1993, respectively.
The Company believes that expenditures for ambulance services in the United States were at least
S4 billion during 1992 and have grown at approximately 10% per year over thc last decade. The growth in
expenditures for ambulance services has resulted from an increase in both the number of ambulance transports
and in average expenditures per transport. Demand for ambulance services has increased due to both the
growth and aging of the U.S. population as well as the trend toward greater use of outpatient care facilities in
response to current efforts to contain health carc costs.
The Company acquired by merger four ambulance service providers concurrent with its initial public
offering in August 1992 and since that time has acquired seven additional ambulance service providers. The
Company's objective is to continue to be thc leading provider of emergency and non -emergency ambulance
services in thc United States. The Company's growth strategy is focused on acquiring new businesses.
expanding existing operations. improving the quality and efficiency of operations and promoting and
capitalizing on the expertise of the operating executives of its providers.
American Medical Response. Inc. was organized as a Massachusetts corporation in February 1992 and
was reincorporateci in Delaware in June 1992. The Company's executive offices are located at 67 Battery -
march Street. Boston. Massachusetts 02110 and its telephone number is (617) 261-1600.
The Offering
Common Stock to be offered:
By the Company
By Selling Stockholders
Total
Common Stock to be outstanding after the Offerings
Use of proceeds
NYSE symbol
1,000.000 shares
750.000 shares
2.750.000 shares
13.38/3.720 shares (1)
For general corporate purposes,
including acquisitions and the
repayment of borrowings under the
Company's revolving line of credit
EMIT
(t) Based on thc number of shares outstanding on August 9, 149: and includes I K(UX.X) shares being offered hereto that arc issuable
upur exercise of warrants held h) a Selling Stixkholdcr Docs not include 425.350 shaves rc.crscd for i„dance upon exercise of
outstanding options granted under cmplosccs and director: stock plans. 120.05/ shales ic.encd for issuance upon exercise of
outstanding warrants and 1(n(X)0 shares conungcnth ',suable in connection ,sith :he acqut.iiion of enc of the Company's
subsidianec
3
r
Summary Financial Data (1)
(in thousands, except per share amounts)
Six Months
Ended Jane 30,
Year Ended December 31,
1993 1992 1992 1991 1990 1989 1985
Earnings Data:
Total revenue $86,190 $58,343 8121,192 8108,018 884,870 865,606 $48,409
Earnings from operations 7,683 4.599 10.273 9,501 5.546 4,547 2,559
Earnings before income taxes 7,250 4,1167 9,489 8,285 4,280 3,408 1,907
Net earnings 4,103 2,402 5,239 4,843 2,528 2,050 1,173
Pro forma net earnings (2) 4,103 2,351 5,917 1,694 2.400 1,903 1,065
Pro forma net earnings per
common share $ 0.38 S 0.30 8 0.67 $ 0.59 $ 0.30 $ 0.24 $ 0.13
Weighted average common
shares outstanding 10,916 7,968 8,838 7,968 7,968 7.968 7,968
June 30, 1993 December 31,
Actual As Adjusted (3) 1992
Balance Sheet Data:
Working capital 824,550 S 51,047 827,096
Total assets 90,392 116,889 70,848
Current maturities of long-term debt 911 911 5,465
Long-term debt 19,114 4,975 8,975
Stockholders' equity 17,408 88,044 37,216
(1) For all periods presented, the summary financial data includes the combined results of the four ombulance service providers acquired
by the Company in August 1992 concurrent with its initial public offering and the eesults of Randle Eastern Ambulance Service, Inc.
wl,ich was acquired in June 1993 and accounted for as a pooling -of -interests. The financial data for the companies acquired by the
Company from November 1992 through June 1993 and accounted far as purchases arc included from their respective dates of
acquisition. The summary financial data should be read in conjunction with the accompanying Consolidated Financial Statements,
and the related notes thereto, the Pro Forma Financial Statements, and the related notes thereto. and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
(2) Certain adjustments have been made to net earnings to reflect income taxes that would have been payable by one of the Company's
subsidiaries that was an S corporation for federal income tax purposes during the periods presented through August 1992. See Note 4
to the Consolidated Financial Statements.
(3) Adjustcd to reflect the sale by the Company of 2.1)00.000 shares of Common Stock in the Offerings at an assumed offering price of
520.625 per share. after deduction of underwriting discounts and estimated offering expenses payable by the Company, the receipt by
the Company of 51,998.000 upon exercise of warrants held by a Selling Stockholder concurrent with the consummation of the
Offerings and application of the net proceeds to the Company from the Offerings to reduce the Company's outstanding borrowinks
under its rcvohing line or credit.
4
•
1
INVESTMENT CONSIDERATIONS
The following factors should be considered together with the other information contained in this
Prospectus. in evaluating an investment in the Company.
Growth Strategy — Acquisition of Ambulance Senice Providers. The Company's growth strategy
depends in large measure on its ability to acquire additional ambulance service providers. Competition for the
acquisition of ambulance service providers is increasing as the ambulance service industry undergoes
consolidation. Although thc Company has acquired seven additional ambulance service providers since it
acquired four providers in August 1992. there can be no assurance that suitable additional acquisitions can be
identified, consummated or successfully integrated into the Company's operations. The Company has used a
combination of cash and securities as consideration for acquisitions. In the event that the Common Stock does
not maintain a sufhcintt valuation or if potential acquisition candidates are unwilling to accept the Company's
securities as consideration, the Company will be required to use more cash resources to continue its acquisition
program. In addition. if sufficient tinancing is not available as needed on terms acceptable to the Company, the
Company's acquisition program could be adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations — Liquidity and Capital Resources" and "Business —
Company Strategy" and "— Competition".
Limited Combined Operating History. The Company was founded in February 1992 to acquire
ambulance service providers and conducted no operations until August 1992 when it acquired four providers.
Since August 1992, the Company has acquired seven additional providers. Although providers acquired by the
Company have substantial operating experience as separate companies, the Company has only operated as a
combined entity for approximately one year. In addition, members of the Company's management group who
were not members of management of the providers acquired had no prior experience in the ambulance service
industry. There can be no assurance that the Company's management will be successful in integrating the
combined operations of providers acquired or in implementing the Company's business strategy. See
"Business — Overview" and "Management".
Possible Adverse Changes in Reimbursement Rates or Coverage. A substantial majority of the
Company's revenues are attributable to payments received from third -party payors, including Medicare,
Medicaid and private insurers. The revenues. cash flows and profitability of the Company, like those of other
companies in the health care industry. are affected by the continuing efforts of third -party payors to control
expenditures for health care. In addition. reimbursement can be influenced by the financial instability of
private third -party payors and by budget pressures and cost shifting by governmental payors. A reduction in
coverage or reimbursement rates by third -party payors could have a material adverse effect on the Company's
results of operations. See "Business — Governmental Regulation" and "— Reimbursement".
Health Cure Reform. The public and the federal government have recently focused significant attention
on reforming the health care system in the United States. In the last session of Coreress, numerous legislative
proposals were introduced that would effect major reforms of the U.S. health care system. The Clinton
Administration has pledged to bring about a reform of the nation's health care system, and, in January 1993,
the Task Force on National Health Carc Reform (the "Task Force") was created and charged with preparing
health care reform legislation to be presented to Congress. Among the stated concerns to be considered by thc
Task Force are means to control or ..duce public and private ~,pending on health care, to reform the payment
methodology for health care goods ar.; services by both the public (Medicare and Medicaid) and private
sectors, which may include overall Iiinitations on federal spending for health care benefits, and to provide
universal access to health care. The Company cannot predict the proposals or policy initiatives that may be
enacted nor the effect any health care reforms may have on its business. No assurance can be given that any
such reforms will not have a material adverse effect on the Company.
Reliance on Personnel. The Company is dependent on its senior management. Although the Company
has entered into employment agreements with t:iese officers. there can be no assurance that the Company will
be able to retain their services. The Company is also dependent on its staff of supervisory personnel and on its
staff of medical personnel. over one-half of which is covered by collective bargaining agreements. The loss of
key management and other personnel, an inability to extend or renew collective bargaining agreements or an
inability to attract and retain sufficient numbers of qualified employees could have an adverse effect on the
Company and its operations. See "Management".
Dependence on Certain Contracts. During the first six months of 1993 and 1992. the Company derived
approximately 37% and 57% of its total revenue, respectively, from emergency medical ambulance services
provided under contracts to provide "911" ambulance services with three counties in California and from
subsidies thc Company received under these contracts. These contracts expire on various dates between June
1994 and June 1996. The cancellation or loss of any one or more of these contracts could have a material
adverse effect on the Company and its operations. These contracts are subjcct to competitive bid processes or
renegotiation upon expiration. See "Business — Marketing and Sales" and "— Contracts".
Government Regulation. Ambulance service providers are subject to numerous federal, state and local
laws and regulations that govern various aspects of their businesses. There can be no assurance that federal,
state or local governments will not adopt laws or regulations that would increase the Company's cost of doing
business, lower reimbursement levels or otherxise have a material adverse effect on the Company. See
"Business Governmental Regulation" and "— Reimbursement".
Competition. The ambulance service industr; is highly competitive. Principal participants include
government entities, Targe regional ambulance service providers, hospitals and numerous local providers.
Certain existing and potential competitors of the Company have significantly greater capital and other
resources than the Company. Thcre can be no assurance that municipalities or health care facilities that
presently contract for ambulance services will not choose to provide ambulance services directly in thc future.
See "Business — Competition".
Shares Eligible for Future Sale. Future sales of substantial amounts of Common Stock in the public
market could adversely affect the market price of the Common Stock. Of the approximately 13.4 million
shares of Common Stock that will be outstanding after the Offerings. approximately 6.7 million shares will be
freely tradeable without restriction. unless held by "affiliates" of the Company, except in certain cases, subject
to certain volume and manner of sale restrictions. The remaining 6.7 million shares are "restricted securities"
within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), and will not be eligible
for resale in the public market until various times in 1994 and 1995. Of these restricted shares, approximately
5.2 million shares (assuming that the underwriters' over -allotment option is not exercised) are held by
directors, executive officers, Selling Stockholders and their affiliates w•ho have agreed not to sell or otherwise
dispose of any of their shares for a period of 180 days after the date of this Prospectus without the prior written
consent of the representatives of the U.S. Underwriters. Upon expiration of the 180 -day period, approximately
2.0 million shares will be available immediately for sale in the public market undcr Rule 144 beginning in
February 1994 and. in addition, approximately 3.6 million shares will be available for sale in the public market
under Rule 144 beginning in August 1994. in each case subject to volume limitations and other restrictions.
Approximately 761.000 of the shares that will be available for resale immediately after the expiration of the
180 -day lock-up period are subject to certain repurchase obligations. As of August 9, 1993, 1.578,112 shares of
Common Stock are available for issuance under a shelf registration statement and generally will be freely
tradeable after their issuance under Rule 145 (unless held by an affiliate). subject to the volume and manner
of sale restrictions under Rule 144. In addition, the Company has tiled an S-8 registration statement under the
Securities Act registering all 1.000.000 shares of Common Stock issuable under the Company's stock plans.
Shares issued upon, the exercise of options generally will be freely tradeable. See "Shares Eligible for Future
Sale"
Control by Stockholders. Upon completion of the Offerings. directors and executive officers of the
Company and their affiliates will own beneficially approximately 39% (or 36% assuming exercise of the over-
allotment option) of the outstanding shares of Common Stock. As a result. these stockholders may. if they act
as a group. be able to elect the Board of Directors of thc Company and to determine the outcome of certain
corporate transactions and amendments to the Co.npany's Restated Certificate of incorporation and By-laws
requiring stockholder approval.
6
r,
•
Possible Volatility of Stock Price. The market price of the Common Stock may be highly volatile.
Factors such as quarter -to -quarter variations in the Company's revenues and earnings. the timing of
acquisitions made by the Company. and the announcement and implementation of health cart rcform
proposals could cause the market price of the Common Stock to fluctuate significantly. In addition, general
economic, political and market conditions may adversely affect the market price of the Common Stock.
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the NYSE under the symbol "EMT". The following table sets forth the
high and low sales prices for the Common Stock from August 5, 1992, the date of the Company's initial public
offering, through August 27, 1993.
1992 Law 1tig11
Third Quarter (from August 5. 1992) S 81/2 SI I
Fourth Quarter 9'/. 191/4
1993
First Quarter 123A 191/2
Second Quarter 144i 201A
Third Quarter (through August 27, 1993) 191/2 2234
On August 27, 1993, thc closing price of the Common Stock was 520.625. On August 9. 1993, there were
808 shareholders of record of the Common Stock.
USE OF PROCEEDS
The Company intends to use the net proceeds to the Company from the Offerings, estimated to be
approximately S38.6 million (assuming an offering price of 520.625 and after deducting underwriting
discounts and the estimated expenses of thc Offerings) for general corporate purposes, including acquisitions
and the repayment of borrowings under the Company's revolving line of credit, which totalled approximately
513.0 million as of August 11. 1993. Thc Company will not receive any proceeds from the shares being sold by
the Selling Stockholders but will receive 51.998,000 upon exercise of warrants held by a Selling Stockholder
concurrent with the consummation of the Offerings. Pend;ng application of the proceeds. the Company
intends to invest the balance in short-term investment-grade, interest bearing securities or certificates of
deposit. Borrowings under the Company's revolving line of credit. which were used to refinance other
indebtedness and for acquisitions and working capital purposes, bear interest at the prime rate or LIBOR plus
2.5%. The revolving line of credit matures in April 1996. After application of the proceeds from the Offerings.
530.0 million will be available to the Company under the revolving line of credit. The Company expects to
borrow under the revolving line of credit as needed in connection with acquisitions and other corporate
purposes.
DIVIDEND POI ICY
The Company has not paid any cash dividends on the Common Stock in the past and does not plan to pay
any cash dividends on the Common Stock in the foreseeable future. In addition, the Company's revolving line
of credit agreement prohibits thc Company from paying dividends and making other payments with respect to
its capital stock in any year in excess of 50% of the Company's net income for that year. Thc Company's Board
of Directors intends. for the foreseeable future. to retain earnings to finance the expansion of the Company's
business, but expects to review its dividend policy regularly.
7
CAPITALIZATION
The following table scts forth the Company's cash, short-term debt and capitalization at June 30, 1993,
and as adjusted to reflect the sale of the shares of Common Stock offered by the Company hereby (assuming
an offering price of 520.625 per share and after deducting underwriting discounts and estimated offering
expenses payable by the Company), the receipt by the Company of S1.998,000 upon exercise of warrants held
by a Selling Stockholder concurrent with the consummation of the Offerings and application of the net
proceeds to the Company from the Offerings to reduce the Company's outstanding borrowings under its
revolving late of credit. This table should be read in conjunc'iur, with the Financial Statements and the related
notes thereto included elsewhere in this Prospectus.
June 30. 1993
As
Actual Adjusted
(ha thousands)
Cash S 5,909 532,406
Current maturities of debt S 911 S 911
Long-term debt 19,114 4,975
Stockholders' equity_
Preferred Stock, S.01 par value. 500.000 shares authorized; notie outstanding
Common Stock, S.01 par value, 25.000,000 shares authorized; 11,126,813
shares outstanding 13.306,813 'shares outstanding as adjusted (I) 111 133
Additional paid -in capital 27,385 67,999
Retained earnings 19,912 19,912
Total stockholders equity 47.408 88,044
Total capitalization 566.522 593.019
(I) Does not include 428,350 shares reserved for issua.;ce upon exercise of outstanding options granted under employees' and directors'
stock plans 120,000 shares reserved for issuance upon exercise of outstanding warrants and 100.000 shares contingently issuablein
connection with the acquisition of one of the Company's subsidiaries.
8
SELECTED FINANCIAL DATA
For all periods pre.ented, the following selected financial information includes the consolidated results of
the four ambulance service protiiders the Company acquired concurrent with its initial public offering and of
Randle Eastern Ambulance Service Inc.. which was accounted for as a pooling -of -interests. The financial data
of the companies acquired by the Company from November 1992 through June 1993 and accounted for as
purchases an; included from their respective dates of acquisition. The following selected consolidated financial
information with respect to the Company's consolidated statements of earnings for the years ended December
31, 1992, 1991 and 1990 and with respect to the Company's consolidated balance sheets as of December 31,
1992 and 1991 have been derived from the Consolidated Financial Statements that have been audited by
KPMG Peat Marwick. The selected consolidated financial information for the years ended December 31.
1989 and 1988 and for thc six-month periods ended June 30. 1993 and 1992 and for the balance sheet data as
of December 31. 1990 have not been audited, but in the Company's opinion refect all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of results of operations for those
periods. The results of the six-month period ended lune 30, 1993 are not necessarily indicative of the results to
be expected for the entire year. The selected financial data provided below should be read in conjunction with
thc accompanying Consolidated Financial Statements. and the related notes thereto, the Pro Forma Financial
Statements. and the related notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
SELECTED FINANCIAL DATA
(ns thousands, except per stare amounts)
Six Months
Ended June 30.
Year Ended December 31.
1993 1992 1992 1991 1990 1989 1988
Earnings DM=
Total revenue 586.190 558,343 5121,192 5108,018 584.870 565.606 548.409
Operating expenses:
Salaries and benefits 42,279 29,114 60,577 52,009 40,922 32,092 24.263
Uncompensated care 19,116 13,659 28,008 25,862 19,769 14,297 10,383
Other operating expenses 14,090 8,946 18,377 16,640 14,554 11.523 8,943
Depreciation 2.363 1.752 3.396 3.079 2,766 2,226 1,270
Amortization of intangibles 659 273 561 927 1,313 921 951
Total operating expenses.. ... , , . 78,507 53,744 110,919 98.517 79.324 61.059 45.850
Earnings from operations 7,683 4,599 10.273 9,501 5.546 4,547 2,559
Interest expense. net ........... ... .. .. 433 532 784 1,216 1,266 1,139 _ 652
Earnings before income taxes 7,250 4,067 9,489 8.285 4,280 3.408 1.907
Income taxes 3,147 1,665 4.250 3,442 1,752 1,358 734
Net earnings .. 5 4,103 5 2,402 S 5.239 S 4.843 82.528 S 2,050 S 1.173
Pru forma net camings(1) S 4.103 5 2351 $ 5,917 5 4.694 S 1400 1,903 5 1,065
Pro forma net earnings per common share 5 0.38 5 030 $ 0.67 5 0.59 5 0.30 S 0.24 5 0.13
Wcightcd average common shares outstanding .. , 10.916 7,968 8.838 7.968 7,968 7,968 7.968
Balance Sheet Data:
June 30. December 31,
1993 1992 1991 1990 1989 1988
Working capital . _ . 524.550 S 27.096 510,413 S 7,538 $ 7,219 S 4,416
Property and equipment. net 15.123 10.555 9,620 8.423 6,859 3.953
Total assets 90,392 70.848 40,064 35,494 29,094 19,447
Currcnt maturities of dcbt .. ..... . ... . . 911 5.465 5.137 4.301 4.114 2.830
Long-term debt 19.114 8,975 8,031 9,28o 10.000 6.789
Stockholders' equity ... 47,408 37.216 12.871 8.725 6,732 4.682
(It Certain adjustments have been made to net earnings to reflect income taxes that could have been payable by one of the Company's
subsidiaries that was an S corporation for federal income tax purposes during the periods presented through August 1992. See Note 4
to the Consolidated Financial St.oements.
9
r
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
introduction
For all periods presented, the following financial information includes thc combined results of the four
ambulance service providers the Company acquired concurrent with its initial public offering in August 1992
and of Randle Eastern Ambulance Service, Inc. which was acquired in June 1993 in a transaction accounted
for as a pooling -of -interests. The companies acquired by the Company from November 1992 through June
1993 and accounted for as rirchases are included from their respective dates of acquisition.
The Company's total revenue, which is comprised primarily of ambulance service fees charged to
Medicare and Medicaid, to other third -party payors, including private insurance carriers and health
maintenance organizations, and directly to patients. is presented net of contractual adjustments. Contractual
adjustments represent the difference between gross billable charges and the portion of those charges allowable
by the third -party payor. The Company's provision for uncompensated care represents the difference between
net ambulance fee revenues and expected collections.
Six Months Ended June 30, 1993 Compared to the Six .Months Ended June 30, 1992
Oven3ew
The Company's net earnings amounted to $4.1 million or $0.38 per share for the six months ended
June 30. 1993. as compared with pro forma net earnings of $2.4 million or $0.30 per share for the
corresponding period of 1992. The increase in net earnings results from incremental earnings provided from
acquisitions, new contracts and increases in transports. The increase in earnings per share results from the
increase in net earnings, which is part1!• offset by an increase in the weighted average number of shares. The
weighted average number of shares was If•,916.042 and 7.967.563 for the first six months of 1993 and 1992,
respectively. The increase in the weighted average number of shares outstanding results from the initial public
offering in August 1992 and shares issued in connection with acquisitions.
Results of Operations
The Company's total revenue amounted to SS6.2 million for the first six months of 1993 as compared
with S58.3 million. for the same period of 1992. an increase of S27.9 million or 47.7%. The largest single
contributor to the increase in total revenue was the incremental revenue provided from acquisitions. Also
contributing to the increase was revenue generated from the Company's contract to provide exclusive "911"
emergency response service to Atlantic City. New Jersey, awarded in late 1992, and an increase in the number
of emergency and non -emergency transports. On June 1, 1993, the Company began providing exclusive "911"
emergency response service to Aurora. Colorado.
The Company is a party to three significant contracts to provide emergency "911" services. The Company
derived approximately 37% and 57% of its total revenue from these contracts during the first six months of
1993 and 1992. respectively.
