Envision Healthcare Holdings, Inc. (Form: 10-Q, Received: 05/08/2015 17:19:26)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36048

ENVISION HEALTHCARE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		45-0832318
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification Number)

6200 S. Syracuse Way, Suite 200
Greenwood Village, CO		80111
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 303-495-1200

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

Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x		Accelerated filer o

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

At May 1, 2015, the registrant had 185,637,644 shares of common stock, par value $0.01 per share, outstanding.

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ENVISION HEALTHCARE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	March 31, 2015			December 31, 2014
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	92,875		$	318,895
Insurance collateral	37,521			32,828
Trade and other accounts receivable, net	1,098,573			950,115
Parts and supplies inventory	24,805			24,484
Prepaids and other current assets	36,119			36,917
Total current assets	1,289,893			1,363,239
Non-current assets:
Property, plant and equipment, net	214,350			211,276
Intangible assets, net	680,614			524,482
Insurance collateral	10,535			10,568
Goodwill	2,869,408			2,538,633
Other long-term assets	82,119			55,555
Total assets	$	5,146,919		$	4,703,753
Liabilities and Equity
Current liabilities:
Accounts payable	$	56,824		$	47,584
Accrued liabilities	477,936			412,657
Current deferred tax liabilities	104,890			104,278
Current portion of long-term debt and capital lease obligations	12,358			12,349
Total current liabilities	652,008			576,868
Long-term debt and capital lease obligations	2,257,654			2,025,877
Long-term deferred tax liabilities	161,451			130,963
Insurance reserves	220,367			180,639
Other long-term liabilities	22,616			20,365
Total liabilities	3,314,096			2,934,712
Commitments and contingencies
Equity:
Common stock ($0.01 par value; 2,000,000,000 shares authorized, 184,586,249 and 183,679,113 issued and outstanding as of March 31, 2015 and December 31, 2014, respectively)	1,846			1,837
Preferred stock ($0.01 par value; 200,000,000 shares authorized, none issued and outstanding as of March 31, 2015 and December 31, 2014)	—			—
Additional paid-in capital	1,632,584			1,616,747
Retained earnings	177,224			143,849
Accumulated other comprehensive income (loss)	(1,719		)	(1,856		)
Total Envision Healthcare Holdings, Inc. equity	1,809,935			1,760,577
Noncontrolling interest	22,888			8,464
Total equity	1,832,823			1,769,041
Total liabilities and equity	$	5,146,919		$	4,703,753

The accompanying notes are an integral part of these financial statements.

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ENVISION HEALTHCARE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share amounts, unaudited)

	Three months ended March 31,
	2015			2014
Revenue, net of contractual discounts	$	2,252,718		$	1,858,494
Provision for uncompensated care	(1,008,216		)	(844,283		)
Net revenue	1,244,502			1,014,211
Compensation and benefits	907,657			743,661
Operating expenses	151,726			114,635
Insurance expense	35,526			30,981
Selling, general and administrative expenses	26,449			19,375
Depreciation and amortization expense	39,881			36,432
Restructuring charges	—			809
Income from operations	83,263			68,318
Interest income from restricted assets	130			86
Interest expense, net	(26,687		)	(30,049		)
Realized gains (losses) on investments	—			606
Other income (expense), net	(332		)	(808		)
Income (loss) before income taxes and equity in earnings of unconsolidated subsidiary	56,374			38,153
Income tax benefit (expense)	(22,516		)	(16,675		)
Income (loss) before equity in earnings of unconsolidated subsidiary	33,858			21,478
Equity in earnings of unconsolidated subsidiary	72			47
Net income (loss)	33,930			21,525
Less: Net (income) loss attributable to noncontrolling interest	(555		)	3,300
Net income (loss) attributable to Envision Healthcare Holdings, Inc.	$	33,375		$	24,825
Net income (loss) per share attributable to Envision Healthcare Holdings, Inc.:
Basic	$	0.18		$	0.14
Diluted	$	0.17		$	0.13

Weighted-average common shares outstanding:
Basic	184,586,249			180,782,025
Diluted	191,241,676			189,391,612

Comprehensive income (loss) :
Net income (loss)	$	33,930		$	21,525
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) during the period	(120		)	(337		)
Unrealized gains (losses) on derivative financial instruments	257			51
Total other comprehensive income (loss), net of tax	137			(286		)
Comprehensive income (loss)	34,067			21,239
Less: Comprehensive (income) loss attributable to noncontrolling interest	(555		)	3,300
Comprehensive income (loss) attributable to Envision Healthcare Holdings, Inc.	$	33,512		$	24,539

The accompanying notes are an integral part of these financial statements.

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ENVISION HEALTHCARE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Three months ended March 31,
	2015			2014
Cash Flows from Operating Activities
Net income (loss)	$	33,930		$	21,525
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense	42,004			39,667
(Gain) loss on disposal of property, plant and equipment	27			(1,981		)
Equity-based compensation expense	1,353			1,062
Excess tax benefits from equity-based compensation	(10,945		)	(14,790		)
Equity in earnings of unconsolidated subsidiary	(72		)	(47		)
Dividends received	370			430
Deferred income taxes	520			928
Changes in operating assets/liabilities, net of acquisitions:
Trade and other accounts receivable, net	(56,224		)	(35,429		)
Parts and supplies inventory	(122		)	(327		)
Prepaids and other current assets	6,930			(3,468		)
Accounts payable and accrued liabilities	22,799			34,183
Insurance reserves	4,745			(11,533		)
Net cash provided by (used in) operating activities	45,315			30,220
Cash Flows from Investing Activities
Purchases of available-for-sale securities	(472		)	(2,458		)
Sales and maturities of available-for-sale securities	200			8,160
Purchases of property, plant and equipment	(13,507		)	(10,714		)
Proceeds from sale of property, plant and equipment	44			2,156
Acquisition of businesses, net of cash received	(498,283		)	(35,791		)
Net change in insurance collateral	(4,508		)	1,200
Other investing activities	(912		)	(2,526		)
Net cash provided by (used in) investing activities	(517,438		)	(39,973		)
Cash Flows from Financing Activities
Borrowings under the ABL Facility	285,000			—
Repayments of the Term Loan	(3,343		)	(3,343		)
Repayments of the ABL Facility	(50,000		)	—
Debt issuance costs	(27		)	—
Proceeds from stock options exercised	3,548			—
Excess tax benefits from equity-based compensation	10,945			14,790
Shares repurchased for tax withholdings	—			(14,430		)
Contributions from (distributions to) noncontrolling interest, net	100			250
Other financing activities	(120		)	(1,230		)
Net cash provided by (used in) financing activities	246,103			(3,963		)
Change in cash and cash equivalents	(226,020		)	(13,716		)
Cash and cash equivalents, beginning of period	318,895			204,712
Cash and cash equivalents, end of period	$	92,875		$	190,996

The accompanying notes are an integral part of these financial statements.

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1. General

Basis of Presentation of Financial Statements

Envision Healthcare Holdings, Inc. is organized as a holding company that operates through various subsidiaries. Envision Healthcare Corporation (“Corporation”) is a wholly-owned subsidiary of the Company.

The accompanying interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) to reflect the consolidated financial position, results of operations and cash flows of the Company for interim reporting, and accordingly, do not include all of the disclosures required for annual financial statements.

In the opinion of management, the consolidated financial statements of the Company include all normal recurring adjustments necessary for a fair presentation of the periods presented. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year ending December 31, 2015. For further information on the Company’s significant accounting policies and other information, see the Company’s consolidated financial statements, including the accounting policies and notes thereto for the year ended December 31, 2014, which includes all disclosures required by GAAP, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The Company’s business is conducted primarily through two operating subsidiaries, EmCare Holdings, Inc. (“EmCare”), its facility-based and post-acute care physician services segment, and American Medical Response, Inc. (“AMR”), its healthcare transportation services segment.

2. Summary of Significant Accounting Policies

Consolidation

The consolidated financial statements of the Company include all of its wholly-owned subsidiaries, including Corporation, EmCare and AMR and their respective subsidiaries and affiliated physician groups. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions relating to the reporting of results of operations, financial condition and related disclosure of contingent assets and liabilities at the date of the financial statements including, but not limited to, estimates and assumptions for accounts receivable and insurance related reserves. Actual results may differ from those estimates under different assumptions or conditions.

Insurance Collateral

Insurance collateral is comprised of investments in U.S. Treasuries and marketable equity and debt securities held by the Company’s captive insurance subsidiary that supports the Company’s insurance program and reserves, as well as cash deposits with third parties. Certain of these investments, if sold or otherwise liquidated, would have to be replaced by other suitable financial assurances and are, therefore, considered restricted. These investments are designated as available-for-sale and reported at fair value with the related temporary unrealized gains and losses reported as a separate component of accumulated other comprehensive income, net of deferred income tax. Declines in the fair value of a marketable investment security which are determined to be other-than-temporary are recognized in the statements of operations, thus establishing a new cost basis for such investment. Investment income earned on these investments is reported as interest income from restricted assets in the statements of operations.

Realized gains and losses are determined based on an average cost basis.

Insurance collateral also includes a receivable from insurers of $1.5 million and $1.5 million as of March 31, 2015 and December 31, 2014, respectively, for liabilities in excess of the Company’s self-insured retention.

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Trade and Other Accounts Receivable, net

The Company estimates its allowances based on payor reimbursement schedules, historical collections and write-off experience and other economic data. The Company’s billing systems do not provide contractual allowances or uncompensated care reserves on outstanding patient accounts. The allowance for uncompensated care is related principally to receivables recorded for self-pay patients and is not recorded on specific accounts due to the volume and variability of individual patient receivable collections. While the billing systems do not specifically record the allowance for doubtful accounts to individual accounts owed or specific payor classifications, the portion of the allowance for uncompensated care associated with fee-for-service charges as of December 31, 2014 was equal to approximately 86% and 82% of outstanding self-pay receivables for EmCare and AMR, respectively, consistent with the Company’s collection history. Account balances are charged off against the uncompensated care allowance when it is probable the receivable will not be recovered and to the contractual allowance when payment is received. The Company’s accounts receivable and allowances as of March 31, 2015 and December 31, 2014 were as follows (in thousands):

	March 31, 2015			December 31, 2014
Gross trade accounts receivable	$	5,201,221		$	4,978,738
Allowance for contractual discounts	(2,808,703		)	(2,800,852		)
Allowance for uncompensated care	(1,293,978		)	(1,227,799		)
Trade accounts receivable, net	1,098,540			950,087
Other receivables, net	33			28
Trade and other accounts receivable, net	$	1,098,573		$	950,115

Other receivables primarily represent employee advances and other miscellaneous receivables.

Accounts receivable allowances at EmCare are estimated based on cash collection and write-off experience at a facility level contract and facility specific payor mix. These allowances are reviewed and adjusted monthly through revenue provisions. The Company continuously compares actual cash collected on a date of service basis to the revenue recorded for that period and records any adjustment necessary for an overage or deficit in these allowances based on actual collections.

AMR contractual allowances are determined primarily on payor reimbursement schedules that are included and regularly updated in the billing systems, and by historical collection experience. The billing systems calculate the difference between payor specific gross billings and contractually agreed to, or governmentally driven, reimbursement rates. The allowance for uncompensated care at AMR is related principally to receivables recorded for self-pay patients. AMR’s allowances on self-pay accounts receivable are estimated based on historical write-off experience.

Business Combinations

Assets and liabilities of an acquired business are recorded at their fair values at the date of acquisition. The excess of the acquisition consideration over the estimated fair values is recorded as goodwill. All acquisition costs are expensed as incurred. While the Company uses its best estimates and assumptions as a part of the acquisition consideration allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period any subsequent adjustments are recorded as expense.