Salaries and benefits expense as a percentage of total revenue was 49.1% and 49.9% for the first six
months of 1993 and 1992. respectively. This was a result of a favorable impact of acquisitions, which in the
aggregate have relatively lower labor costs. offset by the addition of corporate salaries and benefits that did not
exist in the prior period and certain wage increases. It is anticipated that corporate salary expense will increase
in future periods as the Company continues to implement its acquisition program and to centralize certain
operating, financial. and treasury management functions. However. it is also anticipated that corporate salary
expense will decrease as a percentage of total revenue as the Company continues to grow.
Uncompensated care expense as a percentage of total revenue was 22.2% and 23.4% for the six months
ended June 30. 1993 and 1992. respectively. The percentage decrease is due to the favorable impact of
acquisitions. which in the aggregate have experienced lower uncompensated care expense as a per,:cntage of
total revenuc and an improvement in the quality of thc Company's receivables.
10
Other operating expenses were 514.1 million in the first six months of 1993 as compared with 58.9 million
in the same period of 1992. As a percentage of total revenue. other operating expenses increased to 16.3% in
the first six months of 1993 from 15.3% in the same period of 1992. The percentage incrcasc was primarily the
result of the addition of corporate expenses that did not exist in the prior period.
Amortization of intangibles increased to S659,000 for the first six months of 1993 from 5273.000 for the
first six months of 1992, an increase of S386.000. This increase was the result of thc cost in cxccss of net assets
acquired recorded in connection with the Company's acquisitions. Amortization of intangibles will increase in
the future as a result of acquisitions accounted for as purchases.
Net interest expense decreased by $99,000 for the first six months of 1993 as compared to the first six
months of 1992. This decrease was the result of the decline in the Company's weighted average borrowing rate
and the decline in the average amount of debt outstanding. resulting primarily from implementation of the
Company's revolving credit facility.
The effective tax rate for the first six months of 1993 was 43.4% as compared with a pro forma effective
tax rate of 42.2% for thc same period in 1992. The increase in the effective tax rate results primarily from an
increase in amounts that arc not deductible for tax purposes. Pro forma income tax expense for the six months
ended June 30, 1992, are tax amounts that would have been recorded if one of the companies acquired at the
time of the initial public offering had been a C corporation during this period. If the subsidiary had been
c. bject to corporate income taxes on an ongoing basis, the Company's income tax expense would have been
S1,716.000 for the first six months of 1992. In August 1993. legislation was enacted which will increase the top
marginal income tax rate for corporate taxpayers. effective as of January 1, 1993. and which will implement
other tax changes. The Company has not determined the effect such legislation will have on the Company.
Year Ended December 31. 1992 Compared to the Year Ended December 31. 1991
Overview
The Company's net earnings on a pro forma basis amounted to 55 9 million or 50.67 per share for the year
ended December 31. 1992. as compared with pro forma net earnings of S4.7 million or 50.59 per share for
1991. The improvement in pro forma net earnings results from increased transports. increased rates, an
increase in fixed government subsidies, an upgrade of basic life support services to paramedic services. a
reduction in net interest expense. and a reduction in the pro forma effective tax rate. The increase in pro forma
earnings per share results from the increase in net earnings. which is partly offset by an incrcasc in the
weighted average number of shares outstanding resulting from the initial public offering and shares issued in
connection with the acquisitions.
Results of Operations
The Company's total revenue amounted to 5121.2 million for the year ended December 31, 1992 as
compared with 5108.0 million for 1991. an increase of 513.2 million or 12.2%. The largest single contributor to
the increase in total revenue was the increase in ambulance transports in 1992 as compared with 1991. The
balance of the increase was the result of rate increases received in certain areas, an upgrade of basic life
support services to paramedic services and an increase in fixed government subsidies. The acquisitions
accounted for as purchases discussed in Note 2 to the Consolidated Financial Statements contributed
approximately S2.0 million to total revenue for 1992.
The Company is a party to three significant contracts to provide emergency "911" services. The Company
derived approximately 57% of its 'otal revenue from these contracts during 1992.
Salaries and benefits expense amounted to S60.6 million for 1992 as compared with 552.0 million for
1991. an increase of 58.6 million or 16.5%. As a percentage of total revenue. salaries and benefits increased to
50.0% for 1992 from 48.1% in 1991. The increase was primarily the result of higher staffing levels required to
satisfy contractual obligations for faster response times in certain areas. the changing prix to paramedic from
EMT personnel in order to provide enhanced paramedic services. generally higher labor costs due to wage
increases. and thc addition of corporate salaries and benefits which did not exist in thc prior year.
Uncompensated care expense amounted to $28.0 million fur 1992 as compared with 525.9 million for
1991. an increase of 52.1 million or 8.3%. As a percentage of total revenue. uncompensated care was 23.1%
and 23.9% for the years ended December 31, 1992 and 1991. respectively. The dollar increase in uncompen-
sated care expense results primarily from the growth in the Company's business.
Other operating expenses were $18.4 million for 1992 as compared with 516.6 million for 1991, an
increase of $1.7 million or 10.4%. The increase in other operating expenses was a result of the growth of total
revenues and the addition of corporate expenses which did not exist in the prior year. However, as a percentage
of total revenue, other operating expenses remained consistent at 15.2% for 1992 as compared to 15.4% for
1991.
Depreciation expense increased by $317,000 for 1992 as compared to 1991. The increase was attributable
to new vehicle purchases and depreciation expense related to the property and equipment acquired in
connection with the purchase of Mobile Medic Ambulance Service, Inc. As a percentage of total revenue,
depreciation expense remained constant at 2.8% and 2.9%, for 1992 and 1991, respectively.
Amortization of intangibles decreased by $366,000 for 1992 as compared to 1991 due to goodwill
amounts becoming fully amortized in 1991. Amortization of intangibles will increase in the future as a result
of goodwill recorded in connection with the Company's acquisitions.
Net interest expense decreased by 5432,000 for 1992 as compared to 1991. The decrease was the result of
the continued decline in borrowing rates, the decline in the - .rage amount of debt outstanding, and an
increase in investment income derived from the remaining n' t,.oceeds of the initial public offering.
Prior to the merger with the Company, one of the Company's subsidiaries was taxed as an S corporation.
As an S corporation, income taxes were not required to be provided in this subsidiary's financial statements. In
August 1992, concurrent with the merger. this S corporation status was terminated and the method of
accounting for tax purposes changed from the cash to the accrual method. Deferred income tax expense for
the year ended December 31, 1992. includes S780,000 attributable to this termination of S corporation status.
Pro forma income tax expense for the years ended December 31, 1992, 1991 and 1990 are tax amounts
which would have been recorded had this subsidiary been a C corporation during those years. If the subsidiary
had been subject to corporate income taxes on an ongoing basis. income tax expense would have been 53.6
million for 1992 and 1991. The effective tax rate for 1992 was 37.6% as compared with 43.3% for 1991. The
decline in the effective tax rate results from a favorable resolution of an IRS examination for which amounts
had previously been expensed in the Company's financial statements. combined with a decrease in amounts
which are not deductible for tax purposes.
Year Ended December 31, 1991 Compared to the Year Ended December 31, 1990
Overview
The Company's net earnings on a pro forma basis amounted to 54.7 million or 50.59 per share for the year
ended December 31, 1991, as compared with pro forma net earnings of 52.4 million or 50.30 per share for
1990. The improvement in pro forma net earnings results from increased transports, increased rates. an
upgrade of basic life support services to paramedic services, and a reduction in the pro forma effective tax rate.
The increase in pro forma earnings per share results from the increase in net earnings.
Results of Operations
The Company's total revenue amounted to 5108.0 million for the year ended December 3!. 1991 as
compared with 584.9 million for 1990. an increase of S23.1 million or 27.3%. The majority of the increase in
total revenue results from the increase in ambulance transports in 1991 as compared with 1990. The increase
in transports was due primarily to increased transports provided in an expanded area of Alameua County
where the City of Oakland was included for a full year in 1991 as compared to a six month period in 1990.
Enhanced paramedic services and general rate increases also resulted in higher average revenues per transport.
Salaries and benefits expense amounted to S52.0 million for 1991 as compared with S40.9 million for
1990. an increase of 511.1 million or 27.I%. As a percentage of total revenue. salaries and benefits decreased to
12
48.1% for 1991 from 48.2% in 1990. The dollar increase was primarily the result of the general growth of the
Company's business and generally higher labor costs due to wage increases.
Uncompensated care expense amounted to 525.9 million for 1991 as compared with $19.8 million for
1990, an increase of 56.1 million or 30.5%. As a percentage of total revenue, uncompensated carc increased to
23.9% for 1991 from 23.3% for 1990. The increase results primarily from a significant change in patient
demographics resulting from thc provision of services in the Oakland, California area for a full year in 1991
compared to a six month period in 1990.
Depreciation expel:- increased to 53.1 million for 1991 from 52.8 million for 1990, an increase of
5313,000 or 11.3%.
Other expenses were $16.6 million for 1991 as compared with 514.6 million for 1990, an increase of S2.0
million or 14.3%. As a percentage of total revenue, other expenses decreased to 15.4% from 17.1%.
Amortization of intangibles decreased to 5927.000 in 1991 from 51.3 million in 1990, a decrease of
5386.000 or 29.4%.
Net interest expense decreased by 550.000 for 1991 as compared to 1990. This decrease was the result of
the general decline in borrowing rates.
Liquidity and Capital Resources
The Company has financed its cash needs. including cash used for acquisitions. from the net proceeds of
its initial public offering. borrowings under its revolving line of credit and cash from operations. Concurrent
with its initial public offering in August 1992, the Company acquired four ambulance service providers for
aggregate consideration consisting of S10.2 million in cash and 4.143.500 shares of Common Stock. Through
June 30. 1993. the Company has made six additional acquisitions for aggregate consideration consisting of
S15.5 million in cash. 54.3 million in subordinated promissory notes and 1,434,062 shares of Common Stock.
The Company currently has a S30 million unsecured revolving line of credit with a group of banks
consisting of Fleet Bank of Massachusetts, N.A.. Continental Bank N.A. and Pacific Western Bank.
Borrowings under the line of credit have been used to refinance certain indebtedness, for acquisitions and for
working capital purposes. Borrowings are limited to the lesser of 530 million and 200% of the Company's
earnings before interest. income taxes, depreciation and amortization for the most recent twelve months.
Interest is determined at the time of borrowing at the Company's option at either prime or LIBOR plus 2.5%.
Letter of credit fees are 1.0% per annum on outstanding letters of credit that are cash collateralized and 1.5%
pe- annum on outstanding letters of credit that arc not cash collateralized. Under thc agreement, the Company
is required to comply with certain financial and other covenants. The line of credit matures in April 1996. As
of August 11, 1993, the Company had approximately 513.0 million of borrowings and $3.5 million of letters of
credit outstanding under the line of credit, and 513.5 million remained available for future borrowings.
During 1992 and 1991. the Company had additions to ambulances and other operating equipment of $2.2
million and 54.4 million. respectively. During the first six months of 1993, capital expenditures were made
primarily for new atnbulanccs and amounted to 53.0 million. 1t is expected that capital expenditures for the
Company's existing operations for thc remainder of 1993 will be approximately 54.0 million and consist
primarily of new ambulances and other operating equipment.
Cash generated from operations during 1992 was 54.3 million. Cash generated from operations during the
first six months of 1993 was 55.3 million. Working capital at June 30, 1993 amounted to $24.6 million as
compared to 527.1 million at December 31. 1992. Current financial resources and anticipated funds generated
by operations are expected to be adequate to meet the Company's operating cash requirements in the
foreseeable future.
The Company expects to actively continue its acquisition program. Successful implementation of thc
Company's acquisition strategy depends upon its ability to acquire additional ambulance service providers.
The Company plans to continue to use a combination of cash. subordinated debt and Common Stock to
finance its acquisition program.
I3
Subsequent Acquisitions and Pending Developments
In July 1993, the Company acquired substantially all of the assets of Bridgeport Ambulance Service, Inc.
of Bridgeport, Connecticut. The consideration paid by the Company in this transaction consisted of
approximately S1.4 million in cash. a S500,000 subordinated promissory note and 58,589 shares of Common
Stock.
In June 1993. the Company also announced that it reached a preliminary understanding concerning the
acquisition of 911 Emergency Services, Inc., a Califomia-based company which had 1992 revenues in excess
of S50 million. The transaction is subject to due diligence, the negotiation of definitive documentation and the
receipt of certain regulatory approvals. If the transaction is consummated the Company expects that additional
shares of Common Stock will be issued. There can be no assurance that such transaction will be
consummated.
'4
7-11
BUSINESS
Overview
The Company is the leading provider of emergency and non -emergency ambulance services in the United
States. The Company acquired by merger four ambulance service providers concurrent with its initial public
offering in August 1992 and since that date has acquired seven additional providers. Thc Company currently
provides ambulance services in Northern California (Alameda, Contra Costa, Santa Clara and Santa Cruz
Counties), South Central Connecticut (the greater New Haven and Bridgeport areas). Northern Delaware
and Southern New Jersey, Southern and Central Mississippi, Portland, Oregon and surrounding areas, Central
Colorado and Dade County, Florida.
Thc Company provides pre -hospital emergency medical care and ambulance services to patients in
response to "911" emergency medical calls. Additionally, the Company provides non -emergency ambulance
services to patients during transfer to and from health care facilities and residences ar .1 non-medical transport
services to the handicapped and the elderly. The Company completed approxirr...tely 390,000 and 294,000
transports in response to calls for its services during 1992 and the first six months of 1993. respectively.
The following table lists acquisitions made by the Company concurrent with. or subsequent to, its initial
public offering in August 1992:
PROVIDER
Regional Ambulance, Inc.
IN OPERATION
SINCE
1963
American Medical Response %Vest 1964
Ncw Haven Ambulance Service. Inc.
Professional Ambulance Service. Inc.
1972
1978
Mobile Medic Ambulance Service, Inc 1977
Ambulance Service Company 1920
Buck Medical Services .... 1967
A-1 Ambulance Companies 1971
Randle Eastern Ambulance Service. Inc.... _ ..... 1955
Reed Ambulances, Inc 1978
Bridgeport Ambulance Service, Inc. 1968
DATE CURRENT
ACQUIRED SERVICE AREA
August 1992
August 1992
August 1992
August 1992
November 1992
December 1992
January 1993
April 1993
June 1993
June 1993
July 1993
Alameda and Contra Costa
Counties, California
Santa Clara and Santa Cruz
Counties, California
Ncw Haven, Connecticut
Northern Delaware and
Southern New Jersey
Southern and Central Mis-
sissippi
Denver. Colorado and
surrounding areas
Portland, Oregon and
surrounding areas
Boulder, Colorado Springs
and Longmont, Colorado
Dade County. Florida
Denver, Colorado
Bridgeport. Connecticut
Industry Background
The Company believes that expenditures for ambulance services in the United States were at least S4
billion during 1992 and have grown at approximately 10% per year over the last decade. The Company
believes that while the industry is highly fragmented. with over 2,000 privately -owned companies, consolida-
tion is occurring. In addition, the Company believes that privatization of ambulance services has occurred.
The growth in expenditures for ambulance services has resulted from an increase in both the number of
ambulance transports and in average expenditures per transport. Demand for ambulance services has
increased due to both the growth and aging of the U.S. population as well as the trend toward the greater use
of outpatient care facilities in response to current efforts to contain health care costs. Average expenditures per
ambulance transport have increased over the last decade due primarily to the additional costs of providing a
higher level of pre -hospital emergency medical care and shortened response times to emergency medical calls.
Increasingly sophisticated life-saving techniques and medical equipment arc used by trained paramedic s
15
applying medical skills at the scene of an emergency and en route to the hospital. Immediate response to an
emergency medical call is, in many casts, critical in saving a patient's life and determining the course and level
of future medical care. County and municipal contracts for emergency ambulance services typically require
that providers meet or exceed increasingly stringent. specifically -defined response time and other quality
assurance criteria.
Company Strategy
Since its initial public offering in August 1992 the Company has (i) entered new service areas through
acquisitions of providers in Mississippi. Colorado, Oregon and Florida. (ii) expanded certain existing service
areas through the acquisition of two additional Colorado providers, and a provider in Bridgeport, Connecticut
(whose operations were combined with the Company's existing New Haven operations), (iii) obtained a new
service contract in Atlantic City, New Jersey. which is serviced by the Company's Delaware operations, (iv)
established a national insurance program and consolidated capital resource management as part of its efforts to
generate efficiencies by centralizing appropriate functions at the corporate level, and (v) built a management
team with substantial operating experience in the ambulance service business.
The Company's objective is to continue as the leading provider of emergency and non -emergency
ambulance services in the United States. To achieve its objective, the Company's growth strategy is focused
on the following three principal elements:
• Acquiring new businesses.
- Expanding and improving operations.
• Promoting and capitalizing on the expertise and entrepreneurial spirit of the operating executives of the
Company's ambulance service providers.
Growth by Acquisition
New Service Areas. The Company seeks to enter into new service areas by acquiring leading ambulance
service providers with high quality management and strong performance records. The Company selects
acquisition candidates that it believes offer attractive opportunities for intrinsic growth and "add-on"
acquisitions in nearby service areas. Senior management of acquired companies in new service areas typically
remains with the Company after the acquisition to manage local operations.
"Add -On" Service Areas. The Company also seeks to expand existing service areas by acquiring
providers in contiguous or nearby service areas. Management believes that it can enhance levels of .ervice and
achieve economies of scale by integrating these providers with existing operations.
Acquisition Review Process. The Company considers a number of factors in evaluating a potential
acquisition candidate, including the quality of its personnel and management. its financial history and
condition, its operations. the demographic characteristics of its service areas, its regulatory environment, and
its fee structure and reimbursement levels. The Company has an experienced acquisition team that manages
the acquisition and due diligence process. As part of the due diligence process. the Company also draws on the
specific expertise of operating executives of the Company's providers.
Expand and Improve Operations
in addition to its acquisition strategy. the Company reeks to expand and enhance the businesses of its
existing and acquired ambulance services providers. Within existing service areas, the Company's objective is
to :maintain, and where appropriate, improve upon its average response time through. among other things,
enhanced fleet maintenance and advanced fleet dispatching technologies. Management believes that providing
enhanced levels of service within existing service areas is critical to its ability to increase the number of
transports in a service area and improves its ability to retain existing service contracts and to compete for
additional service contracts. The Company also seeks to improve the efficiency of its operations by
consolidating certain administrative. maintenance and financial functions where appropriate.
16
i
a
1
hfanagentent Philosophy
The Company believes that strong. established kcal management and an entrepreneurial atmosphere are
important to the Company's success. The Company encourages its providers to enhance their operations by
drawing on the expertise of its other providers. The Company has assembled a management team with
substantial experience in acquisitions and long records of successful management in the ambulance service
business. The Company believes that the operating expertise of its management enhances the Company's
acquisition due diligence process and is a shared resource available to each of the Company's providers to
improve their respective operations.
Typically, management of an acquired company in a new service area continues to manage local
operations of the acquired business and receives an equity interest in the Company. Local management
generally has autonomy in d.iily operations such as dispatching, marketing and contract supervision and is
supported at the corporate level in such areas as financial and treasury management. insurance and risk
management. and the development and maintenance of quality standards.
Company Services
T1! 't Company generally provides emergency medical ambulance services pursuant to contracts with
counties and municipalities tither on an exclusive or a non-exclusive basis. Under these contracts, the
Company typically provides "911" emergency ambulance services in designated service areas. In some service
areas, the Comr ••.% is designated as "first responder" to emergency medical calls and in other services areas,
where a public sector provider. such as the fire department, is the primary responder, the Company is
designated as back-up responder and supports the first responder as needed.
The Company responds to "911" calls involving lift -threatening emergencies with Advanced Life
Support (ALS) ambulance units. ALS ambulance units, staffed by two paramedics or one paramedic and an
emergency medical technician (EMT), are equipped with advanced life support equipment, such as cardiac
monitors, defibrillators and oxygen delivery systems, and contain pharmaceuticals and medical supplies. Upon
arrival at an emergency, thc ALS crew members deploy portable life support equipment, ascertain the
patient's medical condition and. if required, begin life support techniques and procedures that may include
airway intubation. cardiac monitoring, defibrillation of cardiac arrhythmias and thc administration of
medications and intravenous solutions. As soon as medically appropriate, the patient is placed on a portable
gurney and carried into the ambulance. While a paramedic monitors and treats the patient, the other crew
member drives the ambulance to a hospital designated either by the patient or the particular medical protocol.
En route. the ALS crew generally alerts the hospital to the patient's medical condition and, if necessary, a
physician advises the attending paramedic as to treatment. Upon arrival at thc hospital, the patient is taken to
the appropriate section of the hospital, usually the emergency department.
Thc Company provides Basic Life Support (BLS) ambulance services in response to "911" emergency
medical calls when a patient's medical condition is not life-threatening. The Company also provides BLS
ambulance services to patients requiring a basic level of medical supervision during transfer to and from
residences and health care facilities. These services may be provided when a home -bound patient requires
examination or traattnent at a health care facility or when a hospital patient requires tests or treatments
available at another facility. such as MRI testing, CAT scans, dialysis, or chemotherapy treatment. A BLS
ambulance unit typically is staffed by two EMTs and equipped with medical supplies and equipment necessary
to administer first aid and basic medical treatment. At the scene or while transporting the patient in the
ambulance, the crew may perform BLS services which include basic airway management, hernorrhage control.
stabilization of fractures. emergency childbirth and basic vehicle extrication. BLS ambulance services may be
provided pursuant to contracts with counties and municipalities, health care facilities or at the request of a
patient or a physician. and are either scheduled in advance or provided on an as -needed basis.
The Company also provides critical care transport services to medically- unstable patients. such as cardiac
patients and neonatal patients, who require critical care while being transported between health care facilities.
Critical care services differ from BLS services in that the ambulance may be equipped with additional medical
equipment, such as balloon pumps and isolcttcs. and may also be staffed by a medical specialist provided by
17
r
the Company or by a health care facility to attend to a patient's special medical needs. Critical care services
are typically provided pursuant to contracts with hospitals. health maintenance organizations and other health
care facilities.
In addition to ambulance services, the Company provides non-medical transportation for the handicapped
and the elderly. Transportation is generally between residences or nursing homes and hospitals or other health
care facilities. This service is provided in vans or coaches that contain hydraulic wheelchair lifts or ramps and
are operated by drivers who generally arc trained in cardiopulmonary resuscitation (CPR). These services arc
typically provided pursuant to contracts with nursing homes. hospitals and other health care facilities.
Medical Personnel
As of July 31. 1993. the Company employed 1.207 paramedics. 913 EMTs and 131 invalid coach drivers.
Paramedics and EMTs must be state certified to transport patients and to perform emergency care
services. Certification as an EMT typically requires completion of a minimum of 140 hours of training in a
program designed by the United States Department of Transportation and supervised by state authorities.
EMTs may also complete advanced training courses to become certified to provide certain additional
emergency care services such as administration of intravenous fluids and advanced airway management. in
addition to completion of the EMT training program. certification as a paramedic generally requires
completion of over 800 hours of training in advanced patient care assessment, pharmacology, cardiology and
clinical and field skills. Many of the paramedics currently employed by the Company served as EMTs for the
Company prior to being certified as paramedics.
Medical protocols for paramedics and EMTs are developed by local physician advisory boards.
Paramedics and EMTs arc required to follow the particular medical protocols for a service arca. In addition.
instructions arc conveyed on a case-by-case basis through direct communications between the ambulance
crew and hospital physicians prior to the initiation of life support procedures. Both paramedics and EMTs are
required to complete continuing education programs. and in some cases. to complete state supervised refresher
trainin? examinations. to maintain their certifications. Cer.ification and continuing educa;ion acquirements for
paramedics and EMTs vary among states and count;es_
Dispatch and Communications
Because effective fleet deployment is a key factor in reducing response time. the Company uses vehicle
location and detailed status plans to position its ambulances within a designated service area. The Company's
dispatch center in Fremont, California uses a global positioning satellite tracking system for optimal real time
deployment of its fleet in Alameda and Contra Costa counties. In certain of its designated service areas, the
Company uses computers to analyze data on traffic patterns, demographics, usage frequency and similar
factors to help determine optimal ambulance deployment and selections. Generally. ambulance Linits arc not
stationed at fired sites but are constantly repositioned in "flexible deployment" systems to provide better
coverage and reduce response time.
The center that controls the deployment and dispatch of ambulances in response to "91 I" calls may be
owned and operated either by the county or municipality or by the Company itself. In both cases. the control
center is equipped with computer hardware and software and sophisticated communications equipment.
Control centers servicing larger geographic areas may also be equipped with vehicle locating equipment that
can accurately locate each vehicle in the fleet. Control centers arc responsible for fleet deployment and
utilization 24 hours a day. seven days a week.
Depending on the em.rgency medical dispatch system in a designated service arca. the public authority
that receives ''911- emergency medical calls either dispatches the Company's ambulances directly fro.n the
public control center or communicates information regarding the location and type of medical emergency to
the Company's control center which in turn dispatches ambulances to the scene. In many of the Company's
operations. a computer assists the dispatcher by ar.Jyzing a number of factors such as time of day. ambulance
location and historical traffic patterns in order to recommend optimal ambulance selections. In all cases, a
l8
dispatcher selects and dispatches thc ambulance. While the ambulance is en route to the scene. information
concerning the patient's condition is relayed to the ambulance as it prepares for arrival.
The Company's communication systems also allow the ambulance crew to communicate directly with the
destination hospital to alert hospital medical personnel as to the arrival of the patient and the patient's
condition and to receive instructions directly from hospital personnel on specific pre -hospital medical
treatment. Thcsc systems also allow for close and direct coordination with other emergency service providers,
such as the appropriate police and fire departments, that may also be responding to a call.
Deployment and dispatch are also important factors in providing non -emergency ambulance services. The
Company implements system status plans for these services that are designed to insure appropriate response
times to non -emergency calls.
Billing and Collection
Thc Company derives a substantial majority of its revenue from reimbursement by third -party payors
including payments under Medicare. Medicaid and private insurance programs, typically invoicing and
collecting payments directly from third -party payors. The Company also collects payments directly from
patients, including p. - ments under deductible and co-insurance provisions and otherwise. During 1992, the
Company derived an estimated 29% of its net ambulance fee revenue from Medicare, 8% from Medicaid, 28%
from private insurers, including prepaid health plans and other non-government sources, and 35% directly
from patients. Thc Company's provision for uncompensated care is generally higher with respect to revenues
derived directly from patients than for revenues derived from third -party payors. Uncompensated care
represented 23.1% and 22.2% of the Company's revenue for 1992 and for the first six months of 1993,
respectively.
Thc Company is generally required to provide ambulance services without regard to a patient's insurance
coverage or ability to pay. As a result. the Company is often not compensated for services provided to patients
who are not covered by Medicare. Medicaid or private insurance. The Company has sophisticated collection
systems and its colkction staff is specially trained in third party coverage and reimbursement procedures.
Computerized billing and collection reports allow the Company's personnel to continually monitor open
accounts. The level of uncompensated care may also be considered in determining the Company's subsidy and
permitted rates under contracts with a county or municipality or with a health care facility.
Marketing and Sales
Contracts with countics and municipalities to provide "911" emergency services are generally obtained
through a competitive bidding process. in some instances where the Company is the existing provider, the
county or municipality may elect to renegotiate thc Company's existing contract instead of putting the
contract out for re -bid. The Company believes that counties and municipalities consider quality of care and
historical response time performance to be thc most important factors in awarding contracts although other
factors, such as financial stability. personnel policies and practices. and total cost both to the municipality or
county and to the public. are also considered.
The Company markets its non -emergency ambulance services to hospitals. health maintenance organiza-
tions. convalescent homes and other health care facilities that require a stable and reliable source of medical
transportation for their patients. The Company believes that its status as a "911" provider in a designated
service arca increases its visibility and enhances its marketing efforts for non -emergency services. Contracts
for non -emergency services usually are based on criteria — quality of care, response time and cost — similar
to those in contracts for emergency. services. The Company has recently hired a national marketing director to
coordinate and enhance company -wide and local marketing efforts.
To market its services both to public and private entities, the Company sponsors joint educational
seminars on CPR techniques. safety planning. and emergency life-saving techniques. The Company also
participates in educatioral programs fur the public.
19
Contracts
The Company enters into contracts with counties and municipalities to provide "911" emergency
ambulance services in designated service areas. These contracts typically specify maximum fees that the
Company may charge and set forth required response times, staffing levels, types of vehicles and equipment.
quality assurance and insurance coverage. Counties and municipalities may also require that the Company
provide a performance bond or other assurances of financial responsibility. The amount of the subsidy that the
Company receives from a county or municipality and the rates that the Company is permitted to charge for
services under a contract for emergency ambulance services depend in part on the nature of the services
rendered and performance requirements.
The Company is a party to three contracts .o provide "911" services which cach accounted for more than
IO% of the Company's total revenue for 1952. The Company derived approximately 26%. 17% and 14% of its
total revenue during 1992. and 16%, 12% and 9% of its total revenue during the first six months of 1993, from
contracts with Alameda, Santa Clara and Contra Costa Counties, respectively. These contracts are subject to
competitive bid processes or renegotiation upon expiration. No other contract accounted for more than 5% of
the Company's total revenue during the same periods.
Alameda County. The Company has been under contract with Alameda County, California to provide
ambulance services since 1964. Under thc Company's existing contract, the Company provides dispatch and
emergency ambulance services in response to all "911" requests for emergency ambulance services in the
designated Fervice area. The designated service area consists of most of Alameda County, including the City of
Oakland.' ne existing contract has an initial term of four years. which expires in June 1994_ The county may,
at its option. extend the contract for up to two terms of two ycars each. The county pays the Company a
monthly subsidy of approximately 580.000 through thc initial term of the contract. The contract imposes
financial penalties against the Company for failure to meet performance requirements and provides that the
county may terminate the contract if the Company has materially breached its obligations, after notice and
opportunity to cure.
Santa Clara County- Thc Company has been under contract with Santa Clara County, Califon1ia to
provide ambulance services since 1979. Under the Company's existing contract. which became effective in
July 1993, thc Company provides "911" emergency ambulance services on an exclusive basis in most of Santa
Clara County, including the City of San Jose and the Silicon Valley arca. Thc existing contract expires in June
1996 and may be extended for two one-year periods at the county's option. The county may terminate the
contract for cause after notice and opportunity to cure. and also after notice in thc event of certain regulatory
changes. The contract may also be terminated by either party for convenience after notice.
Contra Costa County. The Company has been under contract with Contra Costa County to provide
ambulance services sincc 1982. Under the Company's existing contract. the Company provides dispatch and
emergency ambulance services in response to "911" emergency medical requests in most of the county which
is directly north of Alameda County. Thc existing contract expires in January 1995. The contract provides for
a monthly subsidy of approximately 5207.000. subject to reduction in certain instances. The county may
terminate the contract if the Company fails to perform its ohliaations under the contract.
Other Contracts. Thc Company also has other contracts with certain cities and counties in California,
Colorado, Connecticut. Delaware. Mississippi, New Jersey and Washington to provide emergency and non-
emergency ambulance services. These contracts expire at various times during 1993-9'. subject in certain
cases to renewal options.
The Company also has contracts with hospitals and othe: health care facilities and nursing homes to
provide non -emergency and critical care ambulance serv':cs. These contracts typically provide that the
Company is the first ambulance service provider contacted to provide non -emergency ambulance services to
those facilities for which the Company receives a base fee, mileage reimbursement and additional fees for the
use of particular medical equipment and supplies.
20
1
Competition
The ambulance service industry is highly competitive. The principal participants include governmental
entities. targe regional ambulance service providers, small local ambulance providers, hospitals and numerous
local volunteer provriers. Ambulance service providers compete primarily on the basis of quality of service,
performance and cost. The Company believes that counties and municipalities consider quality of care and
historical response time performance to be the most important factors in awarding a contract, although other
factors such as financial stability, personnel policies and practices and cost arc also considered. Certain
existing and potential competitors of the Company have significantly greater capital and other resources than
the Company. In addition. there can be no assurance that counties, municipalities, hospitals or health care
facilities that presently contract for ambulance services will not choose to provide ambulance services directly
in thc future.
Competition for acquisitions in the ambulance service industry is expected to continue to increase as the
industry undergoes consolidation. Increased competition for acquisitions may increase purchase prices for
acquisitions.
Governmental Regulation
The Company's business is subject to governmental regulation at the federal, state and local levels. At the
federal level, the Company is subject to regulations under the Occupational Safety and Health Act designed to
protect employees of the Company. The federal government also recommends standards for ambulance design
and construction. medical training curriculum, and designation of appropriate trauma facilities, which
standards may be modified by state agencies.
Each state in which the Company operates regulates various aspects of its business. The Company's
business is subject to state requirements governing the licensing or certification of ambulance service
providers, training and certification of medical personnel, the scope of services that may be provided by
medical personnel, staffing requirements, medical control. medical procedures, communication systems,
vehicles and equipment. The Company's contracts with counties in California typically prescribe maximum
rates that the Company may charge for services. Some states, such as Connecticut. annually set maximum
allowable rates that providers may charge for ambulance and invalid coach services, and allow providers to
earn up to a fixed percentage of revenues annually. The process of determining rates may include cost reviews,
analysts of levels of reimbursement from all sources and a determination of reasonable profits. The public may
participate in thc hearing process of the rate setting agency. Regulatory schemes for ambulance services may
vary widely from state to state.
In California. counties are responsible for enforcing state requirements and standards and often set higher
standards than those established by the state. In other states in which thc Company operates. counties and
local communities may also impose higher standards for ambulance services providers than those established
by the st-te_
Applicable federal. state and local laws and regulations are subject to change. The Company believes that
it is currently in substantial compliance with regulatory requirements applicable to its ambulance service
business. The Company may. however. in the future be required under these regulatory requirements to
increase capital and operating expenditures in order to maintain current operations or initiate new operations.
Reimbursement
A substantial majority of the Company's revenue is attribut...t..c to payments received from third -party
payors, including 'Medicare. Medicaid and private insurers. 1 he rcvrcues, cash flow and profitability of the
Company. like those of other companies in the health care industry, :.nc „ffected by the continuing efforts of
third -party payers to control expenditures for health care.
The Company is s..hject to various regulatory requirements in connection with its participation in
Medicare and Medicaid. Medicare is a federal hcalt}t insurance pr• .rarn for the elderly and for chronically
disabled individuals that pays for ambulance services when med. :';t necessary. Medicare uses a charge -
2!
r -
based
reimbursement system for ambulance services and. subject to the limits fired for the particular
geographic arca. reimburses MTh of charges determined to be reasonable by Medicare. The patient is
responsible for paying the balance of the bill. In determining reasonable charges, Medicare considers the
following charge factors and applies whichever is lowest: the actual charge, the customary charge, the
prevailing charge in the same locality, the amount of reimbursement for comparable services or thc inflation -
indexed charge limit.
Medicaid is a combined federal -state program for medical assistance to impoverished individuals who are
aged, blind, or disabled or members of families with dependent children. Medicaid programs are in effect in all
states in which the Company operates. Although Medicaid programs differ in certain respects from state to
state, all are subject to federal requirements. State Medicaid agencies are permitted to set levels of
reimbursement within federal guidelines.
The Company. like other Medicare and Medicaid providers, is subject to governmental audits of its
Medicare and Medicaid reimbursement claims. The Company has not. to date, experienced significant losses
as a result of any such audit. As a provider of services under the Medicare and Medicaid programs, the
Company is also subject to the Medicare and Medicaid fraud and abuse laws. These laws prohibit any bribe.
kickback or rebate in return for the referral of Medicare or Medicaid patients. Violations of these prohibitions
may result in civil and criminal penalties and exclusion from participation in the Medicare and Mcdicaid
programs. investigations of alleged violations of these laws by ambulance providers are currently being
conducted. The Company believes that it is in substantial compliance with these fraud and abuse laws.
Government funding for health care programs is subject to statutory and regulatory changes. administra-
tive rulings, interpretations of policy. determinations by intermediaries and governmental funding restrictions,
all of which could materially increase or decrease program reimbursements for ambulance services. in recent
years, Congress has consistently attempted to curb federal spending on sue* programs. No assurance can be
given that future funding levels for Medicare and Mcdicaid programs will be comparable to present levels.
Changes in the reimbursement policies as a result of budget cuts or othcr government action could adversely
affect the Company's operations. in the most recent session of Congress. numerous legislative proposals were
introduced that would effect major reforms of the U.S. health care system. Thc Clinton Administration has
pledged to bring about a reform of the nation's health care system. The Company cannot predict the proposals
or policy initiatives that may be enacted nor the effect any health care reform ntay have on its business. No
assurance can be given that any such reform will not ha e a material adverse effect on the Company.
Thc Company also receives direct reimbursement for services from health care institutions such as
hospitals. health maintenance organizations and other state. federal or private entities. Reimbursement can be
influenced by the financial instability of private third party payors. Reductions in coverage or reimbursement
rates by third party payors could have a material adverse effect on the Company's operations.
Legal Proceedings
Thc Company. Regional Ambulance. Inc.. thc Company's wholly owned subsidiary ("Regional"), and
William E. Riggs, an officer and director of Regional and the Company have been named as defendants in a
lawsuit filed by a former stockholder of Regional on August 3. 1993 in the United States District Court for the
Northern District of California. The complaint alleges that during 1990 and 1991 when Regional. through Mr.
Riggs. was negotiating to redeem such stockholder's shares of Regional common stock. they failed to disclose
material facts relating to Regional's intention to merge with other companies and conduct a public stock
offering. The complaint seeks damages in excess of S1.5 million plus interest and exemplary and punitive
damages. Although the Company is unable to predict thc outcome of the proceeding. the Company believes
the claims against it arc without merit and Mr. Riggs has informed the Company that he believes the claims
against him and Regional are without merit and management believes the resolution of the lawsuit will not
have a material adverse effect on the financial condition of the Company. The Company believes that any
losses that the Company and Regional might suffer by reason of or in connection with the lawsuit would be
covered by an indemnity given to Regional and the Company by Mr. Riggs and his wife. who were the sole
stockholders of Regional when it was acquired 1" • '' •mpany. in connection with Regional's 1992 merger
into the Company.
11
•
The Company is a party to litigation arising in the ordinary course of business. There can be no assurance
that the Company's insurance coverage rill be adequate to cover all liabilities occurring out of such claims. In
the opinion of management, any liability that the Company might incur upon the resolution of this litigation
will not, in the aggregate, have a material adverse effect on the consolidated financial condition or results of
operations of the Company.
Insurance
The Company has implemented a company -wide insurance program, which provides a broad range of
general liability. comprehensive property damage, malpractice, worker's compensation, and other insurance
coverage. Management considers the Company's insurance coverage adequate for the protection of its assets
and operations, although there can be no assurance that its coverage limits will be adequate. A successful
claim against the Company in excess of its insurance coverage could have a material adverse effect on the
Company and its financial condition. Claims against the Company. regardless of their merit or outcome, may
also have an adverse effect on the Company's reputation and business. The Company is also subject to
accident claims as a result of the normal operation of its fleet of ambulances.
The Company has hired a corporate director of safety. health and risk management to manage and
administer the Company's safety and risk programs and policies.
Facilities and Equipment
At July 31. 1993, the Company's fleet included 455 owned ambulances and 18 leased ambulances.
The Company leases its principal executive offices in Boston, Massachusetts. The Company also leases
administrative facilities and other facilities used principally for ambulance basing. garaging and ma...tenance
in areas in which it provides ambulance services. The aggregate rental expense for the Company's facilities
was approximately $2.3 million during 1992.
Employees
As of July 31. 1993. the Company had 2,409 full-time and 596 part-time employees. including 1.207
paramedics, 913 EMT's. 131 invalid coach drivers and 754 management. administrative and clerical
personnel_ The Company is a party to seven collective bargaining agreements that as of July 31. 1993 covered
approximately 41% of the Company's employees. The Company considers its relations with employees to be
good.
23
MANAGEMENT
Directors and Executive Officers
The following table sets forth information concerning each of the directors and executive officers of the
Company:
Name Ate Po+itioa
Paul M. Verrochi
Dominic J. Puopolo
Paul T. Shirley
Joseph R. Paolella
William E. Riggs
Ronald M. Levenson
44 Chairman of thc Board. Chief Executive
Officer, President, Director
50 Executive Vice President, Chief Financial
Officer, Trcasurcr, Director
53 Executive Vice President. Chief Operating
Officer. Director
42 Executive Vice President, Director
51 Executive Vicc President, Director
37 Senior Vice President, Chief Accounting
Officer
Senior Vice President
Senior Vicc President
Director
Director
Director
Director
Michael J. McClymont 50
John K. Rester 45
Michael A. Baker (1) 47
David B. Hammond (1) (2) 48
James E. McGrath 38
John Larkin Thompson (1)(2) 62
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
All officers serve at the discrction of the Board of Directors. The directors of thc Company arc elected
annually for one-year terms.
Paul M. Verrochi has served as Chairman of the Board, Chief Executive Officer, President. and a director
of the Company since its inception in February 1992. Since February 1991, he has also been a Principal of
Exel Holdings. Ltd.. a privately -held investment firm he co-founded with Mr. Puopolo. From April 1989 to
December 1990, Mr.Verrochi was Presidcnt of Allwaste Asbestos Abatement. Inc.. a subsidiary of Allwaste,
Inc., a publicly held, national environmental company. Mr. Verrochi was a founder of American Environmen-
tal Group, a regional asbestos abatement company. and served as Chairman of its Board of Directors from
July 1987 until April 1989 when the company was acquired by Allwaste. In addition. Mr. Verrochi was a
founder and Chairman of the Board of Omni Building Services, Inc.. a major regional janitorial service
company. from September 1972 to July 1984 when the company was acquired by a subsidiary of ADT
Limited ("ADT"). an international services company. From July 1984 to December i986. he was a Vice
President of ADT and President of ADT Maintenance Services. Inc.'s Northeast Region.
Dominic J. Puopolo has served as Executive Vice President. Chief Financial Officer. Treasurer and a
director of the Company since its inception in February- 1992. Sincc February 1991. he has also been a
Principal of Exel Holdings. Ltd., which he co-founded with Mr. Verrochi. From April 1989 to December
1990. Mr. Puopolo was Vice President and Chief Financial Officer of Aliwaste Asbestos Abatement, Inc. Mr.
Puopolo was a founder of American Environmental Group and served as its Chief Financial Officer from July
1987 to April 1989. From 1983 to 1987. he was Vice President of Onini Building Services. Inc. Sir. Puopolo
was Chief Financial Officer of ADT Mlaintenance Services. Inc.'s Northeast Region from Jul) 1984 to
December 1986. Mr. Puopolo is a Certified Public Accountant.
Paul T. Shirley has served as an Executive Vi -:e President and a director of the Company since August
1992 and has served as Chief Operating Officer of the Company since Stay 1993. SIr. Shirley was President
24
•
1
41
and Chief Executive Officer of American Medical Response West from March 1989 until August 1992 when
it was acquired by the Company. From June 1963 until March 1989. he was President of Santa Cruz
Ambulance Service, which in 1989 became part of American Medical Response West. Mr. Shirley is
currently a member of the California Ambulance Association, of which he was President from 1968 to 1969.