Insurance Reserves

Insurance reserves are established for automobile, workers compensation, general liability and professional liability claims utilizing policies with both fully-insured and self-insured components. This includes the use of an off-shore captive insurance program through a wholly-owned subsidiary for certain liability programs for both EmCare and AMR. In those instances where the Company has obtained third-party insurance coverage, the Company normally retains liability for the first $1 to $3 million of the loss. Insurance reserves cover known claims and incidents within the level of Company retention that may result in the assertion of additional claims, as well as claims from unknown incidents that may be asserted arising from activities through the balance sheet date.

The Company establishes reserves for claims based upon an assessment of actual claims and claims incurred but not reported. The reserves are established based on quarterly consultation with third-party independent actuaries using actuarial principles and assumptions that consider a number of factors, including historical claim payment patterns and legal costs, changes in case

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reserves and the assumed rate of inflation in healthcare costs and property damage repairs. Claims are discounted at a rate of 1.5% which is commensurate with the risk free rate.

The Company’s most recent actuarial valuation was completed in March 2015. As a result of this and previous actuarial valuations, the Company recorded increases in its provision for insurance liabilities of $2.6 million and $5.2 million during the three months ended March 31, 2015 and 2014, respectively, related to reserves for losses in prior years.

Public Offerings

On each of February 5, 2014 and July 10, 2014, the Company registered the offering and sale of 27,500,000 shares of common stock, and an additional 4,125,000 shares of common stock, upon the underwriters’ exercise of their overallotment option in each offering, which were sold by certain stockholders of the Company, including investment funds sponsored by, or affiliated with Clayton, Dubilier & Rice, LLC (“CD&R Affiliates”), to the underwriters at $30.50 per share and $34.00 per share, respectively, less an underwriting discount. On September 30, 2014, the Company registered the offering and sale of 17,500,000 shares of common stock by certain stockholders of the Company, including CD&R Affiliates, to the underwriters at $34.97 per share. Additionally, on March 5, 2015, the Company registered the offering and sale of 50,857,145 shares of common stock by CD&R Affiliates, which constituted the remaining shares beneficially owned by them, to the underwriter at $36.25 per share, less an underwriting discount.

The underwriters in these selling stockholder transactions offered the shares to the public from time to time at prevailing market prices or at negotiated prices. The Company did not receive any of the proceeds from the sale of the shares sold by the selling stockholders in these transactions, including any shares sold pursuant to any exercise of the underwriters’ overallotment option.

Financial Instruments and Concentration of Credit Risk

The Company’s cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, insurance collateral, long-term debt and other long-term liabilities constitute financial instruments. Based on management’s estimates, the carrying value of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximates fair value as of March 31, 2015 and December 31, 2014. Concentration of credit risks in accounts receivable is limited, due to the large number of customers comprising the Company’s customer base throughout the United States. A significant component of the Company’s revenue is derived from Medicare and Medicaid. Given that these are government programs, the credit risk for these customers is considered low. The Company performs ongoing credit evaluations of its other customers, but does not require collateral to support customer accounts receivable. The Company establishes an allowance for uncompensated care based on the credit risk applicable to particular customers, historical trends and other relevant information. For the three months ended March 31, 2015 and 2014, the Company derived approximately 34% and 33%, respectively, of its revenue from Medicare and Medicaid, 64% and 64%, respectively, from insurance providers and contracted payors, and 2% and 3%, respectively, directly from patients.

The Company estimates the fair value of its fixed rate senior notes based on an analysis in which the Company evaluates market conditions, related securities, various public and private offerings, and other publicly available information (Level 2, as defined below). The estimated fair value of the senior notes as of March 31, 2015 and December 31, 2014 was approximately $766.9 million and $744.4 million, respectively, with a carrying amount of $750.0 million.

Fair Value Measurement

The Company classifies its financial instruments that are reported at fair value based on a hierarchal framework which ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type of instrument and the characteristics specific to the instrument. Instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1—Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The Company does not adjust the quoted price for these assets or liabilities, which include investments held in connection with the Company’s captive insurance program.

Level 2—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Balances in this category include corporate bonds and derivatives.

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Level 3—Pricing inputs are unobservable as of the reporting date and reflect the Company’s own assumptions about the fair value of the asset or liability. Balances in this category include the Company’s estimate, using a combination of internal and external fair value analyses, of contingent consideration for acquisitions described in Note 4.

The following table summarizes the valuation of the Company’s financial instruments by the above fair value hierarchy levels as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31, 2015
Description	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities (insurance collateral)	$	31,632	$	—	$	—	$	31,632
Liabilities:
Contingent consideration	—		—		2,000		2,000
Fuel hedge	—		1,528		—		1,528
Interest rate swap	—		987		—		987

	December 31, 2014
Description	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities (insurance collateral)	$	30,243	$	—	$	—	$	30,243
Liabilities:
Contingent consideration	—		—		2,000		2,000
Fuel hedge	—		1,433		—		1,433
Interest rate swap	—		1,493		—		1,493

The contingent consideration balance classified as a Level 3 liability has remained unchanged since December 31, 2014.

During the three months ended March 31, 2015 and 2014, the Company had no transfers in and out of Level 1 and Level 2 fair value measurements.

Revenue Recognition

Fee-for-service revenue is recognized at the time of service and is recorded net of provisions for contractual discounts and estimated uncompensated care. Fee-for-service revenue represents billings for services provided to patients, for which the Company receives payment from the patient or their third-party payor. Provisions for contractual discounts are related to differences between gross charges and specific payor, including governmental, reimbursement schedules. The Company records fee-for-service revenue, net of the contractual discounts based on the information entered into the Company’s billing systems from received medical charts. An estimate for unprocessed medical charts for a given service period is made and adjusted in future periods based on actual medical charts processed. Information entered into the billing systems is subject to change, e.g. change in payor status, and may impact recorded fee-for-service revenue, net of the contractual discounts. Such changes are recognized in the period the change is known.

Revenue from home health services, net of revenue adjustments and provisions for contractual discounts, is earned and billed either on an episode of care basis (“episodic-based revenue”), on a per visit basis, or on a daily basis depending upon the payment terms and conditions established with each payor for services provided. Revenue recognized on a non-episodic basis is recorded in a similar manner to the Company’s fee-for-service revenue.

Home health service revenue under the Medicare prospective payment system (“PPS”) is based on a 60-day episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) a low utilization payment adjustment (“LUPA”) if the number of visits was fewer than five; (b) a partial payment if the patient transferred to another provider or the Company received a patient from another provider before completing the episode; (c) an outlier payment if the patient’s care was unusually costly (capped at 10% of total reimbursement per provider number); (d) a payment adjustment based upon the level of therapy services required; (e) acceleration if an episode concludes satisfactorily before the end of the 60-day episode period. Adjustments are made to reflect differences between estimated and actual payment amounts, the inability to obtain appropriate billing documentation or authorizations and other reasons unrelated to credit risk. These adjustments are estimated based on historical experience and are recorded in the period in which services are rendered as an estimated revenue adjustment and a corresponding reduction to patient accounts receivable.

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In addition to revenue recognized on completed episodes, a portion of revenue is recognized on episodes in progress. Episodes in progress are 60-day episodes of care that are active during the reporting period, but were not completed as of the end of the period. Revenue is estimated on a monthly basis based upon historical trends. The primary factors underlying this estimate are the number of episodes in progress at the end of the reporting period, expected Medicare revenue per episode and the calculation of the number of days episodes were active in the period based on the 60-day estimate from the episode start date.

Non-Medicare episodic-based revenue is recognized in a similar manner as the Medicare episodic-based revenue; however, rates paid by other insurance carriers can vary based upon the negotiated terms.

Revenue from contract staffing assignments, net of sales adjustments and discounts, are recognized when earned, based on the hours worked by the Company’s contract professionals. Conversion and direct hire fees are recognized when the employment candidate accepts permanent employment and all obligations are satisfied. The Company includes reimbursed expenses in revenue, net of contractual discounts and the associated amount of reimbursement expense in compensation and benefits.

Subsidy and fee revenue primarily represent hospital subsidies and fees at EmCare and fees for stand-by, special event and community subsidies at AMR. Provisions for estimated uncompensated care, or bad debts, are related principally to the number of self-pay patients treated in the period.

The Company has historically reported Medicare and Medicaid managed care in the line “Commercial insurance and managed care”. During 2014, the Company determined that Medicare and Medicaid managed care programs would be better categorized in the Medicare and Medicaid payor class and has reclassified those encounters in the presentation below and conformed prior periods to current period presentation. Net revenue for the three months ended March 31, 2015 and 2014 consisted of the following (in thousands):

	Three months ended March 31,
	2015			2014
Revenue, net of contractual discounts, excluding subsidies and fees:
Medicare	$	362,069		$	250,312
Medicaid	130,976			55,817
Commercial insurance and managed care (excluding Medicare and Medicaid managed care)	651,816			645,183
Self-pay	856,115			724,507
Sub-total	2,000,976			1,675,819
Subsidies and fees	251,742			182,675
Revenue, net of contractual discounts	2,252,718			1,858,494
Provision for uncompensated care	(1,008,216		)	(844,283		)
Net revenue	$	1,244,502		$	1,014,211

Healthcare reimbursement is complex and may involve lengthy delays. Third-party payors are continuing their efforts to control expenditures for healthcare, including proposals to revise reimbursement policies. The Company has from time to time experienced delays in reimbursement from third-party payors. In addition, third-party payors may disallow, in whole or in part, claims for payment based on determinations that certain amounts are not reimbursable under plan coverage, determinations of medical necessity, or the need for additional information. Laws and regulations governing the Medicare and Medicaid programs are very complex and subject to interpretation. Revenue is recognized on an estimated basis in the period in which related services are rendered. As a result, there is a reasonable possibility that recorded estimates will change materially in the short-term. Such amounts, including adjustments between provisions for contractual discounts and uncompensated care, are adjusted in future periods, as adjustments become known. These adjustments in the aggregate increased the contractual discount and uncompensated care provisions (decreased net revenue) by approximately $3.6 million and $1.1 million for the three months ended March 31, 2015 and 2014, respectively.

The Company provides services to patients who have no insurance or other third-party payor coverage. In certain circumstances, federal law requires providers to render services to any patient who requires care regardless of their ability to pay. Services to these patients are not considered to be charity care and provisions for uncompensated care for these services are estimated accordingly.

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Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. ASU 2014-09 is effective for public companies for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company has not yet determined the effects, if any, that adoption of ASU 2014-09 may have on its consolidated financial position or results of operations or the method of adoption.

In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), which amends existing accounting standards for consolidation under the variable interest entity and voting interest entity models. The new guidance changes the analysis for determining whether a fee paid to a decision maker or service provider is a variable interest. ASU 2015-02 is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may choose to adopt the standard using either a full retrospective approach or a modified retrospective approach. The Company has not yet determined the effects, if any, that adoption of ASU 2015-02 may have on its consolidated financial position or results of operations or the method of adoption.

In April 2015, the FASB issued ASU No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”) which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The Company expects to adopt this guidance when effective, and does not expect this guidance to have a significant impact on its financial statements.

3. Basic and Diluted Net Income (Loss) Per Share

The Company presents both basic earnings per share (“EPS”) and diluted EPS. Basic EPS excludes potential dilution and is computed by dividing “Net income (loss) attributable to Envision Healthcare Holdings, Inc.” by the “Weighted-average common shares outstanding” for the period. Diluted EPS reflects the potential dilution that could occur if stock awards were exercised. The potential dilution from stock awards was computed using the treasury stock method based on the average market value of the Company’s common stock. The following table presents EPS amounts for all periods and the basic and diluted weighted-average shares outstanding used in the calculation (in thousands, except share and per share amounts).