Mr. Shirley served as a member of the Santa Cruz County Planning Commission from 1965 to 1969 and as a
member of the State of California Narcotic Addict Evaluation Authority from 1971 to 1974. Hc served as a
member of the Board of Directors of Federal Prison Industries, Inc. from 1982 to 1991. Mr. Shirley has also
served as a member of the Santa Cruz County Emergency Medical Care Commission and the State of
California Emergency Medical Service Advisory Committee.
Joseph R. Paolella has served as an Executive Vice President and a director of the Company, and
President of New Haven Ambulance Services, Inc., a subsidiary of the Company, since 1992. Mr. Paolella was
an Executive Vice President of New Haven Ambulance, inc. from 1974 to August 1992 when it was acquired
by the Company. He was a founding Director of thc Connecticut Ambulance Association and served as its
President from 1980 to 1988. Mr. Paolella is currently the Chairman of the Government Affairs Committee
for the American Ambulance Association which is responsible for public relations with Federal government
agencies including the Health Care Finance Administration.
William E. "Earl" Riggs has served as an Executive Vice President and a director of the Company since
August 1992. Mr. Riggs is also Chief Executive Officer and President of Regional Ambulance, Inc. and
American Medical Response West, subsidiaries of the Company. Mr. Riggs was President and Chief
Executive Officer of Regional Ambulance, inc. until August 1992 when it was acquired by the Company. He
co-founded Fremont Ambulance Company in 1964 and during the subsequent twenty-five year period
organized Regional Ambulance. In 1974, he participated in the reorganization of the Alameda County
Emergency Medical Care Committee and assisted in the development of an ambulance response system for
Alameda County. Mr. Riggs has served as a member of the Committee for Benefit Assessment for thc
Alameda Emergency Medical Services District as well as the Medical Services Advisory Committee of thc
Governor's Emergency Task Force on Earthquake Preparedness. He has served as a Director of the American
Ambulance Association, an Advisory Board Member to the Statc Legislature on Emergency Medical Services
and President of the Califortia Ambulance Association.
Ronald M. Levenson has served as a Senior Vice President and the Chief Accounting Officer of the
Company since October 1. 1992. From 1985 to September 1992. Mr. Levenson was a senior manager at
KPMG Peat Marwick, a public accounting firm, where he was employed from 1979 to 1992. Mr. Levenson is
a Certified Public Accountant and is a former lecturer in accounting at the Boston University School of Law
and Northeastern University.
Michael J. McClymont has served as a Senior Vice President of the Company since February 1992.
Since February 1991. he has been an Associate at Exel Holdings. Ltd. From 1989 to 1991. Mr. McClymont
was President and Chief Operating Officer of Mycor Services. a food and vending service company. From
1988 to 1989, Mr. McClymont was President of Food Concepts. Inc.. an indirect subsidiary of ADT, which
subsequent to Mr. McClymont's tenure filed a petition for bankruptcy under the federal bankruptcy laws.
From 1985 to 1988. he served as Vicc President of Business Development for ADT Maintenance Services,
Inc. From 1984 to 1985. Mr. McClymont served as Regional Manager at Canteen Services. In addition. from
1979 to 1984. he served as Vice President for Food and Vending Operations at ARA Services. inc.
John K. Rester has served as a Senior Vice President of the Company and President of Mobile Medic
Ambulance Service. Inc. a subsidiary of the Company. since November 1992. Mr. Rester was President and
Chief Executive Officer of Mobile Medic Ambulance Service. inc. from 1977 to November 1992 when it was
acquired by the Company.
Michael A. Baker has served as a director of the Company since February' 1992. Mr. Baker is currently
President of Notre Capital Ventures. Ltd. Mr. Baker was a co- founder of Sanitill. Inc.. a developer and
operator of nonhazardous solid waste landfills. where he held the positions of Co -Chief Executive Officer from
May 1989 through November 1989. Senior Vice President -- Corporate Development from December 1989
to October 1991. and director froni May 1989 to May 1992. From August 1987 though March 1989. Mr.
)5
r
Bakcr was Chief Financial Officer for ENSR Corporation, an environmental engineering consulting firm.
From 1984 through 1987, Mr. Baker was a principal with the law firm of Baker & Kirk, P.C. in Houston.
Texas. Mr. Baker taught at the University of Houston Law Center both full time and part time from 1971
through 1985. From 1972 through 1983. he was employed by Browning-Ferris Industries. Inc. with
responsibility for the acquisition of companies in the waste industry. Mr. Baker is a director of Allwaste, Inc.
David B. Hammond has served as a director of thc Company since August 1992. Mr. Hammond is also
currently Deputy Chairman of ADT and has been on ADTs board of directors since September 1984. From
1981 to 1984. Mr. Hammond was a dircctor of Hawley Group PLC, the predecessor company of ADT. From
1973 to 1980, he was employed by Thorn -EMI PLC, in various senior financial positions including financial
and commercial director of its Entertainment Division. Mr. Hammond is also a Chartered Accountant.
James E. McGrath has served as a director of the Company since February 1992. Sincc April 1989, Mr.
McGrath has been Chairman and Chief Executive Officer of Fairfax Capital Partners, Inc., a private
investment firm. From June 1987 to April 1989. he was Managing Director of William E. Simon & Sons. Inc.,
a private merchant banking company. From September 1981 through June 1987, he was employed by EF
Hutton & Company, Inc. where he served at various times as President of its venture capital subsidiary, head
of thc firm's merchant banking operation and as a corporate Senior Vice President. From 1979 until 1981. Mr.
McGrath was Chairman and Chief Executive Officer of McLaughlin, Inc., a private construction firm. Mr.
McGrath is Chairman of the Board and a director of Perceptron, Inc., a manufacturer of laser -based sensor
and image processing systems.
John Larkin Thompson has served as a director of the Company since August 1992. Mr. Thompson has
been of counsel to the law firm Nutter, McClennen & Fish since January 1993. Mr. Thompson has been a
director of Blue Cross and Blue Shield of Massachusetts, Inc. since 1987. From 1987 to September 1992, Mr.
Thompson was President and Chief Executive Officer of Blue Cross and Blue Shield of Massachusetts. Inc.
Mr. Thompson was President of Blue Shield of Massachusetts from 1970 until 1987 when the company
merged with Blue Cross of Massachusetts. From 1964-4970 he was an attorney with the Boston law firm of
Palmer & Dodge. During the past 20 years, Mr. Thompson has been a member of various regional and
national health care related organizations, including the National Advisory Council on Health Care
Technology Assessment. the Health Insurance Benefits Council and the Advisory Panel on National Health
Insurance for the Subcommittee on Health. U.S. House of Representatives Ways and Means. Mr. Thompson
also served as Vice Chairman of thc Massachusetts Advisory Board of Emergency Medical Services from
1975 to 1978. Mr. Thompson is a director of EG&G, Inc., a diversified, technical manufacturing company.
Compensation vi Executive Officers
The following table sets forth information with respect to compensation paid to or accrued in 1992
(beginning on the date in August 1992 when the Company acquired by merger four ambulance providers) on
behalf of the Chief Executive Officer and each of the other four other most highly paid Executive Officers of
the Company in 1992 (the "Named Executive Officers"). None of the Named Executive Officers has been
granted any stock options. Base salary for Messrs. Verrochi and Puopolo was determined by the Company
prior to its initial public offering. Base salary and certain perquisites for the other Named Executive Officers,
who ars former stockholders of providers acquired by the Company, was determined by the board of directors
of the Company at the timc of the acquisition of their companies. Additional compensation and increases in
base salary for the Named Executive Officers will be determined by the Compensation Committee of the
Company's Board of Directors.
Summary Compensation Table
Annual Compensation All Other
Name and Principal Position Year Salary ° Mer(1) Compensation
Paul M. Vcrrochi 1992 564.583 S — S—
Chairman, Chief Executive Officer and President
Dominic J. Puopolo 1992 52,083
Executive Vice President, Chief Financial Officer
and Treasurer
Paul T. Shirley 1992 63,462 9,198 2,083(2)
Executive Vice President and Director
Joseph R. Paolella 1992 60.577 — 3,000(3)
Executive Vice President and Director
William E Riggs 1992 X7,796 14,345 —
Executive Vice President and Director
(1) No Named Executive Officer, other than Messrs. Riggs and Shirley. received other compensation in
excess of the lesser of $50.000 or 10% of his cash compensation. The amounts inclurtcd for Mr. Riggs and
Mr. Shirley reflect the cost of perquisites provided to them by the Company, none of which exceed 259E
of his total perquisites except for the cost of automobiles for Mr. Riggs of 513.095 and for Mr. Shirley of
57.998.
(2) Represents the dollar values of insurance premiums paid by the Company for life insurance for the
benefit of Mr. Shirley.
Represents Company contributions under a profit sharing plan maintained by one of the Company's
subsidiaries.
(3)
See footnote 8 to th. accompanying Consolidated Financial Statements for information regarding certain
relationships between the Company and certain of its directors and executive officers.
Employment Agreements
Messrs. Verrochi, Puopolo, Riggs, Shirley and Paolella have each entered into an employment agreement
with the Company that entitles him to receive an annual base salary as well as such bonuses as may be
authorized from time to timc by the Board of Directors. Each agreement has a term of three years expiring in
1995, with automatic extensions of ore year unless terminated, with a covenant -not -to -compete with the
Company for a period of up to two years following termination of employment. The agreement requires the
executive to devote his full time. attention and efforts to the business and affairs of the Company. If the
Company terminates the agreement other than for cause. the Executive will be entitled to continue to receive
his base salary through the end of the term. If termination is for cause as defined in the agreements, the
Executive will be entitled to receive his bast salary through the date of termination. Base annual salaries for
1993 are Mr. Verrochi — S155.000, Mr. Puopolo — S125,000, Mr. Riggs — 5150.000. Mr. Shirley —
S150.000 and Mr. Paolella — $150,000.
27
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the beneficial ownership of shares of Common
Stack as of August 9, 1993 (i) individually by the Named Executive Officers and each dirt -.tor of the Company, (ii) by
all executive officers and directors of the Company as a group. (iii) by each person known to the Company to be the
beneficial owner of more than five percent of the Company's outstanding Common Stock and (iv) by each of the Selling
Stockholders. Except as noted below, each of the persons fisted has tole investment and voting power with respect to the
shares indicated. The address of each executive officer and direct t; listed is c/o the Company.
Executive Officers.
Directors and S%
Stockholders
William E. Riggst•(4)
Paul T. Shirleyt•(5)
Paul M. Verrochit • (6)
Dominic J. Puopolot•(7)
Joseph R. Pa+lellat'
James E. McGrath•(8)
Michael A. Baker•(9)
Michael J. McClymonl(10)
John Larkin Thompson•(11)
David B. Hammond• (I l )
All executive officers and directors as a group
(12 persons)(12)
Other Selling Stockholders
Amount of Beneficial
Ownership
of Comsat Stock
Prier to Offering
Percentage
Number of Ootstaadieg
Sham Shares(2)
1,712,785
1,238,202
936,525
749.132
317,072
308,628
120,517
60.039
10.000
10.000
15.28%
11.05
8.36
6.68
2.83
2.75
1.08
et
5.735.193 51.06
Phillip Paolella, Jr. 292.073
Ladcnburg, Thalmann & Co. Inc.( 13) 180,000
Stephen Donohoe 160,752
Robert T. Allen(14) 67,658
Rosario Donohoe 53,584
Verrochi Family Charitable Trust (15) 25.000
Junemarie Verrochi(16) 50.000
Sonia M. Puopolo(16) 50.000
Andrea McGrath (16) 50.000
Donna McClvmont(16) 30.000
2.61
1.58
1.43
••
ie
et
es
.•
Amount of Beneficial
Ownership
of Comm. Steck
After Offering(1) Number of
Percentage Shares
Outstanding
�to
Shses(2)(3) Oren-ellotmnt
Number of
Shares to Number of
be Offered Shard
179,145 1,533,640
120,410 1,117,792
91,220 845,305
73.271 675,861
29.410 287,662
30.038 278,540
O 120,517
5,861 54,178
O 10,000
O 10,000
11.459E
8.35
6.31
5.05
2.15
2.08
••
529,405 5,205,788 38.81
:3,435 278,638
180.000 0
15,615 145,137
6.340 61,318
5.205 48,379
25,000 0
4,875 45,125
4.875 45,125
4.875 45,125
2.925 27,075
2.08
0
1.08
••
0
••
Odt
••
137,114
92,158
69,819
56.078
9.026
23.030
0
4,486
0
0
391.711
0
0
11.953
4,852
3.984
0
3,755
3,75.
3,755
2.253
t Named Executive Officer
* Director of the Company.
.• Less than one (1) percent.
(1) Assumes no exercise of the Underwriters' over -allotment options.
(2) Based on 11.208.720 shares outstanding on August 9, 1993. Includes shares icuable pursuant to warrants and options held by the respective person
which may be exercised during the 60 days following the date of this Prospectus.
(3) Includes the 2.000.000 sham offered by the Company hereby and 180.000 shares issuable upon exercise of warrants held by a Selling Stockholder.
(4) Represents shares held by Mr. Riggs and Fr.. wife, Sharon Riggs. in a revocable trust for thcir benefit.
(5) Represents 1.101.602 shares held by Mr. Slirley and his wife. Patricia Shirley, in a revocable trust for their benefit and 136,600 shares held by Mr.
Shirley's children. as to which he disclaims beneficial ownership.
(6) Includes (a) 50.000 sham held by Junemarie Verrochi. Mr. Verrochi's wife, as to which he disclaims beneficial ownership. of which 4.875 sham
are being sold in the Offerings and an additional 3.755 shares arc subject to the Underwriters' overallotment options and (b) 25,000 shares to be
transferred by Mr_ Verrochi to th_ Verrochi Family Charitable Trust. of whichMr. and Mrs. Verrochi arc the trustees. and which arc being sold in
the Offerings.
Includes 50.000 shares held by Sonia M. Puopolo. Mr. Puopolo's wife, as to which he disclaims beneficial ownership, of which 4.875 shares arc
being sold in the Offerings and an additional 3,755 shares are subject to the Underwriters' overallotment options.
Includes 50.000 shares held by Andrea McGrath, Mr. McGrath's wife, as to which he disc' 'ms beneficial ownership, of which 4,875 shares arc
being sold in the Offerings and an additional 3.755 shares are subject to the Underwriters' overallotment options.
(9) Owned by Wasatch Capital Corporation, a corporation owned by Mr. Baker's : hildren. Mr. Baker disclaims beneficial ownership of these shares.
(10) Includes 30,000 sham held by Donna McCIymont, Mr. McClymott's wife. as to which he disclaims beneficial ownership, of which 2.925 shares
arc being sold in the Offerings and an additional 2.253 shares arc subject to the Underwriters' overallotment options.
(11) Represents sham subject to currently exercisable options.
(721 Includes shares issuahle pursuant to iptions held by executive officers and directors which may be exercised during the 60 -day period following the
date of this Prospectus.
(13) Represents shares issuable upon exercise of warrants to purchase Common Stack.
(14) Includes 2.200 shares held by Mr. Allen's children, as to which he disclaims beneficial ownership and 2.500 shares subject to currently exercisable
options
(15) Represents shares that will be transferred to the Verrochi Famil} Charitable Trust by Mr. Verrochi after the effectiveness of the registration
statement .4 which this Prospectus is a pan and prior to the execution of the Underwriting .Agreements.
(16) Excludes shrires held ht the respective person's spouse as to which such person disclaims beneficial ownership.
(71
w
28
r
Shares Eligible for Future Sale
Of the approximately 11,208,720 shares of Common Stock outstanding at August 9. 1993, approximately
7.2 million shares are "restricted securities" and may not be resold except pursuant to an effective registration
statement or an applicable exemption from registration, including an exemption under Rule 144. The
remaining shares are freely tradeable without restriction ,.:der the Securities Act, unless held by an "affiliate"
of the Company as thal term is defined in Rule 144 undt.r the Securities Act (an "Affiliate") or in certain
instances subject to certain restrictions under Rule 145.
Approximately 4.2 million of the restricted shares were issued to former stockholders of providers
acquired by the Company and are subject to contractual restrictions on transfer without the consent of the
Company. These restrictions expire two years from the date of issuance of the shares.
In August 1992. Messrs. Verrochi and Puopolo each entered into a Stock Restriction Agreement with the
Company-, Mr. Riggs and Mr. Shirley which provides that 60% of' thc shares originally issued to him by the
Company are subject to repurchase by the Company at $.01 per share in thc event of his voluntary resignation
as an employee of the Company or the termination of his employment by the Company for cause. The
restrictions lapse ratably each August over four years bcginning in August 1993. In addition, all restrictions
lapse as to either Mr. Verrochi or Mr. Puopolo if he dies or is incapacitated. his employment is terminated by
the Company other than for cause. the Company is a party to a merger or consolidation or sells all or
substantially all of its assets. or either Mr. Riggs or Mr. Shirley voluntarily resigns his employment with the
Company. is terminated by the Company for cause or fails to renew his employment agreement for an
additional one year beyond the original three-year term. As of August 13, 1993. 422,336 shares held by Mr.
Verrochi and 338,909 held by Mr. Puopolo remain subject to the restrictions.
In general. under Rule 144 as currently in effect. a person (or persons whose shares are aggregated),
including an Affiliate, who has beneficially owned "restricted securities" (as that term is defined in Rule 144)
for a period of at least two years from the later of the date such restricted securities were acquired from the
Company or the date they were acquired from an Affiliate, is entitled to sell, within any three-month period. a
number of such securities that does not exceed the greater of l% of the then outstanding shares of the
Company's Common Stock or the average weekly trading volume in thc Company's Common Stock during
the four calendar weeks preceding the filing of notice of such sale. Sales under Rule 144 are also subject to
certain restriction. on the manner of sale. notice requirements. and the availability of current public
information about tits Company. Affiliates may sell shares not constituting restricted securities in accordance
with the foregoing volume limitations and other restrictions, but without regard to the two-year holding period.
Further. under Rule 144(k), if a period of at leas::`.:.: mars has elapsed between the later of the date
restricted securities were acquired from the Company and the date they were acquired from an Affiliate of thc
Company. a holder of such restricted securities who is not an Affiliate of the Company at the time of the sale
and has not been an Affiliate of the Company for at least three months prior to the sale would be entitled to
sell the shares immediately without regard to the volume :imitations and other conditions described above.
As of August 9, 1993. 1,578.112 shares of Common Stock are available for issuance under a shelf
registration statement and generally will be freely tradeable after their issuance under Rule 145 (unless held
by an Affiliate), subject to thc volume and manner of sale restrictions under Rule 144. In addition. the
Company has filed S-8 registration statements under the Securities Act registering all 1.000.000 shares of
Common Stock issuable under the Company's stock plans. Shares issued upon the exercise of options
generally will be freely tradeable. At August 9. 1993, the Company had outstanding under its 1992 Equity
Incentive Plan options to purchase approximately 428.350 shares, and options to acquire approximately
101.675 shares were then immediately exercisable. In addition. Advest Inc. holds warrants to purchase
120.000 shares of Common Stock which may be exercised at any time prior to August 5. 1997.
Thc Company. each executive officer and director of the Company and the Selling Stockholders have
agreed not to sell or otherwise dispose of any shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of the Representatives of the U.S. Underwriters, except in
the case of the Company in connection with certain permitted issuances described itt the Underwriting
Agreements. In addition. Advest. Inc. has agreed not to sell or otherwise dispose of its warrants or shares
issued upon exercise of the warrants for a period of 180 days after the date of this Prospectus.
29
St.
Registration Rights
After giving effect to the Offering. holders of approximately 6,000,000 shares of Common Stock will have
the right, in the event the Company proposes to register under the Securities Act any Common Stock for its
own account or for the account of others. subject to certain exceptions, to require the Company to include
their shares in 'the registration, subject to the right of any managing underwriter of the offering to exclude
some or all of the shares for marketing reasons. In addition, Advest, Inc., which holds warrants to purchase
120.000 shares of Common Stock, has the right until August 1997 to require the Company to file a registration
statement covering the shares issued upon exercise of the warrants, subject to the Company's right to delay
such registration for a 60 -day period under certain circumstances. The Company has also agreed to use its best.
efforts to register for sale under the Securities Act shares of Common Stock issued to former stockholdera'of..
providers acquired thy Companyin the event that such holden are '
egti by required to indemnify the Cor-^an,r
under the acquisition agreements. ,
30
CERTAIN UNITED STATES TAX CONSEQUENCES
TO FOREIGN HOLDERS
The following is a discussion of certain anticipated Unit. -ti States incomc and estate tax consequences of
the ownership and disposition of Common Stock applicable to Foreign Holders of Common Stock. For the
purpose of this discussion, a "Foreign Holder" is any corporaticn, individual, partnership, estate or trust that
is. as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership or a
foreign estate or trust as such terms are defined in the United States Internal Revenue Code of 1986. as
amended (the "Code"). This discussion does not deal with all aspects of United States income and estate
taxation. does not consider specific facts and circumstances which may be relevant to a particular Foreign
Holder, and does not address foreign, state and local tax consequences which may be relevant to Foreign
Holders. Furthermore, the following discussion is based on current provis;"is of the Code and administrative
and judicial interpretations thereof as of the date hereof, all of which are subjcct to change. Prospective
Foreign Holders are urged to consult their rat advisors regarding the United States federal, state, local and
foreign income and other tax consequences of owning and disposing of Common Stock.
Dividends
Divjdends paid to a Foreign Holder of Common Stock will be subject to withholding of United States
federal income tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty,
unless either (i) the dividends are effectively connected with the conduct of a trade or business by the Foreign
Holder within the United States and the Foreign Holder properly files United States Internal Revenue Service
Form 4224 (or such other applicable form that may be required by the internal Revenue Service) with the
Company or its dividend paying agcnt or (ii) if a tax treaty applies, thc dividends arc attributable to a US.
permanent establishment maintained by the Foreign Holder. if the dividends are effectively connected with a
U.S. trade or business or, if a tax treaty applies, are attributable to a U.S. permanent establishment, they wi:l
be subject to the United States fedc_al income tax at the same rates :.pplicable to domestic corporations or
U.S. citizens or residents, as the ase may be. In the case of a corporate Foreign Holder, such effectively
connected income may also be subject to the U.S. branch profits tax, whic • is generally imposed at a 30% rate
(or lower treaty rate) on the repatriated portion of the foreign corpora .ti. n's earnings and profits which are
effectively connected with thc conduct of a trade or business within the United States. Foreign Holders which
are partnerships or trusts may be :,object to certain additional withholding requirements.
Under current United States Treasury Regulations. dividends paid to an address outside thc United
States are presumed to be paid to a resident of such country for purposes of the withholding tax discussed
above and. under the current interpretation of United States Treasury Regulations. for purposes of
determining the applicability of a tax treaty rate. However, under proposed United States Treasury
Regulations not currently in effect, a Foreign Holder of Common Stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy certain certification and other requirements. A Foreign
Holder of Common Stock eligible for a reduced rate of United States withholding tax pursuant to a tax treaty
may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the internal
Revenue Service within the time period applicable to such claims.
Disposition of Common Stock
A Foreign Holder generally will rJt be subject to United States federal income tax or any gain realized
upon the sale or other disposition of Common Stock. unless (i) such gain is effectively connected with thc
conduct of a United States trade or business of the Foreign Holder, (ii) the Foreign Holder is an individual
who has a tax home in the United States and is present in the United States for a period or periods aggregating
183 days or more during the taxable year in which such disposition occurs and certain other conditions a -c
met. (iii) the Foreign holder is a former citizen of the United States whose loss of citizenship within the
preceding ten-year period had as one of its principal purposes the avoidance of United States tax, or (iv) the
Company is, or has been at any time during the live -year period preceding the disposition, a "United States
real property holding corporation" and thc Foreign Holder directiy or indirectly owned more than 5% of the
vaiue of the outstanding Common Stock at any time during such five-year period. Generally, a corporation is a
31
"United States real property holding corporation" if the fair market value of its United States real property
interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus
its other assets used or held for use in a trade or business. Foreign holders should consult their own tax advisors
regarding the rate at which their gain, if any, on the sale of Common Stock would be taxed if they meet any
one of the four conditions described above.
Backup Withholding and Information Reporting
The Company must report annually to the internal Revenue Service and to each Foreign Holder the
amounts of dividends paid and tax withheld with respect to such Foreign Holder's shares of Common Stack
These information reporting requirements apply regardless of whether withholding was reduced or eliminated
by an applicable tax treaty. This information may also be made available to the tax authorities of the country
in which the Forcign Holder resides. United States backup withholding tax (imposed at a rate of 31% on
dividends paid to certain holders who fail to provide in the required manner such identifying information, as
the holder's name, address and taxpayer identification number, or under certain other circumstances)
generally does not apply to dividends that arc subject to the 30% U.S. withholding tax or reduced tax treaty
rate or to dividends paid to a Foreign Holder at an address outside the United States or otherwise to a Foreign
Holder who is an "exempt recipient' (such as a corporation).
The payment of the proceeds of a Foreign Holder's disposition of Common Stock to.or through a United
States office of a broker will be subject to information reporting and backup withholding, unless the Foreign
Holder certifies, among othcr things, its status as a Foreign Holder or otherwise establishes an exemption from
backup withholding. The payment of the proceeds of a Foreign Holder's disposition of Common Stock to or
through a non -United States office of a broker will not be subject to information reporting or backup
withholding, unless the broker is a United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income was effectively connected with the conduct of
a trade or business within the United States during the three-year period ending with the close of the taxable
year preceding the year of payment, in which case information reporting will apply to such payment unless
such broker has documentary evidence in its files of the payee's non -United States status and has no actual
knowledge to the contrary, or the payee otherwise establishes an exemption.
The backup withholding and information reporting rules arc under review by the Internal Revenue
Service and their application to Forcign Holders could be changed by the adoption of proposed regulation or
the issuance of new regulations.
Estate Tax
Common Stock owned, or treated as owned. by a nonresident alien individual at the time of his death will
be included in such holder's gross estate for United States federal estate tax purposes and thus will be subject
to United States federal estate tax. unless an applicable estate tax treaty provides otherwise.
32
UNDERWRITING
The underwriters of the United States Offering of the Common Stock (the "U.S. Underwriters"), for
whom Lehman Brothers Inc., Kidder, Peabody & Co_ Incorporated and Advcst, Inc. are acting as
representatives (thc "Representatives"), have severally agreed, subject to thc terms and conditions of thc U.S.
Underwriting Agreement. the form of which is filed as an exhibit to the Registration Statement, to purchase
from the Company and thc Selling Stockholders, and the Company and the Selling Stockhol&rs have agreed
to sell to the U.S. Underwriters. the aggregate number of shares of Common Stock sct forth opposite their
respective names below:
?Somber of
US. Underwriters Shares
Lehman Brothers Inc
Kidder, Peabody & Co. Incorporated
Advest. Inc.
Total 2,200.000
The managers of the International Offering of the Common Stock (the "International Managers"), for
whom Lehman Brothers International (Europe), Kidder, Peabody International Limitcd and Advcst, Inc. arc
acting as lead managers (thc "Lead Managers"), have severally agreed, subject to the terms and conditions of
thc International Underwriting Agreement, the form of which is filed as an exhibit to the Registration
Statement, to purchase from thc Company and the Selling Stockholders, and the Company and the Selling
Stockholders have agreed to sell to the International Managers, the aggregate number of shares of Common
Stock set forth opposite their respective names below:
Number of
International Managers Shares
Lehman Brothers International (Europe)
Kidder, Peabody International Limited
Advest, Inc.
Total 550.000
The U.S. Underwriting Agreement and the International Underwriting Agreement (collectively, thc
"Underwriting Agreements") provide that thc obligations of the several U.S. Underwriters and the Interna-
tional Managers to purchase shares of Common Stock are subject to the certain conditions contained therein,
and that if any of the foregoing shares of Compton Stock are purchased by the U.S. Underwriters pursuant to
the U.S. Underwriting Agreement or by the International Managers pursuant to the International Underwrit-
33
ing Agreement. all the shares of Common Stock agreed to be purchased by either the U.S. Underwriters or
the international Managers. as thc case may be. pursuant to their respective Underwriting Agreements must
be so purchased. Thc offering price and underwriting discounts and commissions for the United States
Offering and the international Offering are identical. The closing of the United States Offering is a condition
to the closing of the International Offering. and thc closing of thc International Offering is a condition to the
closing of the United States Offering.
The Company has been advised that the U.S. Underwriters and the International Managers propose to
offer the shares of Common Stock directly to the public at the public offering price set forth on the cover page
of this Prospectus, and to certain selected dealers (who may include the U.S. Underwriters and the
International Managers) at such public offering price Tess a selling concession not in excess of $ per share.
The selected dealers may reallow a concession not in excess of S per share to certain brokers and dealers.
After the initial public offering, the public offering price. the concession to selected dealers and the
reallowancc may be changed by the Representatives and the Lead Managers.
The U.S. Underwriters and the International Managers have entered into an Agreement between U.S.
Underwriters and international Managers pursuant to which each U.S. Underwriter has agreed that. as a part
of the distribution of thc shares of Common Stock offered in the United States Offering, (a) it is not
purchasing any such shares for the account of anyone other than a U.S. person and (b) it has not offered or
sold, and will not offer, sell, resell or deliver. directly or indirectly. any of such shares or distribute any
prospectus relating to the United States Offering to anyone other than a U.S. person. In addition, pursuant to
this same Agreement, each International Manager has agreed that, as part of the distribution of the shares of
Common Stock offered in the International Offering, (a) it is not purchasing any of such shares for the
account of any U.S. person and (b) it has not offered or sold, and will not offer, sell or deliver. directly or
indirectly, any of such shares or distribute any prospectus relating to the International Offering to any U.S.
person. The foregoing limitations do not apply to stabilization transactions or to certain other transactions
specified in the Underwriting Agreements and the Agreement between U.S. Underwriters and international
Managers. including (i) certain purchases and sales between the U.S. Underwriters and the international
Managers. (ii) certain offers, sales, resales, deliveries or distributions to or through investment advisors or
other persons exercising investment discretion. (iii) purchases. offers or sales by a U.S. Underwriter who is
also acting as an International Manager or by an International Manager who is also acting as a U.S.
Underwriter and (iv) other transactions specifi, 'ly approved by the Representatives and the Lead Managers.
Pursuant to the Agreement between U.S. Underwriters and International Managers, sales may be made
between the U.S. Underwriters and thc International Managers of such number of shares of Common Stock
as may be mutually agreed. Thc price of any shares so sold shall be the public offering price as then in effect
for Common Stock being sold by the U.S. Underwriters and the international Managers. less an amount not
greater than the selling concession allocable to such Common Stock. To the extent that there are sales
between the U.S. Underwriters and the International Managers pursuant to the Agreement between U.S.
Underwriters and International Managers. the number of shares initially available for sale by the U.S.
Underwriters or by the International Managers may be more or Tess than the amount specified on the cover
page of this Prospectus.
Each International Manager has represented and agreed that (i) it has not offered or sold, and will not
offer or sell. in the United Kingdom, by means of any documents. any shares of Common Stock other than to
persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or agent (except
under circumstances which do not constitute an offer to the public within the meaning of the Companies Act
of 1985): (ii) it has complied and will comply with all applicable provisions of the Financial Services Act of
1986 with respect to anything done by it in relation to the Common Stock in, from or otherwise involving the
United Kingdom. and (iii) it has only issued or passed on. and will only issue or pass on to any person in the
United Kingdom, any document received by it in connection with the issue of the Common Stock if that
person is of a kind described in Article 9(3) of the Financial Services Act of 1986 (investment Advertise-
ments) (Exemptions) Order 1988.
34
No action has been taken in any jurisdiction by the Company or thc International Managers that would
permit a public offering of the shares offered pursuant to the Offerings in any jurisdiction where action for that
purpose is required, other than the United States. Persons into whose possession this Prospectus comes are
required by the Company and the International Managers to inform themselves about and to observe any
restrictions as to the offering of the shares offered pursuant to the Offerings and the distribution of this
Prospectus.
Purchascrs of the shares offered hereby may be required to pay stamp taxes and other charges in
accordance with the laws and practices of the country of purchase in addition to the offering price set forth on
the cover hereof.
Selling Stockholders have granted to the US. Underwriters an option to purchase up to an additional
330,000 shares of Common Stock and the International Managers have been granted a similar option to
purchase up to an additional 82,500 shares of Common Stock at the initial public offering price less the
aggregate underwriting discount. solely to cover over -allotments if any. The options may bc exercised at any
time up to 30 days after thc date of this Prospectus. To the extent that the U.S. Underwriters or the
International Managers exercise such options, each of the U.S. Underwriters or the International Managers,
as the case may be, will be committed, subject to certain conditions, to purchase a numbcr of option shares
proportionate to such US. Underwriter's or International Manager's initial commitment.
The Company and its executive officers and directors, and the Selling Stockholders, have agreed not to
offer, sell or otherwise dispose of any shires of Common Stock for a period of 180 days after the date of this
Prospectus without prior written consent of the Representatives, except in thc case of thc Company in
connection with certain permitted issuances described in the Underwriting Agreements. Advest, Inc., which
holds warrants to purchase 120,000 shares of Common Stock, has also agreed not to offer, sell or otherwise
dispose of such shares for a period of 180 days after thc date of this Prospectus without the prior written
consent of the other Representatives. The Company and the Selling Stockholders have agreed to indemnify
the U.S. Underwriters and the International Managers against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the U.S. Underwriters and International Managers may be
required to make in respect thereof.
Advest. Inc. received its warrants as partial compensation for acting as an underwriter in the Company's
initial public offering. Since the Company's initial public offering, Advest, Inc. has earned an aggregate of
approximately $335.000 from the Company for consulting services rendered in connection with the structuring
and negotiating of thc Company's line of credit and the implementation of the Company's acquisition
program. Since October 23. 1992, the services provided to the Company by Advest, Inc. have been governed
by a letter agreement which provides for fees to be paid by the Company to Advest. Inc. for specified and
ongoing services and for success fees negotiated on a transaction by transaction basis.
Following the effectiveness of the Registration Statement of which this Prospectus is a part, and until the
execution and delivery of thc Underwriting Agreements by the Verrochi Family Charitable Trust, the
Verrochi Family Charitable Trust. one of the proposed Selling Stockholders. may sell the 25,000 shares to be
sold by it in a transaction n- transactions other than to the U.S. Underwriters and the International Managers.
Such sales may be effected on the New York Stock Exchange, in a negotiated transaction or otherwise. at
prevailing market prices or negotiated prices. The shares may be sold through one or more broker-dealers, who
may be deemed to be underwriters with respect to such shares.
LEGAL MATTERS
The validity of the Shares offered hereby will bc passed upon for the Company by Ropes & Gray. Boston,
Massachusetts, Keith F. Higgins, a partner with Ropes & Gray. is secretary of thc Company. Certain legal
matters related to this Offering will be passed upon for the Underwriters by Fulhright & Jaworski L.L.P., New
York. New York.
35
EXPERTS
The audited consolidated financial statements of thc Company listed in the index to Financial
Statements on page F-1, and included herein, and the audited financial statements as of and for the year ended
December 31, 1991 of Buck Medical Services, Inc. and as of and for the years ended December 31, 1992 and
1991 of Randle Eastern Ambulance Service Inc. incorporated herein by reference have been included herein
and in the Registration Statcmcnt in reliance upon the reports of KPMG Peat Marwick, independent certified
public accountants, appearing elsewhere herein or incorporated herein by reference, and upon thc authority of
said firm as experts in accounting and auditing. The audited financial statements of Mobile Medic Ambulance
Service, Inc. incorporated herein by - •fercnce have been incorporated herein in reliance upon the reports of
Arthur Andersen & Co., independent . ablic accountants, incorporated herein by reference, and upon the
authority of said firm as experts in accounting and auditing. The audited financial statements of Ambulance
Service Company incorporated herein by reference have been incorporated by reference in reliance upon the
reports of Gelfond Hochstadt Pangburn Stark & Co., independent certified public accountants, incorporated
by reference, and upon the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement with respect to the Common
Stock offered hereby. This Prospectus. filed as part of the Registration Statement, does not contain all the
information contained in the Registration Statement. certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the Registration Statement including
the exhibits anal schedules thereto. Statements contained in this Prospectus as to the contents or any contract
or any other document are not necessarily complete, and in each instance, reference is made to thc copy of
such contract or other document filed as an exhibit to the Registration Statement. each such statement being
qualified in all respects by such reference. All of these documents may ba inspected without charge at the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Copies can also be obtained from the Commission at prescribed rates.
36
T
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements
Independent Auditors' Report F-2
Consolidated Balance Sheets at June 30. 1993 (unaudited) and December 31, 1992 and 1991 F-3
Consolidated Statements of Earnings for the Six Months Ended June 30, 1993 and 1992
(unaudited) and for the Years Ended December 31, 1992, 1991 and 1990 F-4
Consolidated Statements of Stockholders' Equity for the Six Months Ended June 30. 1993
(unaudited) and for the Years Ended December 31. 1992. 1991 and 1990 F-5
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1993 and 1992
(unaudited) and for the Years Ended December 31, 1992. 1991 and 1990 F-6
Notes to Consolidated Financial Statements F-8
Pro Forma Financial Statements
Introduction F-21
Pro Forma Statement of Earnings for the Six Months Ended June 30, 1993 F-22
Pro Forma Statement of Earnings for the Year Ended December 31, 1992 F-23
Notes to Unaudited Pro Forma Financial Statements F-24
F- 1
Independent Auditors' Report
The Board of Directors
American Medical Response, Inc.:
We have audited the accompanying consolidated balance sheets of American Medical Response, Inc. and
subsidiaries (the `Company") as of December 31, 1992 and 1991, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the years in the three-year, period ended
December 31, 1992. These consolidated financial statements are the responsibility of the". Company's
managcmcnt. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits. •
We conducted our audits in accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arc
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the. amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of American Medical Response, Inc. and subsidiaries as of December 3!,
1992 and 1991, and the consolidated results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1992, in conformity with generally accepted accounting principles.
Boston. Massachusetts
February 25. 1993, except as to Note 1
(Basis of Presentation) which is as of
June 1. 1993
KPMG Peat Marwick
F-2
AMERICAN MEDICAL RESPONSE. INC.
Consolidated Balance Sheets
Jane 30, December 31,
1993 1992 1991
(unaudited)
Assets
Current assets:
Cash and cash equivalents 5 5,909 514,600 S 3,542
Short tcrm investments — 260 925
Accounts receivable, less allowance for uncompensated care of
516,191, 511,655 and 510,843 28,082 22,655 19.672
Advances to stockholders and affiliated parties — — 973
Inventories 1,152 867 748
Prepaid expenses and other receivables 2,888 3.515 2,181
Deferred income taxes 5,571 4,472 —
Total current assets 43,602 46.369 28,041
Property and equipment, net 15.125 10,555. 9.620
Non-current assets:
Cost in excess of net assets acquired, net 29,146 11,153 399
Covenants not to compete, net - 544 735 .1,009
Other 1,975 2,036 995
Total non-current assets 31,665 " 13.924 2,403
Total assets S90.392 S70.848 540,064
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable S 4,264 5 3.607 5 3,159
Accrued compensation, benefits and taxes 6.273 5,094 3.964
Accrued expenses 5,536 2,787 1,627
income taxes payable 2,068 2,320 2,420
Deferred income taxes — — 1,321
Current maturities of debt 911 5.465 5,137
Total current liabilities 19,052 19,273 17,628
Non-current liabilities:
Long-term debt 18,014 7,875 8,031
Subordinated note payable to related party 1,100 1.100 —
Deferred income taxes 4,142 4.240 911
Other liabilities 676 1.144 623
Total non-current liabilities 23.932 14.359 9,565
Total liabilities 42,984 33,632 27.193
Stockholders' equity:
Preferred stock. S.01 par value. 500.000 shares authorized,
none issued
Common stock, 5.01 par value, 25,000,000 shares authorized,
11,126.813, 10,683,828 and 391,459 shares issued
and outstanding 111 107 4
Common stock, predecessor companies — — 90
Additional paid -in capital 27,385 21.300 299
Retained earnings 19.912 15.809 12,528
Note receivable from stockholders — — (50)
Total stockholders' equity 47,408 37,216 12,871
Commitments and contingencies
Total liabilities and stockholders' equity
S90.392 570.848 540.064
See accompanying notes to consolidated financial statements.
F-3
AMERICAN MEDICAL RESPONSE, INC.
Consolidated Statements of Earnings
(in thousands)
Total revenue
Operating expenses:
Salaries and benefits
Uncompensated care
Other operating expenses
Depreciation
Amortization of intangibles
Total operating expenses
Earnings from operations
Interest expense, net
Earnings before income taxes
Income taxes
Net earnings
PRO FORMA DATA (UNAUDITED —
SEE NOTE 4)
Historical net earnings
Pro forma income taxes (benefit)
Pro forma net earnings
Pro forma net earnings per common share
Weighted average common shares
outstanding
For the Stn
Months
Ended Jane 30,
1993 1992
(unaudited)
$86,190 $58,343 S121.192 $108,018 S84,870
For the 'Fear Ended December 31,
1992 1991 1990
42,279 29,114 60,577 52,009 40,922
19,116 13,659 28,008 25,862 19.769
14.090 8,946 18,377 16.640 14,554
2,363 1,752 3,396 3,079 2.766
659 273 561 927 1.313
78,507 53,744 110,919 98.517 79,324
7,683 4,599 10.273 9.501 5,546
433 532 784 1.216 1,266
7,250 4,067 9.489 8,285 4,280
3.147 1,665 4.250 3.442 1.752
S 4,103 S 2.402 S 5.239 S 4.843 S 2.528
$ 4,103 $ 2,402 S 5.239 $ 4,843 $ 2.528
51 (678) 149 128
$ 4,103 S 2.351 S 5.917 8 4.694 S 2.400
S 0.38 $ 0.30 S 0.67 $ 0.59 $ 0.30
10.916 7,968 8.838 7,968 7,968
See accompanying notes to consolidated financial statements_
F-4
r
AMERICAN MEDICAL RESPONSE. INC.
Consolidated Statements of Stockholders' Equity
(in thousands)
COMMON
Common Steck Steck Additional Taal
Predecessor Paid -i. Retrials/ Notes Stockholders'
Shares .Amount C..paks G al Europe Receira/k Equity
Balance at December 31, 1989, as
previously reported — 5— S 91 5 272 S 5,854 S— S 6,217
Restatement for business acquired as a
pooling-of-int..rests 391 4 33 478 515
Balance at December 31, 1989, as
restated 391 4 91 305 6.332 — 6,732
Note re'eivabk from officer for
purchase common stock — — — — — (60) (60).