	Three months ended March 31,
	2015		2014
Net income (loss) attributable to Envision Healthcare Holdings, Inc.	$	33,375	$	24,825

Weighted-average common shares outstanding — common stock:
Basic	184,586,249		180,782,025
Dilutive impact of stock awards outstanding	6,655,427		8,609,587
Diluted	191,241,676		189,391,612

Net income (loss) per share attributable to Envision Healthcare Holdings, Inc.:
Basic	$	0.18	$	0.14
Diluted	$	0.17	$	0.13

As of March 31, 2015 and 2014, there were stock awards to acquire 36,957 shares and zero shares of common stock outstanding, respectively, not included in the weighted-average common shares outstanding above, as their effect is anti-dilutive.

4. Acquisitions

2015 Acquisitions

Scottsdale Emergency Associates, LTD (“SEA”). On January 30, 2015, the Company acquired the stock of SEA for total purchase consideration of $104.8 million paid in cash. SEA is an emergency physician group serving the greater Phoenix market, with 40 physicians and more than a dozen mid-level providers. The Company acquired SEA to achieve certain operational and strategic benefits.

The goodwill recognized in connection with the SEA acquisition is assigned to the EmCare segment and is primarily attributable to synergies that are expected to be achieved through the integration of SEA into the existing operations of EmCare. Of the goodwill recorded, none is tax deductible.

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The allocation of the purchase price is in the table below, which is subject to adjustment based upon the completion of purchase price allocations (in thousands):

Accounts receivable	$	7,000
Acquired intangible assets	37,000
Goodwill	77,914
Accounts payable	(81		)
Accrued liabilities	(450		)
Long-term deferred tax liabilities	(16,549		)
Total purchase price	$	104,834

VISTA Staffing Solutions (“VISTA”). On February 1, 2015, the Company acquired the stock of VISTA, a leading provider of locum tenens staffing and permanent placement services for physicians, nurse practitioners and physician assistants for total purchase consideration of $123.8 million, subject to working capital adjustments, paid in cash. VISTA operates throughout the United States as well as in Australia and New Zealand. The Company acquired VISTA to expand into locum tenens staffing.

The goodwill recognized in connection with the VISTA acquisition is assigned to the EmCare segment and is primarily attributable to synergies that are expected to be achieved through the integration of VISTA into the existing operations of EmCare. Of the goodwill recorded, $13.8 million is tax deductible.

The allocation of the purchase price is in the table below, which is subject to adjustment based upon the completion of purchase price allocations (in thousands):

Cash and cash equivalents	$	1,062
Accounts receivable	22,468
Prepaid and other current assets	1,139
Property, plant, and equipment	2,739
Acquired intangible assets	44,867
Goodwill	78,205
Other long-term assets	5,552
Accounts payable	(740		)
Accrued liabilities	(6,300		)
Long-term deferred tax liabilities	(10,422		)
Insurance reserves	(13,655		)
Other long-term liabilities	(1,132		)
Total purchase price	$	123,783

Emergency Medical Associates. On February 27, 2015, the Company acquired the stock of Emergency Medical Associates of New Jersey, P.A. and assets of Alpha Physician Resources, LLC (collectively “EMA”) for total purchase consideration of $271.8 million, subject to working capital adjustments, paid in cash. EMA provides emergency department, hospitalist and urgent care services at 47 facilities in New Jersey, New York, Rhode Island, and North Carolina. The Company acquired EMA to achieve certain operational and strategic benefits.

The goodwill recognized in connection with the EMA acquisition is assigned to the EmCare segment and is primarily attributable to synergies that are expected to be achieved through the integration of EMA into the existing operations of EmCare. Of the goodwill recorded, $154.5 million is tax deductible.

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The allocation of the purchase price is in the table below, which is subject to adjustment based upon the completion of purchase price allocations (in thousands):

Cash and cash equivalents	$	7,393
Accounts receivable	52,907
Prepaid and other current assets	4,859
Property, plant, and equipment	2,273
Acquired intangible assets	95,000
Goodwill	163,434
Other long-term assets	22,315
Accounts payable	(12,168		)
Accrued liabilities	(38,430		)
Long-term deferred tax liabilities	(3,518		)
Insurance reserves	(22,300		)
Total purchase price	$	271,765

The Company has accounted for the acquisitions of SEA, VISTA, and EMA using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill.

Unaudited pro forma operating results giving effect to the SEA, VISTA, and EMA acquisitions as if they had been completed as of January 1, 2014 are not presented due to the lack of available information at the time of this filing.

Other 2015 Acquisitions . On February 23, 2015 the Company acquired the stock of CareFirst, Inc., a provider of home health services in Birmingham, Alabama and surrounding areas for total purchase consideration of $7.3 million paid in cash.

2014 Acquisitions

Phoenix Physicians, LLC (“Phoenix Physicians”) . On June 17, 2014, the Company acquired the stock of Phoenix Physicians for a total purchase price of $169.5 million paid in cash (the “Phoenix Physicians Acquisition”). Phoenix Physicians, in part through management services agreements with professional entities, is engaged in providing medical practices support and emergency department management and staffing services to hospitals, physicians and healthcare facilities in Florida. The Company has accounted for the acquisition of Phoenix Physicians using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. All of the goodwill is tax deductible and assigned to the EmCare segment.

The final allocation of the purchase price is in the table below (in thousands):

Cash and cash equivalents	$	24,795
Accounts receivable	16,748
Prepaid and other current assets	139
Property, plant, and equipment	92
Acquired intangible assets	57,630
Goodwill	98,408
Accounts payable	(1,073		)
Accrued liabilities	(13,128		)
Long-term deferred tax liabilities	(445		)
Insurance reserves	(13,716		)
Total purchase price	$	169,450

During the three months ended March 31, 2015, the Company made a purchase price allocation adjustment that increased goodwill by $1.2 million with a corresponding increase to accrued liabilities to record an adjustment to accrued wages and benefits.

The following unaudited pro forma operating results give effect to the Phoenix Physicians Acquisition, as if it had been completed as of January 1, 2014. These pro forma amounts are not necessarily indicative of the operating results that would have

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occurred if these transactions had occurred on such date. The pro forma adjustments are based on certain assumptions that the Company believes are reasonable.

	Three months ended March 31,
(in thousands)	2014
Net revenue	$	31,698
Net income	3,017

Other 2014 Acquisitions . The Company completed the acquisitions of Life Line Ambulance Service, Inc., an emergency medical transportation service provider with operations in Arizona, on February 6, 2014, MedStat EMS, Inc., an emergency and non-emergency medical ground transportation service provider with operations in Mississippi, on March 7, 2014, and Streamlined Medical Solutions, LLC, a healthcare technology company which has developed proprietary software to enhance patient direct admission and referral management processes, on May 21, 2014 for total aggregate purchase consideration of approximately $38.0 million paid in cash.

The Company has accounted for these acquisitions using the acquisition method of accounting, whereby the total purchase price was allocated to the acquired identifiable net assets based on assessments of their respective fair values, and the excess of the purchase price over the fair values of these identifiable net assets was allocated to goodwill. During the three months ended March 31, 2015, the Company made purchase price allocation adjustments including a reclassification from goodwill to intangible assets of $1.3 million. The total purchase price for these acquisitions was allocated to goodwill of $9.5 million, $4.9 million of which is tax deductible goodwill, other acquired intangible assets of $28.7 million, net current assets of $3.5 million and long-term deferred tax liabilities of $3.7 million.

5. Insurance Collateral

Insurance collateral consisted of the following as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31,		December 31,
	2015		2014
Available-for-sale securities:
U.S. Treasuries	$	1,204	$	1,191
Corporate bonds /Fixed income	16,663		15,397
Corporate equity	13,765		13,655
Total available-for-sale securities	31,632		30,243
Insurance receivable	1,470		1,470
Cash deposits and other	14,954		11,683
Total insurance collateral	$	48,056	$	43,396

Amortized cost basis and aggregate fair value of the Company’s available-for-sale securities as of March 31, 2015 and December 31, 2014 were as follows (in thousands):

	March 31, 2015
Description	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasuries	$	1,192	$	16	$	(4	)	$	1,204
Corporate bonds /Fixed income	16,603		64		(4		)	16,663
Corporate equity	14,182		45		(462		)	13,765
Total available-for-sale securities	$	31,977	$	125	$	(470	)	$	31,632

	December 31, 2014
Description	Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasuries	$	1,182	$	12	$	(3	)	$	1,191
Corporate bonds /Fixed income	15,339		59		(1		)	15,397
Corporate equity	13,885		27		(257		)	13,655
Total available-for-sale securities	$	30,406	$	98	$	(261	)	$	30,243

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As of March 31, 2015, available-for-sale securities included U.S. Treasuries and corporate bonds/ fixed income securities of $4.0 million with contractual maturities within one year and $13.9 million with contractual maturities extending longer than one year through five years. Actual maturities may differ from contractual maturities as a result of the Company’s ability to sell these securities prior to maturity.

The Company’s temporarily impaired investment securities available-for-sale as of March 31, 2015 and December 31, 2014 were as follows (in thousands):

	March 31, 2015					December 31, 2014
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasuries:
Less than 12 months	$	—	$	—		$	—	$	—
12 months or more	131		(4		)	130		(3		)
Corporate bonds /Fixed income:
Less than 12 months	2,667		(1		)	1,312		(1		)
12 months or more	2,540		(3		)	251		—
Corporate equity:
Less than 12 months	11,208		(462		)	11,160		(257		)
12 months or more	—		—			—		—
Total	$	16,546	$	(470	)	$	12,853	$	(261	)

The Company evaluates the investment securities available-for-sale on a quarterly basis to determine whether declines in the fair value of these securities are other-than-temporary. This quarterly evaluation consists of reviewing the fair value of the security compared to the carrying amount, the historical volatility of the price of each security, and any industry and company specific factors related to each security.

The Company is not aware of any specific factors indicating that the underlying issuers of the U.S. Treasuries and corporate bonds/ fixed income securities would not be able to pay interest as it becomes due or repay the principal amount at maturity. Therefore, the Company believes that the changes in the estimated fair values of these debt securities are related to temporary market fluctuations. Additionally, the Company is not aware of any specific factors which indicate the unrealized losses on the investments in corporate equity securities are due to anything other than temporary market fluctuations.

The Company realized net gains of zero and $0.6 million on the sale and maturities of available-for-sale securities for the three months ended March 31, 2015 and 2014, respectively.

6. Accrued Liabilities

Accrued liabilities were as follows as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31,		December 31,
	2015		2014
Accrued wages and benefits	$	252,034	$	190,220
Accrued paid time-off	30,542		27,156
Current portion of self-insurance reserves	74,787		74,212
Accrued severance and related costs	7,109		8,376
Current portion of compliance and legal	5,395		3,407
Accrued billing and collection fees	3,191		3,823
Accrued incentive compensation	24,112		32,324
Accrued income taxes	8,941		—
Accrued interest	11,029		22,324
Other	60,796		50,815
Total accrued liabilities	$	477,936	$	412,657

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7. Debt and Capital Lease Obligations

Senior Unsecured Notes due 2019

On May 25, 2011, Corporation issued $950 million of senior unsecured notes due 2019 (“2019 Notes”). During the second quarter of 2012, the Company’s captive insurance subsidiary purchased $15.0 million of the 2019 Notes through an open market transaction and currently holds none of the 2019 Notes subsequent to the redemption of the 2019 Notes on December 30, 2013 and June 18, 2014.