Distributions to stockholders — — — — (475) — (475)
Net earnings i — 2.528 2,528
Balance at December 31. 1990 391 4 91 305 8,385 (60) 8,725
Repayment of note receivable — — — — — 10 10
Stock repurchase — — (1) (6) (700) — (707)
Net earnings — i — 4,843 4,843
Balance at December 31. 1991 391 4 90 299 12,528 (50) 12,871
Repurchase and retirement of
common stock — Regional — — (1) (12) (1.803) — (1,816)
Initial issuance of common stock 2,730 27 — 48 — (1) 74
Repurchase and retirement of
common stock (510) (5) — (9) — — (14)
Distribution to
stockholders — Professional — — --. (155) — (155)
Issuance of stock 3,000 30 — 21.435 — — 21.465
Distribution of cash portion of
purchase price for acquisition of
Predecessor Companies — — — (10,'95) — — (10,195)
Distribution of stock portion of
purchase price for acquisitions and
elimination of Predecessor
Companies stock 4.143 42 (89) 47
Repayment of notes receivable — — — — — 51 51
Issuance of common stock 300 3 — 2.369 — — 2.372
Stock options exercised, including
related tax benefit 18 — — 197 — — 197
Issuance of stock in connection with
acquisitions 611 6 — 7.121 — — 7,127
Net earnings — — 5,239 5.239
Balance at December 31. 1992 10,683 i07 — 21.300 15,809 — 37.216
Issuance of stock in conrcction with
acquisitions 432 4 — 5,939 — — 5,943
Stock options exercised. including
related tax benefit 12 — — 146 — — 146
Net earnings — — 4.103 4,103
Balance at June 30. 1993, (unaudited) 11,127 5111 5— S 27,385 519.912 5-- 5 47,408
See accompanying notes to consolidated financial statements.
F-5
AMERICAN MEDICAL RESPONSE, INC.
Consolidated Statements of Cash Flows
(in thousands)
For the Si; Moatbs
Ended Ju.e 30, For the Year Ended December 31,
1993 1992 1992 1991 1990
(ataiidited)
Cash flows from operating activities:
Net earnings S 4,103 $ 2.402 $ 5.239 $ 4,844 $'2,528
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Dcprcciation 2,363 1,752 3,396 3,079 2,766
Amortization 659 273 561 927 1,313
Deferred income taxes (785) — (2,421) 1,002 784
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable (619) 144 (499) (5.391) (1,848)
Other current asscts 755 (350) (1,208) (239) (132)
Other asscts 98 54 (1,008) 404 (1,058)
Accounts payable and accrued
expenses (134) 153 (298) 81 1.249
Accrued compensation, benefits and
taxes (298) 69 383 1.711 503
Income taxes payable (378) 234 (410) 6 (463)
Other liabilities (468) — 524 (156) 448
Net cash p•.ovidcd by operating
activitie. 5.296 4,731 4,259 6,268 6,090
Cash flows from investing activities:
Acquisition of Predecessor Companies — — (10,195)
Acquisitions, net of cash acquired (11,282) — (1,785) — —
Purchase of short term investments (85) — (930) (777)
Proc.-e& from sale of short term
investments 260 — 665 634 73
Purchase of property and
equipment, net (2,980) (1,247) (1,460) (3,763) (1,927)
Purchase of stock and covenant not to
compete — — — (375)
Repayment of advances to related
parties — (62) 332
Net cash used for investing
activities 8(14.002) 8(1,394) $ (12,443) $ (4,434) $(2,631)
F-6
o>16.34,N,
A
AMERICAN MEDICAL RESPONSE, INC.
Consolidated Staten:cats of Cash Flows— (Continued)
(in thousands)
For rhe Six Months
Ended Jane 30. For the Year Ended December 31.
1993 1992 1992 1991 1990
(unandited)
Cash iiows from financing activities:
Proceeds from issuance of common
stock $ — S 74 S 23,911 S -- S —
Repurchase and retirement of common
stock — — (314)
Proceeds from exercise of
stock options 93 — 127 —
Net borrowings under credit frcility 14,139 — — — —
Procecds from borrowings — — 1,407 3,144 1,811
Repayment of borrowings (14,217) (915) (5,864) (4,321) (3,942)
Principal payments on capital lease
obligations — — (562) (127) (172)
Net advances to stockholders — (474) 641 (300) 66
Distribution to stockholders — (155) — (475)
Repayment of notes receivable
for stock — — 51 10
Net cash provided by (used for)
financing activities 15 (1.315) 19.242 (1,594) (2,712 )
Increase (decrease) in cash and cash
equivalents (8,691) 2,022 11,058 240 747
Cash and cash equivalents beginning of
period 14,600 3342 3.542 3.302 2,555
Cash and cash equivalents, end
of pcnod. S 5.909 S 5,564 S 14,600 $ 3.542 $ 3,302
Supplemental disclosure of cash flow
information:
Cash paid during the period for.
Interest S 567 S 601 S 1,144 $ 1,398 $ 1,485
Income taxes S 4,276 S 1,677 S 7,026 $ 1,749 $ 1.291
Supplemental schedule of non-cash
transactions:
Issuance If debt and equipmert for
repurchase of Predecessor Company
common stock S — S — S 1,516 $ 332 $
Issuance of debt for non -compete
agreement S — S — $ 240 $ 340
Issuance of debt for equipment
purchases $ — S — $ 791 $ 579 $ 2,361
Property acquired under capital lease S — S — S 38 S 189 $ 471
Acquisitions:
Assets acquired S 30.001 S — S 17,037 S — S —
Liabilities assumed and issued (11,794) — (6,710) — —
Common stock issued (5.943) — (7,127)
Cash paid 12.264 — 3.200
Less cash acquired (982) — (1,415) —
Net cash paid for acquisitions S 11.282 $ — S 1,785 S — 5 —
See accoa:panying notes to consolidated financial statements.
F-7
r
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
(1) Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of American Medical Response, Inc. and subsidiarics ("Ameri-
can' or the "Company") have been prepared to give retroactive effect to the merger with Randle Eastern
Ambulance Service, Inc. on June, 1993, which was accounted for as a pooling -of -interests.
Principles of Consolidation
The consolidated financial statements include the accounts of American Medical Response, Inc.
("American" or the "Company") and its subsidiaries; American Medical Response West, formerly Vanguard
Ambulance Services ("AMR West"). Regional Ambulance. Inc. ("Regional"), New Haven Ambulance
Services, Inc. ("New Haven"). Professional Ambulance Services, Inc. ("Professional"), Mobile Medic
Ambulance Service ("Mobile Medic"). Ambulance Service Company ("Ambulance Service') and Randle
Eastern Ambulance Service, Inc. ("Randle"). All intercompany balances and transactions have been
eliminated in consolidation.
Reclassifications
Certain amounts for the prior periods have been reclassified to conforrn with the current period
presentation.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid instruments with an
original maturity of three months or less to be cash equivalents.
Short Term Investments
Short term investments consist primarily of marketable equity securities which are stated at lower of cost
or market.
Accounts Receivable and Net Revenue
Accounts receivable and net revenue are reported at the estimated net billable amounts due from
patients, third -party payors and others for services rendered. net of contractual adjustments. which represent
the difference between gross billable charges and the portion of those charges allowable by third -party payors.
L'^eontpensared Care
Uncompensated carc results when ambulance service is provided to patients for which the Company
receives no reimbursement. The Company expects payment for its charges each time ambulance transporta-
tion is provided.
Inventories
Inventories consist primarily of medical supplies and are stated at the lower of cost (first -in. first -out) or
market.
F -R
1
AMERICAN MEDICAL RESPONSE. INC.
Notes to Consolidated Financial Statements
December 31, 1992. 1991 and 1990
Property and Equipment
Property and equipment arc stated at cost. Property and equipment under capital leases are stated at the
present value of minimum !case payments at the inception of the lease. Depreciation and amortization arc
provided using the straight-line method over the estimated useful lives of property and equipment. Estimated
useful lives for major assct categories are 4 years for vehicles, 20 years for buildings, 3-7 years for equipment
and 3-5 years for furniture and fixtures. Equipment held under capital leases and leasehold improvements are
amortized over the shorter of the least tcrm or estimated useful life of the asset. Amortization of assets subject
to capital leases is included in depreciation expense.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired is amortized straight-line over the period of expected benefit. but not
in excess of twenty-five years. Accumulated amortization amounted to 598,000 and 551,000 at December 31,
1992 and 1991. respectively.
Covenants Not To Compete
Covenants not to compete are amortized using the straight-line method over the term of the agreements.
Income Taxes
Income taxes are ,,rovided based upon provisions of Statement of Financial Accounting Standards
No 109. "Accounting for Income Taxes", which requires recognition of deferred income taxes under the asset
and liability method.
Under the asset and liability method. deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The etTect
on the deferred taxes of changes in the tax rates is recognized in income in the period that includes the
enactment date.
Earnings Per Share
Earnings per share are computed based on the weighted average number of shares outstanding plus
common stock equivalents related to stock options and warrants. if such common stock equivalents cause
dilution in earnings per share in excess of 3%.
Earnings per share for all periods prior to the initial public offering have been computed based on
weighted average shares outstanding of 7.967,548 which consist of (i) 2,220.001 founders shares outstanding
prior to the initial public offering. (ii) 4.143.500 shares issued in connection with the merger described in
note 2. (iii) 1.199.412 shares to reflect on a pro forma basis the sale of a sufficient number of shares to provide
funds to pay the S10,195.000 cash portion of the purchase price of the merger. (iv) 391,459 shares issued in
connection with the acquisition of Randle and (v) 13.176 shares considered as outstanding as a result of the
application of the treasury stock method to certain outstanding options.
F-9
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
(2) Reorganization and Acquisitions
The Merger and Reorganization
In August, 1992, concurrent with the initial public offering of the Company's common stock, the
Company acquired by merger four ambulance service providers, Regional, AMR West, New Haven and
Professional (the "Predecessor Companies"). Pursuant to the terms of the merger agreements with each of
the Predecessor Companies, the Company paid a total of 510.195,000 in cash and 4.:43,500 shares of common
stock for such companies as set forth below.
Regional — The Company acquired by merger all of the outstanding shares of Regional for 52,830,000 in cash
and 1,991,859 shares of common stock. The Company also entered into a five-year non -competition
agreement and a three-year employment contract with one of the stockholders and appointed such stockholder
to the Company's board of directors.
AMR West — The Company acquired by merger all of the outstanding shares of AMR West for 53,800,000 in
cash and 1,303,160 shares of common stock. An additional 100.000 shares of common stock will be paid in the
event that AMR West obtains a particular contract for emergency ambulance services by March 1994. The
Company also entered into five-year non -competition agreements and three-year employment agreements
with two stockholders and appointed one of the stockholders to the Company's board of directors.
New Haven — The Company acquired by merger all of the outstanding shares of Ncw Haven for 82,940,000
in cash and 634,145 shares of common stock. The Company also entered into five-year non -competition
agreements with two stockholders, a three-year employment contract with one stockholder and appointed such
stockholder to the Company's board of directors.
Professional — The Company acquired by merger all of the cutstanding shares of Professional for 5625,000 in
cash and 214,336 shares of common stock. The Company also catered into five-year non -competition
agreements and three-year employment contracts with the two stockholders of Professional.
The consolidated operations of American subsequent to the transaction are substantially identical to the
combined operations of the individual Predecessor Companies prior to the transaction. Additionally, as a result
of the mergers. the owners of the Predecessor Companics are significant stockholders of American.
Accordingly. the aforementioned mergers were accounted for as a combination of the Predecessor Companies
and American at historical cost. The assets and liabilities are presented at their historical values and
stockholders' equity has not been adjusted as a result of the mergers.
F-10
AMERICAN MEDICAL RESPONSE. LNC.
Notes to Consolidated Financial Statements
December 31. 1992, 1991 and 1990
Acquisition Accounted for as a Pooling -of -Interests
In June 1993, the Company acquired all the outstanding common stack of Randle Eastern Ambu-
lance, Inc. in exchange for 391,459 shares of the Company's common stock in a transaction accounted for as a
pooling -of -interests.
Restated total revenue and pro forma net earnings of the Company are summarized below:
1992 1991 1990
Total Pro Forma Total Pro Forma Total Pro Ferns
Re,tnse Net Earnings Reresse Net Earnings Rerease Net Earnings
The Company, as previously
reported S 106,433 S5.670 S 94.104 S4.306 S 73.148 $2.091
Randle 14.759 247 13.914 388 11.722 309
The Company, as restated S121.192 55,917 5108.018 54.694 S 84,870 $2,400
To reflect the pooling -of -interests discussed above, pro forma earnings per share has been restated to
50.67, 50.59 and S0.30 versus 50.67, 50.57 and 50.28 as previously reported for the years ended December 31,
1992, 199! and 1990. respectively.
Acquisitions Accounted for as a Purchase
During 1992, the Company also acquired two providers of emergency and nen-emergency pre -hospital
transportation. On November 4. 1992, the Company acquired Mobile Medic Ambriance Service, Inc.. located
in Gulfport, Mississippi and on December 23. 1992. the Company acquired Ambulance Service Company,
located in Denver. Colorado.
The total paid consisted of 53.2 million in cash, $1 .780,000 in subordinated promissory notes and 611,268
shares of the Company's common stock.
The acquisitions have been accounted for as purchases and. accordingly. their results of operations have
been included in the consolidated financial statements from their date of acquisition. The excess of the
purchase price and expenses associated with the acquisition over the estimated fair value of the net assets
acquired has been recorded as goodwill.
The following unaudited pro forma results of operations give effect to the acquisitions as if the
transactions had occurred at the beginning of 1991. Such pro forma financial information reflects certain
adjustments including amortization of goodwill. income tax effects, and the increase in the weighted average
shares outstanding. This pro forma information does not necessarily reflect the results of operations which
would have occurred had the acquisition taken place at the beginning of the respective years and is not
necessarily indicative of results which may be obtained in the future (in thousands, except per share
amounts):
1992 1991
(Unaudited)
Total revenue S139,490 5124,259
Earnings before income taxes 10.824 8,396
Net earnings 5.818 4,723
Pro forma net earnings E.414 4,594
Pro forma earnings per share 0.69 0.53
F-11
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
(3) Property and Equipment
Property and Equipment
Property and equipment consist of the following at Dcccmbcr 31 (in thousands):
1992 1991
Vehicles S13,676 $11,669
Land, buildings and leasehold improvements 1,305 1,255
Equipment 5.739 5,615
Furniture and fixtures 2.434 1,850
23,154 20,389
Less accumulated depreciation 12,599 10,769
Net property and equipment S10.555 S 9,620
Operating Leases
The Company is obligated under a number of non -cancelable operating leases for premises and
equipment expiring in various years through the year 2000. Total rent expense amounted to 52,611,000,
52,328.000 and $1,756.000 for the ycars ended December 31. 1992, 1991 and 1990, respectively.
Minimum future rentals under non -cancelable operating leases (including leases with related parties
discussed in Note 8) as of December 31 are as follows (in thousands):
Amount
1993 $ 2,355
1994 2,146
1995 1,864
1996 1,479
1997 987
Thereafter 1,664
Total minimum lease payments 510,495
F-12
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
(4) Income Taxes
The components of the deferred tax assets and liabilities as of December 31 are as follows (in thousands):
1992 1991
Dcfcrrol tax assets:
Allowance for uncompensated care $ 4,522 $ 1,663
Accrued expenses and other liabilities 2,150 23
Other 98 38
6,770 1,724
Deferred tax liabilities:
Cash to accrual accounting — 3,045
Intangible assets 107 —
Property and equipment 841 635
Change in accounting method 5,552 82
Other 38 194
(6,538) (3,956)
Net deferred asset (liability) S 232 $(2.232)
At December 31, the net deferred tax asset (liability) consists of the following (in thousands):
1992 1991
Deferred income tax asset (liability) — current S 4,472 $(1,321)
Deferred income tax asset (liability) — long term (4,240) (911)
Net deferred income tax asset (liability) S 232 $(2,232)
Included in the gross deferred tax assets and liabilities are deferred tax (benefits) and deferred tax
expense of S(438.000) and S395.000. respectively. relating to allowances for uncompensated care and a
change in accounting method, recorded as a result of the acquisitions of Mobile Medic a•.1 Ambulance
Service Company.
The provisions for Federal and state income taxes for the years ended December 3I consists of the
following (in thousands):
1992 1991 1990
Current:
Federal $ 5,454 $1,939 S 846
State 1,217 533 126
6,671 2,472 972
Deferred:
Federal (1,859) 707 608
State (562) 263 172
(2,421) 970 780
Total S 4.250 $3,442 51,752
F-13
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
For the year ended December 31, 1992. income tax benefits of $70,000 were allocated to additional paid -
in capital for tax benefits associated with the exercise of non-qualified stock options.
The following table reconciles the Federal statutory incomc tax rate and the Company's effective income
tax rate for the years ended December 31:
1992 1991 1990
Provision for income taxes at Federal statutory rate 34.0% 34.0- % 34.0- %
State taxes. net of Federal benefit 5.7 6.7 6.5
Amortization of goodwill .2 1.3 3.2
Subchapter S earnings (.7) (2.1) (3.4)
Change in tax status 8.6 — —
Other. nct (3.0) 1.6 .6
44.8% 41.5% 40.9%
Change in Tax Accounting Method
In connection with the mergers discussed in note 2 to the consolidated financial statements, certain
operating entities changed from the cash to the accrual method of accounting for tax purposes. The resulting
difference in taxable income is being recognized for tax purposes over a four-year period beginning with the
current year.
Change in Tax Status
Prior to the merger with the Company. one of the Predecessor Companies was taxed as an S corporation.
As an S corporation. income taxes were not required to be provided in this subsid ary's financial statements. In
August 1992, concurrent with the merger, this S corporation status terminated and the method of accounting
for tax purposes changed from the cash to the accrual method. Deferred income tax expense for thc year
ended December 31. 1992, includes 5780.000 attributable to this termination of S corporation status. Pro
forma income tax expense for thc years ended December 31. 1992, 1991 and 1990, arc tax amounts which
would have been recorded had this subsidiary been a C corporation during those years.
F-14
4
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31. 1992, 1991 and 1990
(5) Debt
Long-term debt and capital lease obligations consist of the following at December 31 (in thousands):
1992 1991
Demand notes payable, unsecured, interest rates ranging from 6.75% to
7.5% $ 228 $ 273
Demand notes payable, secured, bearing interest at 10% — 236
Demand notes payable to principal stockholder, bearing interest at prime
plus 2% — 94
Notes payable, secured. interest rates ranging from 6% to 16.5%, payable
in installments, maturing through 1998 6,771 8,625
Notes payable to former owners and individuals, interest rates ranging
from 6% to 9%, payable in installments, maturing through 2007 3,529 2,583
Notes payable, unsecured, interest rales varying from 5.6% to 8%,
payable in installments, maturing in 1993 683
Subordinated notes payabk to stockholders and former owners, bearing
interest at 7% and 7.5%, maturing through 1996 1.780 —
Capital lease obligations 1,449 1,357
14,440 13,168
Less current maturities 5,465 5,137
Long-term debt. excluding current maturities $ 8.975 $ 8,031
Annual maturities of long-term debt and future minimum lease payments under capital leases as of
December 31. 1992 are as follows (in thousands):
1993
1994
1995
1905
1997
Thereafter
Total payments
Less: amounts representing interest
Total obligations und:r capital leases
Lear
term Capital
debt leases
$ 4,729 $ 880
3,885 616
2.239 299
652 107
220 18
1.267 —
312 992 1,920
471
$ 1,449
(6) Capital Stock and Additional 1'aid-in Capital
Preferred Stock
The Company is authorized to issue up to 500.000 shares of preferred stock. $0.01 par value, of which no
shares are issued or outstanding. The Company's board of directors is authorized to provide for the issuance of
the preferred stock in series. to establish the number of shares to be included in each such series, and the
qualifications. limitations or restrictions thereof. This includes any voting rights, preemptive rights, conversion
privileges and liquidation rights which shall be superior to the common stock.
F-15
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
Common Stock
The Company is authorized to issue 25,000,000 shares of common stock, $0.01 par value, of which
10,683,828 shares were issued and outstanding at December 31, 1992.
The Company has an effective Shelf Registration Statement on file with thc Securities and Exchange
Commission covering 2,000,000 shares of common stock, of which 1,918,370 shares remain available at
December 31, 1992 for issuance in connection with the acquisition of other businesses by the Company.
In August, 1992. the Company completed an initial public offering of common stock and issued 3,000,000
shares of such stock at a price of S8.50 per share. The proceeds. net of underwriting discounts and expenses of
the offering, were approximately S21,465.000. Concurrent with the completion of the public offering. the
Company paid 510,195.000 to thc stockholders of Regional, AMR West. New Haven, and Professional and
issued an aggregate 4,143.500 shares of common stock in connection with the acquisition by merger of those
companies by American. On September 3, 1992, the Company sold an additional 300,000 shares of common
stock pursuant to an overallotment option granted to the underwriters in connection with the initial public
offering. The proceeds from this overallotment. net of underwriting discounts, were S2.37I,500.
In connection with the i:iitial public offering, the Company issued warrants to the underwriters to
purchase an additional 300.000 shares of thc Company's common stock at an exercise price of $10.20 per
share for 150,000 shares and 512.00 per share for 150,000 shares. Such warrants expire on August 5, 1997.
During the period February 21, 1992 to May 22. 1992. thc Company issued 2,703,001 shares of common
stock to its founders at a price of S0.0273 per share. On July 17, 1992. the Company repurchased and retired
510.000 sharcs of founds common stock at the original purchase price of S0.0273 per snare for a total of
SI 3.923.
The Company was incorporated on February 21, 1992. On June 8. 1992, the Cornpany was reorganized as
a Delaware corporation. Pursuant to the reorganization. each of the outstanding shares of the Massachusetts
corporation was converted into 2,928.71 shares of common stock. resulting in 2.730.001 shares outstanding on
that date. All financial information and share znd per share information with respect to the Company's stock
have been restated to reflect the shares issued in the reorganization.
Common Stock — Predecessor Conrpanies
All of the outstanding shares of common stock of the Predecessor Companies were acquired by American
in connection with the merger and reorganization.
In January 1992. prior to the merger of Regional with American, Regional repurchased 1,600 sharcs of its
common stock from two former employees for a total of 51.816,000. In addition. Regional entered into five
year non -competition agreements with the former employees for S240.000.
During 1991. Regional repurchased 800 shares of its stock from former shareholders. A charge to
retained earnings of S700.000 was recorded as a result of this transaction.