On December 30, 2013, Corporation redeemed $332.5 million in aggregate principal amount of the 2019 Notes of which $5.2 million was held by the Company’s captive insurance subsidiary at a redemption price of 108.125%, plus accrued and unpaid interest of $2.2 million. During the year ended December 31, 2013, the Company recorded a loss on early debt extinguishment of $38.7 million related to premiums and unamortized debt issuance costs from the partial redemption of the 2019 Notes.

On June 18, 2014, Corporation redeemed the remaining $617.5 million in aggregate principal amount of the 2019 Notes of which $9.8 million was held by the Company’s captive insurance subsidiary at a redemption price of 106.094%, plus accrued and unpaid interest of $2.4 million. During the year ended December 31, 2014, the Company recorded a loss on early debt extinguishment of $66.4 million related to premiums, financing fees paid to the creditors of the unsecured senior notes due 2022, and unamortized debt issuance costs from the redemption of the 2019 Notes.

Senior Secured Credit Facilities

On May 25, 2011, Corporation entered into $1.8 billion of senior secured credit facilities (“Senior Secured Credit Facilities”) that consisted of a $1.44 billion senior secured term loan facility due 2018 (the “Term Loan Facility”) and a $350 million asset-backed revolving credit facility due 2016 (the “ABL Facility”). The Senior Secured Credit Facilities are secured by substantially all of the assets of the Company.

Term Loan Facility

On February 7, 2013, Corporation, the borrower under the Term Loan Facility, entered into a First Amendment (the “Term Loan Amendment”) to the credit agreement governing the Term Loan Facility (as amended, the “Term Loan Credit Agreement”). Under the Term Loan Amendment, the Company incurred an additional $150 million in incremental borrowings under the Term Loan Facility, the proceeds of which were used to pay down the ABL Facility. In addition, the rate at which the loans under the Term Loan Credit Agreement bear interest was amended to equal (i) the higher of (x) the rate for deposits in U.S. dollars in the London Interbank Market (adjusted for maximum reserves) for the applicable interest period (“LIBOR”) and (y) 1.00%, plus, in each case, 3.00% (with a step-down to 2.75% in the event that the Company meets a consolidated first lien net leverage ratio of 2.50:1.00), or (ii) the alternate base rate, which will be the highest of (w) the corporate base rate established by the administrative agent from time to time, (x) 0.50% in excess of the overnight federal funds rate, (y) the one-month LIBOR (adjusted for maximum reserves) plus 1.00% and (z) 2.00%, plus, in each case, 2.00% (with a step-down to 1.75% in the event that the Company meets a consolidated first lien net leverage ratio of 2.50:1.00). The Company recorded a loss on early debt extinguishment of $0.1 million related to unamortized debt issuance costs as a result of this modification.

The credit agreement governing the Term Loan Facility contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants are limited to the following: limitations on the incurrence of debt, liens, fundamental changes, restrictions on subsidiary distributions, transactions with affiliates, further negative pledge, asset sales, restricted payments, investments and acquisitions, repayment of certain junior debt (including the senior notes) or amendments of junior debt documents related thereto and line of business. The negative covenants are subject to the customary exceptions.

ABL Facility

On February 27, 2013, Corporation entered into a First Amendment (the “ABL Amendment”) to the credit agreement governing the ABL Facility (as amended, the “ABL Credit Agreement”), under which the Company increased its commitments under the ABL Facility to $450 million and extended the term to 2018. In addition, the rate at which the loans under the ABL Credit Agreement bear interest was amended to equal (i) LIBOR plus, (x) 2.00% in the event that average daily excess availability is less than or equal to 33% of availability, (y) 1.75% in the event that average daily excess availability is greater than 33% but less than or equal to 66% of availability and (z) 1.50% in the event that average daily excess availability is greater than 66% of availability, or (ii) the alternate base rate, which will be the highest of (x) the corporate base rate established by the administrative agent from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) the one-month LIBOR

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(adjusted for maximum reserves) plus 1.00% plus, in each case, (A) 1.00% in the event that average daily excess availability is less than or equal to 33% of availability, (B) 0.75% in the event that average daily excess availability is greater than 33% but less than or equal to 66% of availability and (C) 0.50% in the event that average daily excess availability is greater than 66% of availability.

On February 5, 2015, Corporation entered into a Second Amendment to the ABL Credit Agreement, under which certain lenders under the ABL Facility increased the commitments available to Corporation under the ABL Facility to $550 million.

The ABL Facility bears a commitment fee that ranges from 0.500% to 0.375%, payable quarterly in arrears, based on the utilization of the ABL Facility. The ABL Facility also bears customary letter of credit fees.

As of March 31, 2015, letters of credit outstanding which impact the available credit under the ABL Facility were $120.6 million and the maximum available under the ABL Facility was $194.4 million.

The credit agreement governing the ABL Facility contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants are limited to the following: limitations on indebtedness, dividends and distributions, investments, acquisitions, prepayments or redemptions of junior indebtedness, amendments of junior indebtedness, transactions with affiliates, asset sales, mergers, consolidations and sales of all or substantially all assets, liens, negative pledge clauses, changes in fiscal periods, changes in line of business and hedging transactions. The negative covenants are subject to the customary exceptions and also permit the payment of dividends and distributions, investments, permitted acquisitions and payments or redemptions of junior indebtedness upon satisfaction of a “payment condition.” The payment condition is deemed satisfied upon 30-day average excess availability exceeding agreed upon thresholds and, in certain cases, the absence of specified events of default and compliance with a fixed charge coverage ratio of 1.0 to 1.0.

Senior Unsecured Notes due 2022

On June 18, 2014, Corporation issued $750.0 million of senior unsecured notes due 2022 (“2022 Notes”) the proceeds of which were used to redeem the remaining 2019 Notes and for general corporate purposes. The Company paid $9.4 million in financing fees to the creditors of the 2022 Notes which was recorded to loss on early debt extinguishment in the second quarter of 2014.

The 2022 Notes have a fixed interest rate of 5.125%, payable semi-annually on January 1 and July 1 with the principal due at maturity on July 1, 2022. The 2022 Notes are general unsecured obligations of the Company and are guaranteed by each of the Company’s domestic subsidiaries, except for any of the Company’s subsidiaries subject to regulation as an insurance company, including the Company’s captive insurance subsidiary.

The Company may redeem the 2022 Notes, in whole or in part, at any time prior to July 1, 2017, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium. The Company may redeem the 2022 Notes, in whole or in part, at any time (i) on and after July 1, 2017 and prior to July 1, 2018, at a price equal to 103.844% of the principal amount of the 2022 Notes, (ii) on or after July 1, 2018 and prior to July 1, 2019, at a price equal to 102.563% of the principal amount of the 2022 Notes, (iii) on or after July 1, 2019 and prior to July 1, 2020, at a price equal to 101.281% of the principal amount of the 2022 Notes, and (iv) on or after July 1, 2020, at a price equal to 100.000% of the principal amount of the 2022 Notes, in each case, plus accrued and unpaid interest, if any, to the redemption date. In addition, at any time prior to July 1, 2017, the Company at its option may redeem up to 40% of the aggregate principal amount of the 2022 Notes with the proceeds of certain equity offerings at a redemption price of 105.125%, plus accrued and unpaid interest, if any, to the applicable redemption date.

The indenture governing the 2022 Notes contains covenants that, among other things, limit Corporation’s ability and the ability of its restricted subsidiaries to: incur additional indebtedness or issue certain preferred shares; pay dividends on, redeem or repurchase stock or make other distributions in respect of its capital stock; repurchase, prepay or redeem subordinated indebtedness; make investments; create restrictions on the ability of Corporation’s restricted subsidiaries to pay dividends to Corporation or make other intercompany transfers; create liens; transfer or sell assets; consolidate, merge or sell or otherwise dispose of all or substantially all of its assets; enter into certain transactions with affiliates; and designate subsidiaries as unrestricted subsidiaries. Upon the occurrence of certain events constituting a change of control, Corporation is required to make an offer to repurchase all of the 2022 Notes (unless otherwise redeemed) at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any to the repurchase date. If Corporation sells assets under certain circumstances, it must use the proceeds to make an offer to purchase the 2022 Notes at a price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

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Debt and capital lease obligations consisted of the following as of March 31, 2015 and December 31, 2014 (in thousands):

	March 31, 2015			December 31, 2014
Senior unsecured notes due 2022	$	750,000		$	750,000
Senior secured term loan due 2018 (4.00% at March 31, 2015 and December 31, 2014)	1,286,232			1,289,575
Discount on senior secured term loan	(3,068		)	(3,317		)
ABL Facility	235,000			—
Notes due at various dates from 2015 to 2022 with interest rates from 6% to 10%	466			482
Capital lease obligations due at various dates from 2015 to 2018	1,382			1,486
Total	2,270,012			2,038,226
Less current portion	(12,358		)	(12,349		)
Total long-term debt and capital lease obligations	$	2,257,654		$	2,025,877

8. Derivative Instruments and Hedging Activities

The Company manages its exposure to changes in fuel prices and interest rates and, from time to time, uses highly effective derivative instruments to manage well-defined risk exposures. The Company monitors its positions and the credit ratings of its counterparties and does not anticipate non-performance by the counterparties. The Company does not use derivative instruments for speculative purposes.

At March 31, 2015, the Company was party to a series of fuel hedge transactions with a major financial institution under one master agreement. Each of the transactions effectively fixes the cost of diesel fuel at prices ranging from $3.30 to $3.58 per gallon. The Company purchases the diesel fuel at the market rate and periodically settles with its counterparty for the difference between the national average price for the period published by the Department of Energy and the agreed upon fixed price. The transactions fix the price for a total of 2.6 million gallons, which represents approximately 11% of the Company’s total estimated usage during the periods hedged, through December 2016. The Company recorded, as a component of other comprehensive income (loss) before applicable tax impacts, a liability associated with the fair value of the fuel hedge in the amount $1.5 million and $1.4 million, respectively, as of March 31, 2015 and December 31, 2014, respectively. Over the next 12 months, the Company expects to reclassify $0.8 million of deferred loss from accumulated other comprehensive income (loss) as the related fuel hedge transactions mature. Settlement of hedge agreements are included in operating expenses and resulted in net payments to the counterparty of $0.2 million for the three months ended March 31, 2015 and net receipts of $0.2 million for the three months ended March 31, 2014.

In October 2011, the Company entered into interest rate swap agreements which mature on August 31, 2015. The swap agreements are with major financial institutions and effectively convert a total of $400 million in variable rate debt to fixed rate debt with an effective rate of 4.49%. The Company will continue to make interest payments based on the variable rate associated with the debt (based on LIBOR, but not less than 1.0%) and will periodically settle with its counterparties for the difference between the rate paid and the fixed rate. The Company recorded, as a component of other comprehensive income (loss) before applicable tax impacts, a liability associated with the fair value of the interest rate swap in the amount of $1.0 million and $1.5 million as of March 31, 2015 and December 31, 2014, respectively. Over the next 12 months, the Company expects to reclassify $1.0 million of deferred loss from accumulated other comprehensive income (loss) to interest expense as the related interest rate swap transactions mature. Settlement of interest rate swap agreements are included in interest expense and resulted in net payments to the counterparties of $0.5 million and $0.5 million for the three months ended March 31, 2015 and 2014, respectively.

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9. Changes in Accumulated Other Comprehensive Income (Loss) by Component

The following table summarizes the changes in the Company’s accumulated other comprehensive income (loss) (“AOCI”) by component as of March 31, 2015 and December 31, 2014 (in thousands). All amounts are after tax.

	Fuel hedge			Interest rate swap			Unrealized holding gains on available-for-sale securities			Total
Balance as of January 1, 2014	$	420		$	(1,958	)	$	699		$	(839	)
Other comprehensive income (loss) before reclassifications	(1,130		)	(216		)	(491		)	(1,837		)
Amounts reclassified from accumulated other comprehensive income (loss)	(187		)	1,239			(232		)	820
Net current-period other comprehensive income (loss)	(1,317		)	1,023			(723		)	(1,017		)
Balance as of December 31, 2014	(897		)	(935		)	(24		)	(1,856		)
Other comprehensive income (loss) before reclassifications	(182		)	7			(120		)	(295		)
Amounts reclassified from accumulated other comprehensive income (loss)	122			310			—			432
Net current-period other comprehensive income (loss)	(60		)	317			(120		)	137
Balance as of March 31, 2015	$	(957	)	$	(618	)	$	(144	)	$	(1,719	)

The following table shows the line on the statements of operations affected by reclassifications out of AOCI (in thousands):

	Amount reclassified from AOCI
	Three months ended March 31,
Details about AOCI components	2015			2014			Statements of Operations
Gains and losses on cash flow hedges:
Fuel Hedge	$	(196	)	$	181		Operating expenses
Interest rate swap	(496		)	(496		)	Interest expense, net
	(692		)	(315		)	Total before tax
	260			119			Tax benefit (expense)
	$	(432	)	$	(196	)	Net of tax
Unrealized holding gains on available-for-sale securities	$	—		$	606		Realized gains (losses) on investments
	—			606			Total before tax
	—			(228		)	Tax benefit (expense)
	$	—		$	378		Net of tax

10. Equity Based Compensation

Upon completion of the Company’s initial public offering in August of 2013, the then-existing stock compensation plan (“Stock Compensation Plan”) terminated and the Envision Healthcare Holdings, Inc. 2013 Omnibus Incentive Plan (“Omnibus Incentive Plan”) was adopted pursuant to which options and awards with respect to a total of 16,708,289 shares of common stock are available for grant. As of March 31, 2015, a total of 16,439,875 shares remained available for grant under the Omnibus Incentive Plan. Awards under the Omnibus Incentive Plan include both performance and non-performance based awards. As of March 31, 2015, no grants of performance based awards under the Omnibus Incentive Plan had been made. Options are granted with exercise prices equal to the fair value of the Company’s common stock at the date of grant. No participant may be granted in any calendar year awards covering more than 2.5 million shares of common stock or 1.5 million performance awards up to a maximum dollar value of $5.0 million. Non-performance based awards have time-based vesting and performance-based awards vest upon achievement of certain company-wide objectives. All options have 10 year terms.

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Awards previously granted under the Stock Compensation Plan were unaffected by the termination of the Stock Compensation Plan; however no future grants will be made under the Stock Compensation Plan.

A compensation charge of $1.4 million and $1.1 million was recorded for the three months ended March 31, 2015 and 2014, respectively.

11. Commitments and Contingencies

Lease Commitments

The Company leases various facilities and equipment under operating lease agreements. Rental expense incurred under these leases was $12.8 million and $11.3 million for the three months ended March 31, 2015 and 2014, respectively.

The Company also records certain leasehold improvements and vehicles under capital leases. Assets under capital leases are capitalized using inherent interest rates at the inception of each lease. Capital leases are collateralized by the underlying assets.

Services

The Company is subject to the Medicare and Medicaid fraud and abuse laws which prohibit, among other things, any false claims, or any bribe, kickback or rebate in return for the referral of Medicare and Medicaid patients. Violation of these prohibitions may result in civil and criminal penalties and exclusion from participation in the Medicare and Medicaid programs. Management has implemented policies and procedures that management believes will assure that the Company is in substantial compliance with these laws and regulations but there can be no assurance the Company will not be found to have violated certain of these laws and regulations. From time to time, the Company receives requests for information from government agencies pursuant to their regulatory or investigational authority. Such requests can include subpoenas or demand letters for documents to assist the government agencies in audits or investigations. The Company is cooperating with the government agencies conducting these investigations and is providing requested information to the government agencies. Other than the proceedings described below, management believes that the outcome of any of these investigations would not have a material adverse effect on the Company.

Letters of Credit

As of March 31, 2015 and December 31, 2014, the Company had $120.6 million and $112.3 million, respectively, in outstanding letters of credit.

Other Legal Matters

In December 2006, AMR received a subpoena from the U.S. Department of Justice (“DOJ”). The subpoena requested copies of documents for the period from January 2000 through the present. The subpoena required AMR to produce a broad range of documents relating to the operations of certain AMR affiliates in New York. The Company produced documents responsive to the subpoena. The government identified claims for reimbursement that the government believes lack support for the level billed, and invited the Company to respond to the identified areas of concern. The Company reviewed the information provided by the government and provided its response. On May 20, 2011, AMR entered into a settlement agreement with the DOJ and a Corporate Integrity Agreement (“CIA”) with the Office of Inspector General of the Department of Health and Human Services (“OIG”) in connection with this matter. Under the terms of the settlement, AMR paid $2.7 million to the federal government. In connection with the settlement, the Company entered into a CIA with a five-year period beginning May 20, 2011. Pursuant to this CIA, the Company is required to maintain a compliance program, which includes, among other elements, the appointment of a compliance officer and committee, training of employees nationwide, safeguards for its billing operations as they relate to services provided in New York, including specific training for operations and billing personnel providing services in New York, review by an independent review organization and reporting of certain reportable events. The Company entered into the settlement in order to avoid the uncertainties of litigation, and has not admitted any wrongdoing. In May 2013, a subsidiary of the Company entered into an agreement to divest substantially all the assets underlying AMR’s services in New York, although the obligations of the Company’s compliance program will remain in effect following the expected divestiture. The divesture was completed on July 1, 2013.

Four different putative class action lawsuits were filed against AMR and certain subsidiaries in California alleging violations of California wage and hour laws. On April 16, 2008, Laura Bartoni commenced a suit in the Superior Court for the State of California, County of Alameda; on July 8, 2008, Vaughn Banta filed suit in the Superior Court of the State of California, County of Los Angeles; on January 22, 2009, Laura Karapetian filed suit in the Superior Court of the State of California, County of Los

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Angeles; and on March 11, 2010, Melanie Aguilar filed suit in Superior Court of the State of California, County of Los Angeles. The Banta, Aguilar and Karapetian cases have been coordinated in the Superior Court for the State of California, County of Los Angeles, and the Aguilar and Karapetian cases have subsequently been consolidated into a single action. In these cases, the plaintiffs allege principally that the AMR entities failed to pay wages, including overtime wages, in compliance with California law, and failed to provide required meal breaks, rest breaks or pay premium compensation for missed breaks. The plaintiffs are seeking to certify classes on these claims and are seeking lost wages, various penalties, and attorneys’ fees under California law. The Court has certified classes in the consolidated Karapetian/ Aguilar case on claims alleging that AMR has not provided meal periods in compliance with the law as to dispatchers and call takers, that AMR has an unlawful time rounding policy, and that AMR has an unlawful practice of setting rates for those employees; the Court denied certification of the rest period claims of these employees. In the Banta case, the Court denied certification of the meal and rest period claims as to EMTs and paramedics, a decision that is being appealed; the Court indicated that it would certify a class on overtime claims, but plaintiff’s counsel has indicated that they intend to dismiss that claim as AMR’s policy complies with a recent Court of Appeals decision. In the Bartoni case, the Court denied certification on the meal and rest period claims of all unionized employees in Northern California, a decision that is being appealed. While the Court certified a class on the overtime claims, plaintiffs’ counsel stipulated to decertify and dismiss those claims as AMR’s policy complies with a recent Court of Appeals decision. The Company is unable at this time to estimate the amount of potential damages, if any.

Merion Capital, L.P. (“Merion”), a former stockholder of Corporation, filed an action in the Delaware Court of Chancery seeking to exercise its right to appraisal of its holdings in Corporation prior to the merger of Corporation with a wholly-owned subsidiary of the Company on May 25, 2011 (the “Merger”). During the year ended December 31, 2013, the Company expensed $8.4 million of legal settlement costs and $1.9 million of interest. On April 15, 2013, the Company paid $52.1 million in a settlement of Merion’s appraisal action, in which Merion agreed to release its claims against the Company. $13.7 million of this payment is included in cash flows from operations and $38.3 million is included in cash flows from financing activities on the statements of cash flows for the year ended December 31, 2013.

On August 7, 2012, EmCare received a subpoena from the OIG requesting copies of documents for the period from January 1, 2007 through the present that appears to primarily be focused on EmCare’s contracts for services at hospitals that are affiliated with Health Management Associates, Inc. (“HMA”). The Company has been cooperating with the government during its investigation and, as such, continues to gather responsive documents. During the months of December 2013 and January 2014, several lawsuits filed by whistleblowers on behalf of the federal and certain state governments against HMA have been unsealed; the Company is a named defendant in two of these lawsuits. Although the federal government intervened in these lawsuits in connection with certain of the allegations against HMA, the federal government has not, at this time, disclosed whether it will intervene in these matters as they relate to the Company. The Company continues to engage in meaningful dialogue with the relevant government representatives and, at this time, the Company is unable to determine the potential impact, if any, that will result from this investigation.

The Company is involved in other litigation arising in the ordinary course of business. Management believes the outcome of these legal proceedings will not have a material adverse impact on its financial condition, results of operations or liquidity.

12. Related Party Transactions

CD&R Affiliates

Stockholders Agreement

In connection with the Company’s initial public offering in August of 2013, the Company entered into a stockholders agreement (“Stockholders Agreement”) with CD&R Affiliates. Under the Stockholders Agreement, CD&R Affiliates were granted the right to designate nominees for the Company’s board, subject to the maintenance of specified ownership requirements. Following the CD&R Affiliates’ disposition of their remaining shares of the Company’s common stock in a registered secondary offering, on March 11, 2015, the stockholders agreement terminated pursuant to its terms and, as a result, the CD&R Affiliates are no longer entitled to designate directors for nomination as of such date.

Registration Rights Agreement

In connection with the closing of the Merger, the Company entered into a registration rights agreement (“Registration Rights Agreement”) with the CD&R Affiliates, which granted the CD&R Affiliates specified demand and piggyback registration rights with respect to the Company’s common stock. Under the Registration Rights Agreement, if the Company registered common stock under the Securities Act of 1933, as amended (the “Securities Act”), holders of the common stock, including CD&R

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Affiliates, had the right to require the Company to use reasonable best efforts to include in the Company’s registration statement shares of common stock held by them, subject to certain limitations and at the expense of the Company. Upon the CD&R Affiliate’ disposition of the remaining shares of the Company’s common stock beneficially owned by them in a registered secondary offering, on March 11, 2015 the registration rights agreement terminated pursuant to its terms, and, as a result, the CD&R Affiliates are no longer entitled to specified demand and piggyback registration rights as of such date.

Indemnification Agreements

In connection with the closing of the Merger, the Company entered into separate indemnification agreements with CD&R and CD&R Affiliates (the “CD&R Entities”). Under the indemnification agreement with the CD&R Entities, the Company, subject to certain limitations, agreed to indemnify the CD&R Entities and certain of their affiliates against certain liabilities arising out of performance of the Consulting Agreement and certain other claims and liabilities.

Employment agreements with certain of the Company’s executive officers include indemnification provisions whereby the Company agrees to indemnify each of these individuals against claims arising out of events or occurrences related to that individual’s service as the Company’s agent or the agent of any of its subsidiaries to the fullest extent legally permitted.

In connection with the Company’s initial public offering, the Company entered into indemnification agreements with each of its directors. On November 11, 2013, the Company entered into an indemnification agreement with Mark V. Mactas. Under these agreements, the Company agreed to indemnify each of these individuals against claims arising out of events or occurrences related to that individual’s service as the Company’s agent or the agent of any of its subsidiaries to the fullest extent permitted by law.