(7) Commito,cdts and Contingencies
Third -Porte Rate Adjustments and Revenue
A significant portion of thc Company's net revenue is derived under Federal and stale third -party
reimbursement programs. These revenues are based. in part, on cost reimbursement principles and are subject
to audit and retroactive adjustment by the respective third -party fiscal i.itermediaries. In the opinion of
management. retroactive adjustments if any. would not be material to the financial position or results of
operations of the Company.
F-16
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
Legal Proceedings
The Company is party to various legal actions arising in the ordinary course of business. In management's
opinion. the ultimate disposition of these matters will not have a material adverse effect on the Company's
financial position.
Letters of Credit
The Company has outstanding letters of credit of 5784.000 to secure payments of certain insurance
policies. Such letters of credit expire in February 1993.
(8) Related Party Transactions
Indemnification Agreements
In connection with thc merger and reorganization discussed in note 2, certain related parties have agreed
to indemnify the Company up to a maximum of 51,750,000 for losses the Company may incur if one of its
former insurors is unable to refund unearned premiums and pay pending claims.
Leasing Transactions
The Company leases various facilities from rclatcd parties. The leases on these properties expire at
various times through thc year 2000. Total rent exp nee paid to related parties amounted to 5990,000,
51,020,000 and S661.000 for the years ended December 31, 1992, 1991 and 1990, respectively.
Loans and Cash Advances
Loans and advances outstanding to related panics amounted to SO and 5973.000 at December 31, 1992
and 1991, respectively.
Notes payable to rclatcd parties amounted to SO and 594,000 at December 31, 1992 and 1991,
respectively.
Guaranty'
The Company has guaranteed a 52.500.000 loan owed by a related party to a bank. This loan is secured
by one of the Company's operating facilities that it leases from a related party. bears interest at prime plus 1%
and is callable by the bank on or after May 1994. Thc related party has agreed to indemnify the Company in
the event the Company is required to pay any amounts under the guaranty.
Contractual Agreements
The Company purchases vehicles and repair parts from a rclatcd party. Vehicles purchased from related
parties amounted to S143.000. 5306.000 and 5153.000 for the years ended December 31, 1992, 1991 and 1990,
respectively. Repair parts purchased from related parties and included in erpense amounted to $168,000,
S159.000 and S175.000. respectively. Accounts payable included 520.000 and 582,000 at December 31, 1992
and 1991. respectively, due to these related parties.
(9) Stock Option Plans
1992 Equity Incentive Plan
The Company's 1992 Equity Incentive Plan (the "Equity incentive Plan") was adopted on June 8, 1992
and provides for the grant of a variety of stock and stock -based awards and related benefits. The Equity
F- I7
AMERICAN MEDICAL RESPONSE. INC.
Notes to Consolidated Finandal Statements
December 31. 1992, 1991 and 1990
Incentive Plan permits the gran ing of options that qualify as incentive stock options and non-qualified options.
The option exercise price of each option shall bc determined by the Board of Directors, but in the case of
incentive stock options shall not be Icss than 100% of the fair market value of the shares on the date of grant
(110% in the case of incentive stock options granted to an individual with stockholdings in excess of certain
limits.)
Subject to adjustment for stock splits and similar events, the total number of shares of Common Stock
that can be issued undcr the Equity Incentive Plan is 800.000.
1992 Stock Option for Non -Employee Directors
The Company's 1992 Stock Option Plan for Non -Employee Directors (the "Dircctor Option Plan") was
adopted on June 8, 1992. Pursuant to the Director Option Plan, beginning on the date of the first annual
meeting of stockholders aftcr the date of the initial public offering. each director who is not an employee of the
Company or one of its subsidiaries and neither is a holder of five percent or more of the Company's Common
Stock nor was a stockholder of the Company prior to completion of the initial public offering will receive, on
the date of his or her first election as director, an option to purchase 7,500 shares of Common Stock.
Thereafter, each director will be granted, at each annual meeting at which such director is elected or reelected,
so long as he or she remains an eligible director, an option to acquire an additional 7,500 shares of Common
Stock.
The exercise price of such options will be the fair market value of the Common Stock on the date of
grant. Each option will be non -transferable except upon death, will expire 10 years after the date of grant and
will become exercisable on the first anniversary of the date of grant.
Stock Option Activity
A summary of stock option activity under the Company's stock option plans for the year ended
December 31 follows:
Number Option Price
of Options Range
Outstanding at December 31. 1991 — S —
Granted 303.100 5.00-12.375
Exercised (17,600) 5.00- 8.500
Cancelled — —
Outstanding at December 31. 1992 285.500 S5.00-12.375
Exercisable at December 31. 1992 60.875
(10) Employee Benefit Plans
1992 Employee Stock Purchase Plan
The 1992 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") was adopted by the
Board of Directors of the Company and approved by the stockholders on June 8, 1992. The Employee Stock
Purchasc Plan is designed to enable eligible employees to purchase shares of Common Stock at a discount on
a periodic basis through payroll deductions. All employees with at least six months o: continuous service, other
than employees owning 5% or more of the combined voting power of all classes of stock of the Company. are
eligible to participate. Purchases will occur at the end of option periods. each of six months' duration. The first
such option period began January 1. 1993.
F -I8
astral'
t
1
AMERICAN MEDICAL RESPONSE, IN( .
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
The purchase price of Common Stock under the Employee Stock Purchase Plan is 85% of the lesser of
the value of thc Common Stock at the beginning of an option period and the value of the Common Stock at
the end of the option period. Participants may elect under the Employee Stock Purchase Plan. prior to each
option period. to have from 2% to 10% of their pay withheld and applied to the purchase of shares at the end of'
thc option period However. the Employee Stock Purchase Plan imposes a maximum of SI0,000 on the
amount that may be withheld from any participant in any option period.
Subject to adjustment for stock splits and similar events, a total of 100,000 shares of Common Stock has
been reserved for issuance under the Employee Stock Purchase Plan. None of these shares has been Issued to
date.
Retirement Plans
Two of the Company's subsidiaries ':ave defined contribution 401(k) plans for the benefit of their
employees. Full-time employees with one year of service and 1,000 hours arc eligible to,participate. The total
plan expense for the years ended December 31, 1992. 1991 and 1990 was 5450.000, 5242,000"and 5339,000.
respectively.
Four the Company's subsidiaries have profit sharing plans which cover substantially all of their
employees. Contributions into the trust funds of the plans are discretionary, and the companies have the right
to amend, modify or terminate the plans, but in no event will any portion of the contributions paid revert to the
companies. The total profit sharing plan expense for the years ended December 31, 1992. 1991 and 1990 was
5115.000. 5109.000 and 533.000. respectively.
(11) Quarterly Financial Data (Unaudited)
The Company's summary financial data for the years ended December 31 1992 and 1991 by quarter is as
follows (in thousands except per share amounts):
Year ended December 31, 1992
4t19uarter 3rd uarter 2nd Quarter 1st Quarter
Total revenue 531,664 S31,185 529.558 528,785
Total operating expenses 29,237 27,938 26.854 26,890
Earnings from operations 2,427 3,247 2,704 1,895
Earnings before income taxes 2.330 3,092 2.443 1.624
Net earnings 1.700 1,137 1.4'.2 980
Pro forma net earnings 1.700 1.866 1,418 933
Pro forma earnings per common share 0.17 0.20 0.18 0.12
Weighted average com-non shares outstanding10.279 9,161 7.968 7.968
Year ended December 31, 1991
4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
Total revenue 529.500 S28.243 S25.639 54,636
Total operating expenses 27,028 25,716 23.500 22.273
Earnings from operations 2,472 2.527 2.139 2.363
Earnings before income taxes 2.132 2,215 1.834 2.054
Net earnings 1.273 1.284 1.092 1.194
Pro forma net earnings 1.200 1,257 1,074 1.163
Pro forma earnings per common share 0.15 0.16 0.13 0.15
Weighted average common shares outstanding7.968 7,968 7.968 7.968
F-19
r
AMERICAN MEDICAL RESPONSE, INC.
Notes to Consolidated Financial Statements
December 31. 1992, 1991 and 1990
(12) Subsequent Events
Acquisition
On January 11, 1993, the Company acquired Buck Medical Services, Inc. located in Portland Oregon.
The purchase price consisted of 55.500,000 in cash and 125,085 shares of the Company's common stock. The
acquisition has been accounted for as a purchase, and the excess of the purchase price and expenses associated
with the acquisition over the estimated fair value of the net assets acquired has been recorded as goodwill.
The following unaudited pro forma summary gives effect to the acquisition as if it had occurred on
December 31, 1992 with respect to the pro forma balance sheet and as if the transaction (along with the
acquisition of Mobile Medic and Ambulance Service) occurred at the beginning of 1991. Such pro forma
financial information reflects certain adjustments including amortization of goodwill, income tax effects. and
the increase in the weighted average shares outstanding. This pro forma information does not necessarily
reflect the results of operations which would have occurred had the acquisition taken place at the beginning of
1991 and is not necessarily indicative of results which may be obtained in the future (in thousands, except per
share amounts):
1992
(unaudited)
Balance Sheet
Total assets S 76,954 t
Total liabilities 37,580 6
Total stockholders' equity 39,374
Total liabilities and stockholders equity $ 76.954
1992 1991
(unaudited) —
Statements of Earnings:
Net revenue 5157,829 5138,196
Earnings before income taxes 10,996 8,664
Net earnings 6,107 4,956
Pro forma net earnings 6,649 4,656
Pro forrna earnings per share 0.70 0.53
Credit Facility
In February 1993. the Company received a commitment from a group of banks for a 530.0 million
revolving credit facility to refinance existing indebtedness. for acquisitions and working capital purposes.
F-20
•
•
AMERICAN MEDICAL RESPONSE, INC. AND SUBSIDIARIES
Introduction
During 1992, the Company acquired Mobile Medic Ambulance Service, Inc. ("Mobile") and Ambu-
lance Service Company ("ASC") in acquisitions accounted for as purchases. During 1993, the Company
acquired Buck Medical Services. Inc. ("Buck"), A -I Aw'„ulance Services ("A-1"), Inc. and Recd
Ambulances. Inc. ("Reed") in transactions accounted for as purchases :.no also acquired Randle -Eastern
Ambulance Service, Inc. ("Randle") in a transaction accounted for as a pooling -of -interests. The unaudited
pro forma combined statements of earnings for the six months ended June 30, 1993 and for the year ended
December 31, 1992 give effect to the above acquisitions accounted for as purchases as if the transactions were
consummated as of . anuary 1, 1992.
The pro forma financial data do not purport to represent what the Company's financial position or results
of operations would actually have been if such transaction% had in fact occurred on those dates or to project
the Company's financial position or results of operations for any future period.
F-21
AMERICAN MEDICAL RESPONSE, INC. AND SUBSIDIARIES
Pro Forma Combined Statement of Earnings
For the Six Months Ended June 30, 1993
(In thousands)
(Unaudited)
Pro form Pro form.
Historical Adjustme.ts(1) Combined
Total revenue S86.190 S8.317 S94,507
Expenses
Salaries and benefits 42,279 4,001(2) 46,280
Uncompensated care 19,116 1,697 20,813
Other 16,453 1,986 18,439
Amortization of intangibles 659 207(3) 866
Total operating expenses 78,507 7,891 86,398
Earnings from operations 7,683 426 8,109
Interest expense, net 433 149(4) 582
Earnings before income taxes 7,250 277 7,527
Income tax expense 3,147 157(5) 3,304
Net earnings S 4,103 $ 120 $ 4,223
Historical net earnings S 4,103 S 120 $ 4,223
Pro forma income tax expense (benefit) — 108 108
Pro forma net earnings S 4.103 $ 12 $ 4,115
Pro forma net earnings per share S 0.38 — S 0.37
Weighted average shares outstanding 10.916 198(6) 11,114
See accompanying notes to unaudited pro forma combined statement of earnings.
F-22
AMERICAN MEDICAL RESPONSE, INC. AND SUBSIDIARIES
Pro Forma Combieed Statement of Earaiags
For the Year Ended December 31, 1992
(In thousands)
(Unaudited)
Ilimori al
Total revenue S121,192
Expenses
Salaries and benefits 60,577
Uncompensated care 28,008
Other 21,773
Amortization of intangibles 561
Total operating expenses 110.919
Earnings from operations 10,273
Interest expense, net 784
Earnings before income taxes 9.489
Income tax expense 4,250
]yet earnings S 5,239
Historical net earnings $ 5,239
Pro forma income tax expense (benefit) (678)
Pro forma net earnings S 5,917
Pro forma net earnings per share S 0.67
Weighted average shares outstanding 8.838
Pro forma
Adjastments(7)
S54,095
25.061(8)
11,203
12,519(9)
1,153(10)
49,936
4.159
666(11)
3,493
1.120(12)
S 2,373
S 2,373
559
S 1.814
986(13)
See accompaming notes to unaudited pro forma combined statement of earnings.
F-23
Pro forma
Combined
$175.287
85,638
39,211
34,292
1.714
160,855
14,432
1,450
12,982
5,370
S 7,6/2
S 7,612
(119)
S 7.731
S 0.79
9,824
AMERICAN MEDICAL RESPONSE, INC. AND SUBSIDIARIFS
Notes to Unaudited Pro Forma Combined Financial Statements
Notes to Unaudited Pro Forma Combined Statement of Earnings
for the Six Months Ended Jane 30, 1993
(1) To include the results of A-1 and Reed as if' the acquisitions occuned at the beginning of 1993.
(2) To adjust salaries and benefits to reflect the difference between existing compensation agreements and
those assumed to take effect after the acquisition.
(3) To record amortization of goodwill resulting from the acquisitions that were accounted for as purchases.
Goodwill is assumed to be amortized by the straight Line method over 25 years.
(4) To record interest expense related to the subordinated debt issued in connection with the acquisitions.
(5) To record income tax effect of the pro forma adjustments.
(6) To adjust the weighted average number of shares outstanding as if the shares issued in connection with
the acquisitions had been outstanding since the beginning of 1993.
Notes to Unaudited Pro Forms Combined Statement of Earnings
for the Year Ended December 31, 1992
(7) To include the results of Mobile, ASC. Buck. A-1 and Reed as if the acquisitions occurred at the
bcginning of 1992.
(8) To adjust salaries and benefits to reflect the difference between existing compensation agreements and
those assumed to take effect after the acquisitions.
(9) To adjust rent expense as a result of the modification of certain leases.
(10) To record amortization of goodwill resulting from the acquisitions that were accounted for as purchases.
Goodwill is assumed to be amortized by the straight line method over 25 years.
(11) To record interest expense related to the subordinated debt issucd in connection with the acquisitions.
(12) To record income tax effect of pro Pm -ma adjustments.
(13) To adjust thc weighted average number of shares outstanding as if thc shares issucd in connection with
the acquisitions had been outstanding since the beginning of 1992.
F-24
No dealer, salesperson or any other person has
been authorized to give any information or to
make any representations not contained in this
Prospectus, and, if given or made, such informa-
tion or representations must not be relied upon
as having been authorized by the Company, the
Selling Stockholders or the U.S. Underwriters.
This Prospectus does not constitute an offer of
any securities other than those to which it re-
later or an offer to sell, or a solicitation of an
offer to buy, to any person in any jurisdiction
where such an offer or solicitation would be
unlawfuL Neither the delivery of this Prospec-
tus nor any sale made hereunder shall, under any
circumstances, create any implication that the
information contained herein is correct as of any
time subsequent to the date hereof
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of Certain Documents
by Reference 2
Prospectus Summary 3
Investment Considerations 5
Price Range of Common Stock 7
Use of Proceeds 7
Dividend Policy 7
Capitalization 8
Selected Financial Data 9
Managem t s Discussion and Analysis
tna
of F' esncial Condition and Results
of Operations 10
Business 15
Management 24
Principal and Selling Stockholders 28
Certain United States Tax Consequences to
Non -United States Holders 31
Underwriting 33
Legal Matters 35
Experts 36
Additional Information 36
Index to Financial Statements F-1
2,750,000 Shares
fiW
mg_Ldi.'e1L'l.kei toil Om :41%.74 a.diaiae+r
Common Stock
PROSPECTUS
1993
LEHMAN BROTHERS
KIDDER, PEABODY & CO.
INCORPORATED
ADVEST, INC.
•
0
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FARM 10-0
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30,1993 Commission File Number: 1-11196
AMERICAN MEDICAL RESPONSE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
04-3147881
(I.R.S. Employer identification
No.)
67 Batterymarch Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
(617) 261-1600
(Registrant's telephone number. including arca code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 1 5(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 NO
The number of shares outstanding of each of the issuer's classes of common stock
as of the latest practicable date is:
Common Stock, $0.01 par value, outstanding as of August 3, 1993: 11,206,903 shares.
1
Exhibit Index on Page 17
i •
ti
AMERICAN MEDICAL RESPONSE, INC.
INDEX
Number Ea=
Part L Financial Information
Item 1. Finarcial Statements
Consolidated Balance Sheets at June 30, 1)93 (unaudited) and
December 31, 1992 3
Consolidated Statements of Earnings (unaudited) for the Three Months and
Six Months Ended June 30, 1993 and 1992 4
Consolidated Statement of Stockholders' Equity (unaudited) for the
Six Months Ended June 30, 1993 5
Consolidated Statements of Cash Flows (unaudited) for the
Six Months Ended June 30. 1993 and 1992 6
Notes to Interim Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature 16
Exhibit Index 17
1
AMERICAN MEDICAL RESPONSE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands. except share amounts)
ASSETS
June 30, Decanbcr 31.
1993 1992
(Unaudited)
Currant assets:
Cash and cash equivalents S 5,909 S 14,600
Short-term investments — 260
Accounts receivable, less allowance for uncompensated care of 516,191
at lune 30, 1993 and 511,655 at December 31. 1992 28,082 22,655
Inventories 1,152 867
Prepaid expenses and other receivables 2,888 3,515
Deferred income taxes 5571 4A72
Total sure l assets 43"602 42.369
Property and equipment, net 15.122 10_555
Non-current assets:
Cost in excess of net assets acquired, net 29,146 11.153
Covenants not to compete, net 544 735
Other 1.975 2.036
Total non-current assets 31 661 13 924
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
S 40.392 $ 70.848
Current liabilities:
Accounts payable S 4,264 S 3,607
Accrued compensation, benefits and taxes 6,273 5,094
Accrued expenses 5.536 2,787
Income taxes payable 2,068 2,320
Current maturities of debt _211 5.465
Total current liabilities 19.052 19.273
Non-current liabilities:
Long -tam debt 18,014 7,875
Subordinated note payable to related party 1,100 1,100
Deferred income taxes 4,142 4,240
Other liabilities 676 L144
Total non-current liabilities 23.932 14.359
Total liabilities 42.984 33.632
Stockholders' equity:
Preferred stock, S.01 par value. 500.000 shares authorized. none issued
Common stock, S.01 par value, 25,000,000 shares authorized, 11,126,813
and 10,683,828 shares issued and outstanding 111 107
Additional paid -in capital 27,185 21,300
Retained earnings 19.912 15 809
Total stockholders' equity 47.408 37.216
Commitments and contingencies
Total liabilities and stockholders' equity S 90 392 S ,70.848
See accompanying notes to interim consolidated financial statements.
3
f
AMERICAN MEDICAL RESPONSE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
For The Three Months and Six Mooths Ended lune 30.1993 and 1992
(In thousands. except per share amounts)
Three Months Ended Six Month Ended
lune 30. lune 30,
6 1993 1992 1993 1992
1 (Unaudited)
I Total revenue S 44.1211 S 2422 S 86.120 5 311,111
Operating Expenses:
Salaries and benefits 21,630 14.387 42,279 29,114
Uncompensated care 9,852 7.083 19,116 13,659
Other 7.319 4,334 14,090 8.946
Depreciation 1,194 923 2.363 1.752
Amortization of intangibles 344 _122 __824 _221
Total operating expenses 411334 26.124 28,2121 23144
Earnings from operations 4.439 2,704 7,683 4,599
Interest expense, net 203 261 433 • 1- 12
Earnings before income taxes 4,236 2.443 7,250 4,067
Income taxes 1.841 _1.021 .3.142 L661
Net earnings $ 2.343 5 .,1.432 s —1.12.1 S L4Qj
PRO FORMA DATA
Historical net carvings 5 2.395 $ 1,422 S 4,103 S 2.402
Income taxes — _-4 — --al
Net earnings $ .2221 $ ...1.11/1 S -.4.1111 S .2.111
Net earnings per common share $ 0.22 $ O.ig S _2..1II S —2211
Weighted average common shares outstanding 11.Q1k —MU 18.21 7.95E
See accompanying notes to interim consolidated financial statements.
4
AMERICAN MEDICAL RESPONSE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Si: Months Ended June 30, 1993
(In thousands)
(unaudited)
Additional Total
Cumman.510r.k Paid -in Retained Stockboldas'
Sham Ammmt CaR3ta1 Finings FdgiWC
Balance at December 31. 1992 10.683 S 107 S 21.300 S 15.1109 S 37.216
Stock issued for acquisitions 432 4 5.939 — 5.943
Stock options exercised,
including related tax benefit 12 — 146 — 146
Net earnings — — LIM LAI
Balance at June 30. 1993 . L122 S -XI S 2L,1$1 S 12.212 S
See accompanying notes to interim consolidated financial statements.
5
AMERICAN MEDICAL RESPONSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Mouths Ended Jane 30, 1993 and 1992
(Io thousands)
Six Months Ended
June 30.