13. Variable Interest Entities

GAAP requires the assets, liabilities, noncontrolling interests and activities of Variable Interest Entities (“VIE”) to be consolidated if an entity’s interest in the VIE has specific characteristics including: voting rights not proportional to ownership and the right to receive a majority of expected income or absorb a majority of expected losses. In addition, the entity exposed to the majority of the risks and rewards associated with the VIE is deemed its primary beneficiary and must consolidate the entity.

AHAH-Evolution JV

Evolution Health, LLC (“Evolution”), included within the EmCare segment, entered into an agreement in 2014 with Ascension Health to form an entity which would provide home health, hospice, and home infusion therapy pharmacy services to patients (“AHAH-Evolution JV”). AHAH-Evolution JV began providing services to patients during the first quarter of 2015 and meets the definition of a VIE. The Company determined that, although Evolution holds 50% voting control, Evolution is the primary beneficiary and must consolidate this VIE because:

· Evolution provides management services to AHAH-Evolution JV including providing comprehensive management oversight, operational reporting guidelines, recruiting, credentialing, billing, payroll, accounting, and other various administrative services and therefore substantially all of AHAH-Evolution JV’s activities involve Evolution; and

· as payment for management services, Evolution is entitled to receive a variable management fee from AHAH-Evolution.

The following table summarizes the AHAH-Evolution JV assets and liabilities as of March 31, 2015, which are included in the Company’s consolidated financial statements (in thousands):

	March 31,
	2015
Current assets	$	18,427
Current liabilities	9,045

During the three months ended March 31, 2015, cash contributions of $0.1 million were made to AHAH-Evolution JV by each of the parties for working capital requirements.

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UHS-EmCare JV

EmCare entered into an agreement in 2014 with Universal Health Services, Inc. to form an entity which would provide physician services to various healthcare facilities (“UHS-EmCare JV”). UHS-EmCare JV began providing services to healthcare facilities during the second quarter of 2014 and meets the definition of a VIE. The Company determined that, although EmCare holds 50% voting control, EmCare is the primary beneficiary and must consolidate this VIE because:

· EmCare provides management services to UHS-EmCare JV including recruiting, credentialing, scheduling, billing, payroll, accounting and other various administrative services and therefore substantially all of UHS-EmCare JV’s activities involve EmCare; and

· as payment for management services, EmCare is entitled to receive a variable management fee from UHS-EmCare JV.

The following table summarizes the UHS-EmCare JV assets and liabilities as of March 31, 2015 and December 31, 2014, which are included in the Company’s consolidated financial statements (in thousands):

	March 31,		December 31,
	2015		2014
Current assets	$	23,998	$	21,427
Current liabilities	5,960		6,748

During the three months ended March 31, 2015 and 2014, cash contributions of zero and $0.3 million were made to UHS-EmCare JV by each of the parties for working capital requirements.

HCA-EmCare JV

EmCare entered into an agreement in 2011 with an indirect wholly-owned subsidiary of HCA Holdings Inc. to form an entity which would provide physician services to various healthcare facilities (“HCA-EmCare JV”). HCA-EmCare JV began providing services to healthcare facilities during the first quarter of 2012 and meets the definition of a VIE. The Company determined that, although EmCare only holds 50% voting control, EmCare is the primary beneficiary and must consolidate this VIE because:

· EmCare provides management services to HCA-EmCare JV including recruiting, credentialing, scheduling, billing, payroll, accounting and other various administrative services and therefore substantially all of HCA-EmCare JV’s activities involve EmCare; and

· as payment for management services, EmCare is entitled to receive a base management fee from HCA-EmCare JV as well as a bonus management fee.

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The following table summarizes the HCA-EmCare JV assets and liabilities as of March 31, 2015 and December 31, 2014, which are included in the Company’s consolidated financial statements (in thousands):

	March 31,		December 31,
	2015		2014
Current assets	$	141,008	$	155,041
Current liabilities	46,993		31,163

During the three months ended March 31, 2015 and 2014, there were no cash contributions made to HCA-EmCare JV by each of the parties for working capital requirements.

14. Segment Information

The Company is organized around two separately managed business units: facility-based and post-acute care physician services and healthcare transportation services, which have been identified as operating segments. The facility-based and post-acute care physician services reportable segment provides physician services to hospitals primarily for emergency department, anesthesiology, hospitalist/inpatient, radiology, tele-radiology and surgery services. It also offers physician-led care management solutions outside the hospital. The healthcare transportation services reportable segment focuses on providing a full range of medical transportation services from basic patient transit to the most advanced emergency care and pre-hospital assistance. The Chief Executive Officer has been identified as the chief operating decision maker (the “CODM”) as he assesses the performance of the business units and decides how to allocate resources to the business units.

Net income (loss) before equity in earnings of unconsolidated subsidiary, income tax benefit (expense), loss on early debt extinguishment, other income (expense), net, realized gains (losses) on investments, interest expense, net, equity-based compensation expense, transaction costs related to acquisition activity, related party management fees, restructuring charges, severance and related costs, adjustment to net (income) loss attributable to noncontrolling interest due to deferred taxes, and depreciation and amortization expense (“Adjusted EBITDA”) is the measure of profit and loss that the CODM uses to assess performance and make decisions. Adjusted EBITDA is not considered a measure of financial performance under GAAP and the items excluded from Adjusted EBITDA are significant components in understanding and assessing the Company’s financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to such GAAP measures as net income, cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in the Company’s financial statements as an indicator of financial performance. Since Adjusted EBITDA is not a measure determined to be in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Pre-tax income from continuing operations represents net revenue less direct operating expenses incurred within the operating segments. The accounting policies for reported segments are the same as for the Company as a whole (see Note 2).

During the fourth quarter of 2014, the Company included within the definition of Adjusted EBITDA transaction costs related to acquisition activity. Adjusted EBITDA for the three months ended March 31, 2014 has been presented to conform to the current period presentation.

The Company’s operating segment results were as follows (in thousands):

	Three months ended March 31,
	2015		2014
Facility-Based Physician Services
Net revenue	$	825,108	$	644,566
Income from operations	52,175		51,235
Adjusted EBITDA	77,095		71,682

Healthcare Transportation Services
Net revenue	$	419,394	$	369,645
Income from operations	31,088		17,083
Adjusted EBITDA	51,771		39,098

Segment Totals
Net revenue	$	1,244,502	$	1,014,211
Income from operations	83,263		68,318
Adjusted EBITDA	128,866		110,780

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A reconciliation of net income (loss) to Adjusted EBITDA (in thousands):

	Three months ended March 31,
	2015			2014
Net income (loss)	$	33,930		$	21,525
Add-back of non-operating expense (income):
Interest expense, net	26,687			30,049
Income tax expense (benefit)	22,516			16,675
Realized losses (gains) on investments	—			(606		)
Interest income from restricted assets	(130		)	(86		)
Equity in earnings of unconsolidated subsidiary	(72		)	(47		)
Other expense (income), net	332			808
Income from operations — segment totals	83,263			68,318
Add-back of operating expense (income):
Depreciation and amortization expense	39,881			36,432
Restructuring charges	—			809
Severance and related costs	1,694			—
Net (income) loss attributable to noncontrolling interest	(555		)	3,300
Interest income from restricted assets	130			86
Equity-based compensation expense	1,353			1,062
Transaction costs	3,100			773
Adjusted EBITDA	$	128,866		$	110,780

15. Consolidating Financial Information

Pursuant to the indenture governing the 2022 Notes, so long as any of the 2022 Notes are outstanding, the Company is required to provide condensed consolidating financial information with a separate column for (i) the Company and its subsidiaries (other than Corporation and its subsidiaries) on a combined basis, (ii) Corporation and its subsidiaries, (iii) consolidating adjustments on a combined basis, and (iv) the total consolidated amount. The consolidating adjustments column represents the elimination of any intercompany activity between EVHC (excluding Corporation and its subsidiaries) and Corporation.

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Consolidating Balance Sheet

As of March 31, 2015

(in thousands, unaudited)

	EVHC (excluding Corporation)			Corporation and Subsidiaries			Consolidating Adjustments			Total
Assets
Current assets:
Cash and cash equivalents	$	5		$	92,870		$	—		$	92,875
Insurance collateral	—			37,521			—			37,521
Trade and other accounts receivable, net	—			1,098,573			—			1,098,573
Parts and supplies inventory	—			24,805			—			24,805
Prepaids and other current assets	5,019			36,119			(5,019		)	36,119
Total current assets	5,024			1,289,888			(5,019		)	1,289,893
Property, plant, and equipment, net	—			214,350			—			214,350
Intangible assets, net	—			680,614			—			680,614
Long-term deferred tax assets	145			—			(145		)	—
Insurance collateral	—			10,535			—			10,535
Goodwill	—			2,869,408			—			2,869,408
Other long-term assets	—			82,119			—			82,119
Investment in wholly owned subsidiary	1,805,764			—			(1,805,764		)	—
Total assets	$	1,810,933		$	5,146,914		$	(1,810,928	)	$	5,146,919
Liabilities and Equity
Current liabilities:
Accounts payable	$	998		$	55,826		$	—		$	56,824
Accrued liabilities	—			481,586			(3,650		)	477,936
Current deferred tax liabilities	—			106,259			(1,369		)	104,890
Current portion of long-term debt and capital lease obligations	—			12,358			—			12,358
Total current liabilities	998			656,029			(5,019		)	652,008
Long-term debt and capital lease obligations	—			2,257,654			—			2,257,654
Long-term deferred tax liabilities	—			161,596			(145		)	161,451
Insurance reserves	—			220,367			—			220,367
Other long-term liabilities	—			22,616			—			22,616
Total liabilities	998			3,318,262			(5,164		)	3,314,096
Equity:
Common stock	1,846			—			—			1,846
Preferred stock	—			—			—			—
Additional paid-in capital	1,632,584			1,559,864			(1,559,864		)	1,632,584
Retained earnings	177,224			247,619			(247,619		)	177,224
Accumulated other comprehensive loss	(1,719		)	(1,719		)	1,719			(1,719		)
Total Envision Healthcare Holdings, Inc. equity	1,809,935			1,805,764			(1,805,764		)	1,809,935
Noncontrolling interest	—			22,888			—			22,888
Total equity	1,809,935			1,828,652			(1,805,764		)	1,832,823
Total liabilities and equity	$	1,810,933		$	5,146,914		$	(1,810,928	)	$	5,146,919

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Consolidating Balance Sheet

As of December 31, 2014

(in thousands)