1993 1992
(unaudited)
Cash flow from operating activities
Net earnings S 4.103 S 2.402
Adjustments to rcconclk net eantings to net cash provided
by operating activities:
Depreciation 2.363 1,752
Amortization of intangible assets 659 273
Deferred income taxes (785) —
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (619) 144
Other current assets 755 (350)
Other assets 98 54
Accounts payable and accrued expenses (134) 133
Accrued compensation. benefits and taxes (298) 69
Income taxes payable (378) —
Other liabilities (4681 Net cash provided by operating activities —5.2215
x.711
Cash flows from investing activities:
Acquisitions, net of cash acquired (11,282) —
Purchases (sales) of short tenn investments, net 260 (85)
Capital expenditures, net. (2.980) (1.247)
Advance to related parties — --(152)
Net cash used for investing activities (M 002)
Cash flows from financing activities:
Proceeds from issuance of connnon stock — 74
Proceeds from exercise of stock options 93
Net borrowings under credit facility 14,139 —
Repayment ofborrowings (14.217) (915)
Net advances to stockholders
Net cash provided by (used for) financing activities *5 rt__
Increase (decrease) in cash and cash equivalents (8.691) 2.022
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period 8 _.W S _1421
Supplemental disclosure of cash flow information:
Cash paid during the period for.
Interest S 567 S
Income taxes S 4 276 S
Supplemental schedule of non-cash transactions:
Issuance of debt and equipment for repurchase of Predecessor common stock S — 8 1316
Issuance of debt for non -compete agreement S — S 240
Acquisitions:
Assets acquired S 30.001 S
Liabilities assumed and issued (11.794)
Common stock issued (5.943)
Cash paid 12.264
Liss cash acquired t9R'1
1113
Net cash paid for acquisitions S 2 S
See accompanying notes to interim consolidated financial statements,
6
AMERICAN MEDICAL RESPONSE. INC.
NOTES TO INTERIM CONSOLIDATED FINANr1AL STATEMENTS
1. Basis of Presentation
The consolidated financial statements include the accounts of American Medical Response. Inc. and
its subsidiaries ("Americ+n" or the "Company").
The interim consolidated financial statements are unaudited. but in the opinion of management
include all adjustments, which consist only of normal and recurring adjustments, necessary for a fair
presentation of its financial position and results of operations. Results of operations for the interim
periods are not necessarily indicative of the results to be expected for tIsft Aol year. These statements
should be read in conjunction with the consolidated financial statements as of and for the year ended
December 31, 1992.
2. Acquisitions
Acquisition Accounted for as a Pooling -of -Interests
In June 1993, the Company acquired all of the outstanding common stock of Randle Eastern
Ambulance, Inc. in exchange for 391,459 shares of the Company's common stock in a transaction
accounted for as a pooling -of -interests.
Restated total revenue and pro forma net earnings of the Company are summarized below:
The Company
as previously rcportcd
Randle
The Company. as restated
Three Months Ended
June 30. 1992
Total Pro Forma
Revenue Net Earnings
S 26.277 S 1.485
3.281
S 29.55$
Six Months Ended
June 30. 1992
Total Pro Forma
Roam=
$ 51.504
(67) _6.812
$ 1.418 S 58.343
jFarninv
S 2.565
(214)
S .2.351
To reflect the pooling -of -interests discussed above, pro forma net earnings per share have been restated
to $0.18 and $0.30 from $0.20 and $0.34 for the three months and six months ended June 30. 1992,
respectively.
Acquisitions Accounted for as Purchases
During 1992. the Company acquired two ambulance service providers. In November 1992, the
Company acquired Mobile Medic Ambulance Service, Inc., located in Gulfport. Mississippi and in
December 1992, the Company acquired Ambulance Service Company, located in Denver, Colorado. The
aggregate consideration paid for these acquisitions consisted of approximately $:).2 million in cash, S1.8
million in subordinated promissory notes and 611,268 shares of the Company's common stock.
During the first six months of 1993. the Company ...quircd three additional ambulance service
providers. In January 1993, the Company acquired Buck Medical Services, Inc., located in Portland,
Oregon. In April 1993 the Company acquired A-1 Ambulance Service located in Boulder, Colorado. In
7
AMERICAN MEDICAL RESPONSE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
June 1993, the Company acquired Reed Ambulance Service, Inc. located in Denver, Colorado. The
aggregate consideration paid for these acquisitions consisted of approximately S12.3 million in cash,
$2.5 million in subordinated promissory notes and 431,335 shares of the Company's common stock.
These acquisitions have been accounted for as purchases and, accordingly, the results of operations
have been included in the consolidated financial statements from the date of acquisition. The excess of
the purchase price and expenses associated with each acquisition over the estimated fair value of the net
assets acquired has been recorded as cost in excess of net assets acquired.
The following unaudited pro fonna results of operations give effect to the acquisitions as if the
transactions had occurred at the beginning of 1992. Such pro forma financial information reflects certain
adjustments, inciuding amortization of goodwill, income tax effects, and the increase in the weighted
average shares outstanding. This pro forma information does not necessarily reflect the results of
operations that would have occurred had the acquisitions taken place at the beginning of 1992 and is not
necessarily indicative of results that may be obtained in the future (in thousands, except per share
amounts):
Total revenue
Pro forma net earnings
Pro forma earnings per share
Subsequent Acquisitions and Recent Developments
Six Months Ended
,tine 30
(unaudited)
1221 1222
$94,507 $83,915
$ 4,115 S 3,473
$ .37 $ .39
In July 1993. the Company acquired substantially all of the assets of Bridgeport Ambulance Service,
Inc. located in Bridgeport, Connecticut. The consideration paid for this acquisition consisted of
approximately $1.4 million in cash, 58,589 shares of the Company's common stock, and $.5 million in a
subordinated promissory note.
In June 1993. the Company also announced that it had reached a preliminary understanding relating
to the possible acquisition of an ambulance service provider located in California. This complex
transaction is subject to due diligence and the negotiation of definitive agreements.
3. Credit Facility
In April 1993, the Company entered into a three-year, $30 million unsecured revolving line of credit
with a group of banks to refinance certain indebtedness, for acquisitions and for working capital
purposes. Interest is determined at the time of borrowing at the Company's option at either prime or
LIBOR plus 2.5%. Under the agreement. the Company is required to comply with certain financial and
other covenants and borrowing availability is based on earnings.
8
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
For all periods presented, the following financial information includes the combined results of the
four ambulance service providers the Company acquired concurrent with its initwl public offering in
August 1992 and Randle Eastern Ambulance Service, Inc. which was acquired in a transaction accounted
for as a pooling -of -interests. The five companies acquired by the Company from November 1992
through June 1993 accounted for as purchases are included from their dates of acquisition.
The Company's total revenue, which is comprised primarily of ambulance service fees charged to
Medicare and Medicaid, to other third -patty payors, including private insurance carriers and health
maintenance organizations, and directly to patients, is presented net of contractual adjustments.
Contractual adjustments represent the difference between gross billable charges and the portion of those
charges allowable by the third -party payor. The Company's provision for uncompensated care represents
the difference between net ambulance fee revenue and expected collections.
Three Months Ended June 30,1993 Compared to the Three Months Ended June 30, 1992
Overview
The Company's net earnings amounted to $2.4 million or $.22 per share for the second quarter of
1993. as compared with pro forma net earnings of $1.4 million or $.18 per share for the corresponding
period of 1992. The increase in nct earnings results from incremental earnings provided from
acquisitions and from the growth in business. The increase in pro forma earnings per share results from
the increase in net earnings, which is partly offset by an increase in the weighted average number of
shares outstanding resulting from the initial public offering and shares issued in connection with
acquisitions.
Results of Operations
The Company's total revenue amounted to $44.8 million for the three months ended June 30, 1993,
as compared with 529.6 million for the same period of 1992, an increase of $15.2 million or 51.5%. The
largest single contributor to the increase in total revenue was thc incremental revenue provided from
acquisitions. Also contributing to the increase was revenue generated from the Company's contract to
provide exclusive "911" emergency response service to Atlantic City, New Jersey awarded in late 1992
and an increase in the number of emergency and non -emergency transports. On June 1. 1993, the
Company began providing exclusive "911" emergency response service to Aurora. Colorado, the third
largest city in Colorado.
The Company is a party to three significant contracts to provide emergency "911" services. The
Company derived approximately 37% and 58% of its total revenue from these contracts during the
second quarter of 1993 and 1992. respectively.
Salaries and benefits expense as a percentage of total revenue decreased to 48.3% for thc three
months ended June 30. 1993, from 48.7% for the same period of 1992. This was a result of the favorable
9
1
i
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
impact of acquisitions, which in the aggregate have relatively lower labor costs, offset by the addition of
corporate salaries and benefits which did not exist in the prior period and certain wage increases. It is
anticipated that corporate salaries will increase in future periods as the Company continues to implement
its acquisition program and centralize certain operating. financial and treasury management functions.
However, it is also anticipated that corporate salaries will decrease as a percentage of total revenue as the
Company continues to grow.
Uncompensated care expense as a percentage of total revenue was 22.0% and 24.0% for the three
months ended June 30, 1993, and 1992, respectively. The percentage decrease is due to the favorable
impact of acquisitions, which in the aggregate have experienced lower uncompensated care expense as a
percentage of total revenue, and an improvement in the quality of the Company's receivables.
Other operating expenses were S7.3 million in the second quarter of 1993 as compared with S4.3
million in the same period of 1992, an increase of 68.9%. As a percentage of total revenue, other
operating expenses increased to 16.4% in the second quarter of 1993 from 14.7% in the same period of
1992. The increase in other ope: - ting expenses was a result of the growth in business and the addition of
corporate expenses that did not exist in the prior period.
Net interest expense decreased by S58.000 for the three months ended June 30, 1993. as compared
to the same period of 199'. This decrease was the result of the decline in the Company's weighted
average borrowing rate and the decline in the average amount of debt outstanding, resulting primarily
from the implementation of the Company's new revolving credit facility.
Amortization of intangibles increased to $344,000 for the second quarter of 1993 from S 127,000 for
the same period of 1992, an increase of S217,000. This was a result of the cost in excess of net assets
acquired recorded in connection with the Company's acquisitions. Amortization of intangibles will
increase in the future as a result of the cost in excess of net assets acquired recorded in connection with
the Company's acquisitions accounted for as purchases.
The effective tax rate for the second quarter of 1993 was 43.5% as compared with a pro forma
effective tax rate of 42.0% for the same period in 1992. The increase in the effective tax rate results
primarily from an increase in amounts that are not deductible for tax purposes. Pro forma income tax
expense for the second quarter of 1992. are tax amounts that would have been recorded if one of the
companies acquired at the time of the initial public offering had been a C corporation during this period.
If the subsidiary had been subject to corporate income taxes on an ongoing basis, the Company's income
tax expense would have been S1.025,000 for the second quarter of 1992.
10
r
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 1993 Compared to the Six Months Ended June 30,1992
Overview
The Company's net earnings amounted to 54.1 million or 5.38 per share for the six months ended
June 30, 1993, as compared with pro forma net earnings of 52.4 million or 530 per share for the
corresponding period of 1992. The increase in net earnings results from incremental earnings provided
from acquisitions and from the growth in business. The increase in pro forma earnings per share results
from the increase in net earnings, which is partly offset by an increase in the weightcd average number of
shares outstanding resulting from the initial public offering and shares issued in connection with
acquisitions.
Results of Operations
The Company's total revenue amounted to 586.2 million for the first six months of 1993 as
compared with 558.3 million for the same period of 1992, an increase of 527.9 million or 47.7%. The
largest single contributor to the increase in total revenue was the incremental revenue provided from
acquisitions. Also contributing to the increase was revenue generated from the Company's contract to
provide exclusive "91 1" emergency response service to Atlantic City, New Jersey au.., led in late 1992
and an increase in the number of emergency and non -emergency transports. On lune 1, 1993, the
Company began providing exclusive "911" emergency response service to Aurora, Colorado, the third
largest city in Colorado.
The Company is a party to three significant contracts to provide emergency "911" services. The
Company derived approximately 37% and 57% of its total revenue from these contracts during the first
six months of 1993 and 1992, respectively.
Salaries and benefits expense as a percentage of total revenue was 49.1% and 49.9% for the first six
months of 1993 and 1992, respectively. This was a result of a favorable impact of acquisitions, which in
the aggregate have relatively lower labor costs, offset by the addition of corporate salaries and benefits
which did not exist in the prior period and certain wage increases. It is anticipated that corporate salaries
will increase in future periods as the Company continues to implement its acquisition program and
centralize certain operating. financial, and treasury management functions. However, it is also
anticipated that corporate salaries will decrease as a percentage of total revenue as the Company
continues to grow.
Uncompensated care expense as a percentage of total revenue was 22.2% and 23.4% for the six
months ended June 30, 1993 and 1992, respectively. The percentage decrease is due to the favorable
impact of acquisitions, which in the aggregate have experienced lower uncompensated care expense as a
percentage of total revenue and an improvement in the quality of the Company's receivables
Other operating expenses were $14.1 million in the first six months of 1993 as compared with 58.9
million in the same period of 1992. an increase of 57.5%. As a percentage of total revenue, other
operating expenses increased to 16.3% in the first six months of 1993 from 15.3% in the same period of
1992. The increase in other operating expenses was a result of the growth in business and the addition of
corporate expenses that did not exist in the prior period.
1I
s
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net interest expense decreased by $99,000 for the first six months of 1993 as compared to the first
six months of 1992. This decrease was the result of the decline in the Company's weighted average
borrowing rate and the decline in the average amount of debt outstanding, resulting primarily from
implementation of the Companies revolving credit facility.
Amortization of intangibles increased to $659.000 for the first six months of 1993 from 5273,000
for the first six months of 1992, an increase of 3386,000. This increase was the result of the cost in
excess of net assets acquired recorded in connection with the Company's acquisitions. Amortization of
intangibles will increase in the future as a result of the cost in excess of net assets acquired recorded in
conn:ction with the Company's acquisitions accounted for as purchases.
The effective tax rate for the first six months of 1993 was 43.4% as compared with a pro forma
effective tax rate of 42.2% for the same period in 1992. The increase in the effective tax rate results
primarily from an increase in amounts that are not deductible for tax purposes. Pro forma income tax
expense for the six months ended June 30, 1992, are tax amounts that would have been recorded if one of
the companies acquired at the time of the initial public offering had been a C corporation during this
period. If the subsidiary had been subject to corporate income taxes on an ongoing basis, the Company's
income tax expense would have been $1.716.000 for the first six months of 1992.
Liquidity and Capital Resources
The Company has financed its cash needs, including cash used for acquisitions. from the net
proceeds of its initial public offering, borrowings under its revolving line of credit and cash from
operations. Concurrent with its initial public offering in August 1992, the Company acquired four
ambulance service providers for aggregate consideration consisting of $10.2 million in cash and
4,143,500 shares of Common Stock. Through June 30, 1993, the Company has made six additional
acquisitions for aggregate consideration consisting of $15.5 million in cash, S4.3 million in subordinated
promissory notes and 1,434,062 shares of Common Stock.
The Company currently has a S30 million unsecured revolving line of credit with a group of banks
consisting of Fleet Bank of Massachusetts, N.A., Continental Bank, N.A. and Pacific Western Bank.
Borrowings under the line of credit have been used to refinance certain indebtedness, for acquisitions and
for working capital purposes. Under the agreement. the Company is required to comply with certain
financial and other covenants and borrowing availability is based on earnings. Borrowings are limited to
the lesser of 330 million or 200% of the Company's earnings before interest, income taxes, depreciation
and amortization for the most recent twelve months. Interest is determined at the time of borrowing at
the Company's option at either prime or LIBOR plus 2.5%. The line of credit matures in April 1996. As
of August 4. 1993. the Company had approximately 313.0 million of borrowings and S3.5 million of
letters of credit outstanding under the line and S13.5 million remained available for future borrowings.
12
0.
T
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
During the first six months of 1993, capital expenditures were made primarily for new ambulances
and amounted to S3.0 million.
Cash generated from operations during the first six months of 1993 was $5.3 million. Working
capital at June 30, 1993 amounted to S24.6 million as compared to S23.1 million at December 31, 1992.
Current financial resources and anticipated funds generated by operations are expected to be adequate to
meet the Company's operating cash requirements in the foreseeable future.
The Company expects to continue its acquisition program. Successful implementation of the
Company's acquisition strategy depends upon its ability to acquire related businesses. The Company
plans to continue to use a combination of cash, subordinated debt and the Company's common stock to
finance its acquisition program.
Subsequent Acquisitions and Recent Developments
In July 1993. Company acquired substantially all of the assets of Bridgeport Ambulance Service,
Inc. of Bridgeport, Connecticut. The consideration paid for this acquisition consisted of approximately
51.4 million in cash, 58.589 shares of the Company's common stock. and S.5 million in a subordinated
promissory note.
In June 1993, the Company also announced that it had reached a preliminary understanding relating
to the possible acquisition of en ambulance service provider located in California. This complex
transaction is subject to due diligence and the negotiation of definitive agreements.
13
--1
..
Part I I . Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes In Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of the Company was held on May 13. 1993.
(b) All nine directors of the Company were re-elected at the meeting as described in paragraph
(c) below.
(c)The voting for the directors was as follows:
Nominee EQI Withheld
Paul M. Verrochi 9,422,541 10,850
Dominic J. Puopolo 9,422,541 10,850
Joseph R. Paolella 9,422,741 10,650
William E. Riggs 9,422,641 10,750
Paul T. Shirley 9,422,741 10,650
James E. McGrath 9,422,641 10.750
Michael A. Baker 9,422,741 10,650
David 13. Hammond 9,422,741 10,650
John Larkin Thompson 9,422,741 10,650
(d)Not Applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Agreement between the County of Santa Clara and Medevac, Inc. dated
July 1, 1988, as amc ded.
(10.2) Contract Extension between the County of Santa Clara and Medevac, Inc.
dated as of July 1, 1993.
(11) Statement regarding Computation of Earnings Per Share.
(b) Reports on Form 8-K
The Company filed a Form 8-K dated June 29, 1993, relative to the acquisition of
Randle Eastern Ambulance Service, Inc. and the A-1 Ambulance Service Companies.
The following is a list of the financial statements filed with this report:
Financial statemet:ts of Randle Eastern Ambulance Service, Inc.:
Independent Auditors' Report
Balance Sheets at March 31, 1993 (unaudited), December 31, 1992 and
December 31, 1991
14
Part I I . Other Information -(continued)
Statements of Income and Retained Earnings for the Years Ended December 31,
1992 and 1991
- Statements of Income and Retained Earnings for the Three Months Ended March
31, 1993 and 1992 (unaudited)
- Statements of Cash Flows for the Years Ended December 31, 1992 and 1991
Statements of Cash Flows for the Three Months Ended March 31, 1993 and
1992 (unaudited)
- Notes to Financial Statements -December 31, 1992 and 1991
Pro Forma Combined Financial Statements:
- Pro Forma Combined Financial Statements (unaudited)
- Pro Fora Combined Balance Sheet at December 31, 1992 (unaudited)
- Pro Forma Combined Balance Sheet at March 31, 1993 (unaudited)
- Pro Forma Combined Statement of Earnings for the Year Ended December 31,
1992 (unaudited)
- Pro Forma Combined Statement of Earnings for the Three Months Ended March
31, 1993 (unaudited)
- Notes to Unaudited Pro Forma Combined Financial Statements
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant bas duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN MEDICAL RESPONSE. INC.
(Registrant)
August 4, 1993 /s/ Ronald M. Levenson
(Date) Ronald M. Levenson
Senior Vice President and
Chief Accounting Officer
16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN MEDICAL RESPONSE. INC.
(Registrant)
August 4, 1993
(Date) Ronald M. Levenson
Senior Vice President and
Chief Accounting Officer
16
AMERICAN MEDICAL RESPONSE, INC.
EXHIBIT INDEX
The following designated exhibits have previously been filed with the Securities and Exchange k
Commission under the Securities Act of 1933 as part of the Registrant's Registration Statement on Form
S-1, as amended (No. 33-52702) and are incorporate herein by reference to such filing.
SEC
IAis rags
10.1 Agreement between the County of Santa Clara and Medevac, 10.28
Inc. dated July 1, 1988, as amended
10.2 Contract Extension between the County of Santa Clara and 10.29
Medevac, Inc. dated as of July I. 1993
11 Statement regarding computation of per share earnings Filed 18
herewith
F.XHIBIT 11
AMERICAN MEDICAL RESPONSE, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(In thousands. except per share amounts)
Thee Months Ended Six Month Ended
lune 30, lune 30.
1993 1992 1993 1992
Pro Fonna net earnings available to common shareholders S-2..121 $ L418 $ 1.102 $ 2131
Weighted average shares of common stock outstanding 11,036 7,933 10,916 7.933
Common stock equivalents assumed to be
outstanding total! periods 32 _ 32
Lcss reduction for treasury stock method akulation_ (19) _ (19)
Pro forma weighted average common stock and common _
stock equivalents deemed outstanding 1 L036 7.9.8 10.916 -2.211
Pro forma net earnings per common
share and equivalents
18
S x.22 S -Ali S X018 S 0.30
4
\
CITY OF LODI
AGENDA TITLE:
MEETING DATE:
PREPARED BY:
COUNCIL COMMUNICATION
r'1
Ambulance Company Merger Report
October 20, 1993
City Manager
RECOMMENDED ACTION: None required. Information only.
BACKGROUND INFORMATION: The ambulance company serving the City of Lodi and
surrounding areas (Life Medical Industries, Inc.) has
been acquired by a nationwide company, American
Medical Response, IL_c. Mr. Mike Nilssen, Chief
Operations Officer of Life Medical Industries, Inc..
will be in attendance at Wednesday night's meeting to briefly review with the
City Council the particulars of this action.
FUNDING: None required
TAP:br
CCCOM856/TXTA.07A
APPROVED
Respectfully submitted,
,e .a.
Thomas A. Peterson
City Manager
THOMAS A. PETERSON
City Manager