	EVHC (excluding Corporation)			Corporation and Subsidiaries			Consolidating Adjustments			Total
Assets
Current assets:
Cash and cash equivalents	$	5		$	318,890		$	—		$	318,895
Insurance collateral	—			32,828			—			32,828
Trade and other accounts receivable, net	—			950,115			—			950,115
Parts and supplies inventory	—			24,484			—			24,484
Prepaids and other current assets	5,019			36,917			(5,019		)	36,917
Total current assets	5,024			1,363,234			(5,019		)	1,363,239
Property, plant, and equipment, net	—			211,276			—			211,276
Intangible assets, net	—			524,482			—			524,482
Long-term deferred tax assets	145			—			(145		)	—
Insurance collateral	—			10,568			—			10,568
Goodwill	—			2,538,633			—			2,538,633
Other long-term assets	—			55,555			—			55,555
Investment in wholly owned subsidiary	1,756,407			—			(1,756,407		)	—
Total assets	$	1,761,576		$	4,703,748		$	(1,761,571	)	$	4,703,753
Liabilities and Equity
Current liabilities:
Accounts payable	$	999		$	46,585		$	—		$	47,584
Accrued liabilities	—			416,307			(3,650		)	412,657
Current deferred tax liabilities	—			105,647			(1,369		)	104,278
Current portion of long-term debt and capital lease obligations	—			12,349			—			12,349
Total current liabilities	999			580,888			(5,019		)	576,868
Long-term debt and capital lease obligations	—			2,025,877			—			2,025,877
Long-term deferred tax liabilities	—			131,108			(145		)	130,963
Insurance reserves	—			180,639			—			180,639
Other long-term liabilities	—			20,365			—			20,365
Total liabilities	999			2,938,877			(5,164		)	2,934,712
Equity:
Common stock	1,837			—			—			1,837
Preferred stock	—			—			—			—
Additional paid-in capital	1,616,747			1,544,222			(1,544,222		)	1,616,747
Retained earnings	143,849			214,041			(214,041		)	143,849
Accumulated other comprehensive loss	(1,856		)	(1,856		)	1,856			(1,856		)
Total Envision Healthcare Holdings, Inc. equity	1,760,577			1,756,407			(1,756,407		)	1,760,577
Noncontrolling interest	—			8,464			—			8,464
Total equity	1,760,577			1,764,871			(1,756,407		)	1,769,041
Total liabilities and equity	$	1,761,576		$	4,703,748		$	(1,761,571	)	$	4,703,753

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Condensed Consolidating Statement of Operations

(in thousands, unaudited)

	Three months ended March 31, 2015
	EVHC (excluding Corporation)			Corporation and Subsidiaries			Consolidating Adjustments			Total
Net revenue	$	—		$	1,244,502		$	—		$	1,244,502
Compensation and benefits	—			907,657			—			907,657
Operating expenses	—			151,726			—			151,726
Insurance expense	—			35,526			—			35,526
Selling, general and administrative expenses	—			26,449			—			26,449
Depreciation and amortization expense	—			39,881			—			39,881
Restructuring charges	—			—			—			—
Income from operations	—			83,263			—			83,263
Interest income from restricted assets	—			130			—			130
Interest expense, net	—			(26,687		)	—			(26,687		)
Realized gains (losses) on investments	—			—			—			—
Other income (expense), net	(332		)	—			—			(332		)
Income (loss) before taxes and equity in earnings of unconsolidated subsidiary	(332		)	56,706			—			56,374
Income tax benefit (expense)	129			(22,645		)	—			(22,516		)
Income (loss) before equity in net income (loss) of subsidiary and equity in earnings of unconsolidated subsidiary	(203		)	34,061			—			33,858
Equity in net income (loss) of subsidiary	33,578			—			(33,578		)	—
Equity in earnings of unconsolidated subsidiary	—			72			—			72
Net income (loss)	33,375			34,133			(33,578		)	33,930
Less: Net (income) loss attributable to noncontrolling interest	—			(555		)	—			(555		)
Net income (loss) attributable to Envision Healthcare Holdings, Inc.	$	33,375		$	33,578		$	(33,578	)	$	33,375

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Condensed Consolidating Statement of Operations

(in thousands, unaudited)

	Three months ended March 31, 2014
	EVHC (excluding Corporation)			Corporation and Subsidiaries			Consolidating Adjustments			Total
Net revenue	$	—		$	1,014,211		$	—		$	1,014,211
Compensation and benefits	—			743,661			—			743,661
Operating expenses	—			114,635			—			114,635
Insurance expense	—			30,981			—			30,981
Selling, general and administrative expenses	—			19,375			—			19,375
Depreciation and amortization expense	—			36,432			—			36,432
Restructuring charges	—			809			—			809
Income from operations	—			68,318			—			68,318
Interest income from restricted assets	—			86			—			86
Interest expense, net	—			(30,049		)	—			(30,049		)
Realized gains (losses) on investments	—			606			—			606
Other income (expense), net	(1,142		)	334			—			(808		)
Income (loss) before taxes and equity in earnings of unconsolidated subsidiary	(1,142		)	39,295			—			38,153
Income tax benefit (expense)	380			(17,055		)	—			(16,675		)
Income (loss) before equity in net income (loss) of subsidiary and equity in earnings of unconsolidated subsidiary	(762		)	22,240			—			21,478
Equity in net income (loss) of subsidiary	25,587			—			(25,587		)	—
Equity in earnings of unconsolidated subsidiary	—			47			—			47
Net income (loss)	24,825			22,287			(25,587		)	21,525
Less: Net (income) loss attributable to noncontrolling interest	—			3,300			—			3,300
Net income (loss) attributable to Envision Healthcare Holdings, Inc.	$	24,825		$	25,587		$	(25,587	)	$	24,825

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Condensed Consolidating Statement of Cash Flows

(in thousands, unaudited)

	Three months ended March 31, 2015
	EVHC (excluding Corporation)			Corporation and Subsidiaries			Total
Cash Flows from Operating Activities
Net cash provided by (used in) operating activities	$	(204	)	$	45,519		$	45,315
Cash Flows from Investing Activities
Purchases of available-for-sale securities	—			(472		)	(472		)
Sales and maturities of available-for-sale securities	—			200			200
Purchase of property, plant and equipment	—			(13,507		)	(13,507		)
Proceeds from sale of property, plant and equipment	—			44			44
Acquisition of businesses, net of cash received	—			(498,283		)	(498,283		)
Net change in insurance collateral	—			(4,508		)	(4,508		)
Other investing activities	—			(912		)	(912		)
Net cash provided by (used in) investing activities	—			(517,438		)	(517,438		)
Cash Flows from Financing Activities
Borrowings under the ABL Facility	—			285,000			285,000
Repayments of the Term Loan	—			(3,343		)	(3,343		)
Repayments of the ABL Facility	—			(50,000		)	(50,000		)
Debt issuance costs	—			(27		)	(27		)
Proceeds from stock options exercised	—			3,548			3,548
Excess tax benefits from equity-based compensation	—			10,945			10,945
Proceeds from noncontrolling interest	—			100			100
Other financing activities	—			(120		)	(120		)
Net intercompany borrowings (payments)	204			(204		)	—
Net cash provided by (used in) financing activities	204			245,899			246,103
Change in cash and cash equivalents	—			(226,020		)	(226,020		)
Cash and cash equivalents, beginning of period	5			318,890			318,895
Cash and cash equivalents, end of period	$	5		$	92,870		$	92,875

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Condensed Consolidating Statement of Cash Flows

(in thousands, unaudited)

	Three months ended March 31, 2014
	EVHC (excluding Corporation)		Corporation and Subsidiaries			Total
Cash Flows from Operating Activities
Net cash provided by (used in) operating activities	$	—	$	30,220		$	30,220
Cash Flows from Investing Activities
Purchases of available-for-sale securities	—		(2,458		)	(2,458		)
Sales and maturities of available-for-sale securities	—		8,160			8,160
Purchase of property, plant and equipment	—		(10,714		)	(10,714		)
Proceeds from sale of property, plant and equipment	—		2,156			2,156
Acquisition of businesses, net of cash received	—		(35,791		)	(35,791		)
Net change in insurance collateral	—		1,200			1,200
Other investing activities	—		(2,526		)	(2,526		)
Net cash provided by (used in) investing activities	—		(39,973		)	(39,973		)
Cash Flows from Financing Activities
Repayments of the Term Loan	—		(3,343		)	(3,343		)
Excess tax benefits from equity-based compensation	—		14,790			14,790
Shares repurchased for tax withholdings	—		(14,430		)	(14,430		)
Contributions from noncontrolling interest, net	—		250			250
Other financing activities	—		(1,230		)	(1,230		)
Net cash provided by (used in) financing activities	—		(3,963		)	(3,963		)
Change in cash and cash equivalents	—		(13,716		)	(13,716		)
Cash and cash equivalents, beginning of period	81,722		122,990			204,712
Cash and cash equivalents, end of period	$	81,722	$	109,274		$	190,996

16. Subsequent Events

In April 2015, AMR entered into a definitive agreement to acquire ambulance operations located in the northeastern U.S.

Beginning on May 1, 2015, the Company’s employees may participate in the Envision Healthcare Holdings, Inc. 2015 Employee Stock Purchase Plan (“the ESPP”), pursuant to which the Company is authorized to issue up to 1.2 million shares of common stock. Substantially all full-time employees who have been employed by the Company for at least 60 days prior to the offering period are eligible to participate in the ESPP. Employee stock purchases are made through payroll deductions.

Beginning on May 1, 2015, certain individuals that provide clinical services for the Company and its subsidiaries or professional association affiliates may participate in the Envision Healthcare Holdings, Inc. 2015 Provider Stock Purchase Plan (“the PSPP”), pursuant to which the Company is authorized to issue up to 1.2 million shares of common stock. All active service providers that customarily work more than 120 hours per month and have provided at least 240 hours of service prior to the relevant offering period are eligible to participate in the PSPP. Provider stock purchases are made through paycheck deductions.

Under the terms of both the ESPP and PSPP, employees and service providers may not deduct an amount which would permit such employee or service provider to purchase the Company’s capital stock under all of the Company’s stock purchase plans at a rate which would exceed $25,000 in fair value of capital stock in any offering period. The purchase price of the stock is 90% of the closing price of the common stock on the last trading day of the offering period. The issuance of shares of the Company’s common stock under the ESPP and the PSPP is subject to stockholder approval at the Company’s 2015 Annual Meeting.

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

Forward-Looking Statements and Factors That May Affect Results

Certain statements and information herein may be deemed to be “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Any forward-looking statements herein are made as of the date this Quarterly Report on Form 10-Q is filed with the SEC, and we undertake no duty to update or revise any such statements. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in this Quarterly Report on Form 10-Q and in our other filings with the SEC from time to time, including the risks described in Item 1A “Risk Factors” of Part II of this Form 10-Q.

Among the factors that could cause future results to differ materially from those provided in this Quarterly Report on Form 10-Q are: decreases in our revenue and profit margin under our fee-for-service contracts due to changes in volume, payor mix and third party reimbursement rates, including from political discord in the federal budgeting process; the loss of existing contracts; failure to accurately assess costs under new contracts; difficulties in our ability to recruit and retain qualified physicians and other healthcare professionals, and enforce our non-compete agreements with our physicians; failure to implement some or all of our business strategies, including our efforts to grow our Evolution Health business and cross-sell our services; lawsuits for which we are not fully reserved; the adequacy of our insurance coverage and insurance reserves; our ability to successfully integrate strategic acquisitions; the high level of competition in the markets we serve; the cost of capital expenditures to maintain and upgrade our vehicle fleet and medical equipment; the loss of one or more members of our senior management team; our ability to maintain or implement complex information systems; disruptions in disaster recovery systems, management continuity planning or information systems; our ability to adequately protect our intellectual property and other proprietary rights or to defend against intellectual property infringement claims; challenges by tax authorities on our treatment of certain physicians as independent contractors; the impact of labor union representation; the impact of fluctuations in results due to our national contract with the Federal Emergency Management Agency (“FEMA”); potential penalties or changes to our operations, including our ability to collect accounts receivable, if we fail to comply with extensive and complex government regulation of our industry; the impact of changes in the healthcare industry, including changes due to healthcare reform; our ability to timely enroll our providers in the Medicare program; our ability to restructure our operations to comply with future changes in government regulation; the outcome of government investigations of certain of our business practices; our ability to comply with the terms of our settlement agreements with the government; our ability to generate cash flow to service our substantial debt obligations; and risks related to other factors discussed in this Quarterly Report on Form 10-Q.

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

Healthcare Reform

As currently enacted the Patient Protection and Affordable Care Act (the “PPACA”) changes how health care services are delivered and reimbursed, and increases access to health insurance benefits to the uninsured and underinsured population in the United States. On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of the individual mandate provisions of the PPACA, but struck down the provisions that would have allowed the Department of Health and Human Services (“HHS”) to penalize states that do not implement Medicaid expansion provisions through the loss of existing federal Medicaid funding.

Most of the provisions of the PPACA that seek to decrease the number of uninsured became effective January 1, 2014. Based on the government’s February 2014 projection, by 2022, the PPACA will expand coverage to 25 million additional individuals. This increased coverage will occur through a combination of public program expansion and private sector health insurance and other reforms. The employer mandate, which requires firms with 100 or more full-time employees to offer health insurance or pay fines, became effective on January 1, 2015. For employers with 50 to 99 employees, this requirement has been further delayed until January 1, 2016.

A number of states have opted out of the Medicaid expansion, but these states could choose to implement the expansion at a later date. It is unclear how many states will ultimately decline to implement the Medicaid expansion provisions of the law. At this point, we cannot quantify or predict with any certainty the likely impact of the PPACA on our business model, financial condition or results of operations.

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Company Overview

We are a leading provider of physician-led, outsourced medical services in the United States with more than 35,000 employees and affiliated clinicians. We market our services on a stand-alone, multi-service and integrated basis, primarily under our EmCare and AMR brands. EmCare is a leading provider of integrated facility-based physician services, including emergency, anesthesiology, hospitalist/inpatient care, radiology, tele-radiology and surgery. EmCare also provides comprehensive care to patients across various setting, many of whom suffer from advanced illnesses and chronic diseases. AMR is a leading provider and manager of community based healthcare transportation services, including emergency “911”, non-emergency, managed transportation, fixed-wing ambulance and disaster response.

Key Factors and Measures We Use to Evaluate Our Business

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

We evaluate our revenue net of provisions for contractual payor discounts and provisions for uncompensated care. Medicaid, Medicare and certain other payors receive discounts from our standard charges, which we refer to as contractual discounts. In addition, individuals we treat and transport may be personally responsible for a deductible or co-pay under their third party payor coverage, and most of our contracts require us to treat and transport patients who have no insurance or other third party payor coverage. Due to the uncertainty regarding collectability of charges associated with services we provide to these patients, which we refer to as uncompensated care, our net revenue recognition is based on expected cash collections. Our net revenue represents gross billings after provisions for contractual discounts and estimated uncompensated care. Provisions for contractual discounts and uncompensated care have increased historically primarily as a result of increases in gross billing rates without corresponding increases in payor reimbursement.

The table below summarizes our approximate payor mix as a percentage of both net revenue and total transports and patient encounters for the three months ended March 31, 2015 and 2014. In determining the net revenue payor mix, we use cash collections in the period as an approximation of net revenue recorded. With the expansion of the Medicaid program in certain states, we would expect cash collections related to the Medicaid payor class to continue to increase over time as those collections are received. During the second quarter of 2014, the Company determined that Medicare and Medicaid managed care programs would be better categorized in the Medicare and Medicaid payor class and has reclassified those encounters in the presentation below and conformed prior periods to current period presentation.

	Percentage of Cash Collections (Net Revenue)				Percentage of Total Volume
	Three months ended March 31,				Three months ended March 31,
	2015		2014		2015		2014
Medicare	24.9	%	24.8	%	31.8	%	31.9	%
Medicaid	8.8		8.3		24.3		23.4
Commercial insurance and managed care (excluding Medicare and Medicaid managed care)	43.5		46.3		29.2		27.4
Self-pay	2.6		3.4		14.7		17.3
Fees/other	8.9		7.1		—		—
Subsidies	11.3		10.1		—		—
Total	100.0	%	100.0	%	100.0	%	100.0	%

As illustrated above, Commercial insurance and managed care (excluding Medicare and Medicaid managed care) has consistently represented our largest payor group based on net revenue. Separately, given the emergency nature of many of our services, self-pay (primarily uninsured patients) has represented approximately 14% to 17% of our total patient volume, but is only 2% to 3% of our total cash collections. The decrease in self-pay as a percentage of total revenue over the past three years has been due to both additional service lines with lower self-pay, including our post-acute care services, and Medicaid expansion evidenced by an approximate 1.3% drop in self-pay volume to 14.7% for the first three months of 2015 as compared to a self-pay mix of approximately 16.0% in the fourth quarter of 2014.

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EmCare

Of EmCare’s net revenue for the three months ended March 31, 2015, approximately 76% was derived from our hospital contracts for emergency department staffing, 7% from contracts related to anesthesiology services, 9% from our hospitalist/inpatient services, 5% from our post-acute care services, 1% from our radiology/tele-radiology services, 1% from our surgery services, and 1% from other hospital management services. Approximately 84% of EmCare’s net revenue was generated from billings to third party payors and patients for patient encounters and approximately 16% was generated from billings to hospitals and affiliated physician groups for professional services. EmCare’s key net revenue measures are:

· Patient encounters. We utilize patient encounters to evaluate net revenue and as the basis by which we measure certain costs of the business. We segregate patient encounters into four main categories—ED visits, hospitalist encounters, radiology reads, and anesthesiology cases—due to the differences in reimbursement rates for and associated costs of providing the various services. As a result of these differences, in certain analyses we weight our patient encounter numbers according to category in an effort to better measure net revenue and costs. In calculating “weighted patient encounters”, each radiology read and anesthesiology case is not counted as a full patient encounter as we apply a discount factor to reflect differences in reimbursement rates for and associated costs of providing such services.

· Number of contracts. This reflects the number of contractual relationships we have for outsourced ED staffing, anesthesiology, hospitalist/inpatient, radiology, tele-radiology, surgery and other hospital management services. We analyze the change in our number of contracts from period to period based on “net new contracts,” which is the difference between total new contracts and contracts that have terminated.

· Revenue per patient encounter. This reflects the expected net revenue for each patient encounter based on gross billings less all estimated provisions for contractual discounts and uncompensated care. Net revenue per patient encounter also includes net revenue from billings to third party payors and hospitals.

The change from period to period in the number of patient encounters under our same store contracts is influenced by general community conditions as well as hospital-specific elements, many of which are beyond our direct control. The general community conditions include: (i) the timing, location and severity of influenza, allergens and other annually recurring viruses, and (ii) severe weather that affects a region’s health status and/or infrastructure. Hospital-specific elements include the timing and extent of facility renovations, hospital staffing issues and regulations that affect patient flow through the hospital.

The costs incurred in our EmCare business segment consist primarily of compensation and benefits for physicians and other professional providers, professional liability costs, and contract and other support costs. EmCare’s key cost measures include:

· Provider compensation per hour of coverage. Provider compensation per hour of coverage includes all compensation and benefit costs for all professional providers, including physicians, physician assistants and nurse practitioners, during each patient encounter. Providers include all full-time, part-time and independently contracted providers. Analyzing provider compensation per hour of coverage enables us to monitor our most significant cost in performing services under our contracts.

· Professional liability costs. These costs include provisions for estimated losses for actual claims, and claims likely to be incurred in the period, based on our past loss experience and actuarial analysis provided by a third party, as well as actual direct costs, including investigation and defense costs, claims payments, and other costs related to provider professional liability.

EmCare’s business is not as capital intensive as AMR’s and EmCare’s depreciation expense relates primarily to charges for usage of computer hardware and software, and other technologies. Amortization expense relates primarily to intangibles recorded for customer relationships.

AMR

Approximately 81% of AMR’s net revenue for the three months ended March 31, 2015 was transport revenue derived from the treatment and transportation of patients, including fixed-wing air ambulance services, based on billings to third party payors, healthcare facilities and patients. The balance of AMR’s net revenue is derived from direct billings to communities and government agencies, including FEMA, for the provision of training, dispatch center and other services. AMR’s key measures for transport net revenue include:

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· Transports. We utilize transport data, including the number and types of transports, to evaluate net revenue and as the basis by which we measure certain costs of the business. Excluded from our transport data are transports which are outsourced /brokered through our managed transportation business. We segregate transports into two main categories—ambulance transports (including emergency, as well as non-emergency, critical care and other inter-facility transports) and wheelchair transports—due to the differences in reimbursement and the associated costs of providing ambulance and wheelchair transports. As a result of these differences, in certain analyses we weight our transport numbers according to category in an effort to better measure net revenue and costs. In calculating “weighted transports”, each wheelchair transport is not counted as a full transport, as we apply a discount factor to reflect differences in reimbursement rates for and associated costs of providing such services.

· Net revenue per transport. Net revenue per transport reflects the expected net revenue for each transport based on gross billings less provisions for contractual discounts and estimated uncompensated care. In order to better understand the trends across service lines and in our transport rates, we analyze our net revenue per transport based on weighted transports to reflect the differences in our transportation mix.

The change from period to period in the number of transports and net revenue per transport is influenced by changes in transports in existing markets from both new and existing facilities we serve for non-emergency transports, and the effects of general community conditions for emergency transports. The general community conditions may include (i) the timing, location and severity of influenza, allergens and other annually recurring viruses, (ii) severe weather that affects a region’s health status and/or infrastructure and (iii) community-specific demographic changes.

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

· Unit hours and cost per unit hour. Our measurement of a unit hour is based on a fully staffed ambulance or wheelchair van for one operating hour. We use unit hours and cost per unit hour to measure compensation-related costs and the efficiency of our deployed resources. We monitor unit hours and cost per unit hour on a combined basis, as well as on a segregated basis between ambulance and wheelchair transports.

· Operating costs per transport. Operating costs per transport is comprised of certain direct operating costs, including vehicle operating costs, medical supplies and other transport-related costs, but excluding compensation-related costs. Monitoring operating costs per transport allows us to better evaluate cost trends and operating practices of our regional and local management teams.

· Accident and insurance claims. We monitor the number and magnitude of all accident and insurance claims in order to measure the effectiveness of our risk management programs. Depending on the type of claim (workers compensation, auto, general or professional liability), we monitor our performance by utilizing various bases of measurement, such as net revenue, miles driven, number of vehicles operated, compensation dollars, and number of transports.

We have focused our risk mitigation efforts on employee training for proper patient handling techniques, development of clinical and medical equipment protocols, driving safety, implementation of equipment to reduce lifting injuries and other risk mitigation processes.

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

Factors Affecting Operating Results

Rate Changes by Government Sponsored Programs

In February 2002, Centers for Medicare & Medicaid Services (“CMS”) issued the Medicare Ambulance Fee Schedule Final Rule (“Ambulance Fee Schedule”) that revised Medicare policy on the coverage of ambulance transport services, effective April 1, 2002. The Ambulance Fee Schedule was the result of a mandate under the Balanced Budget Act of 1997 (the “BBA”) to establish a national fee schedule for payment of ambulance transport services that would control increases in expenditures under Part B of the Medicare program, establish definitions for ambulance transport services that link payments to the type of services furnished, consider appropriate regional and operational differences and consider adjustments to account for inflation, among other provisions. The Ambulance Fee Schedule provided for a five-year phase-in of a national fee schedule, beginning April 1, 2002. We estimate that the impact of the ambulance service rate decreases under the national fee schedule mandated under the BBA, as modified by the phase-in

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provisions of the Medicare Modernization Act, resulted in a decrease in AMR’s net revenue of approximately $18 million in 2010, an increase of less than $1 million in 2011, and an increase of $6 million in 2012. In 2013, we expected an increase of approximately $3 million from the provisions outlined above, but the sequestration cuts implemented on April 1, 2013 offset the increase resulting in a reduction of approximately $2 million for the full year 2013. While a reduced fee schedule was scheduled to go into effect in 2014, Congress extended updates preventing any reductions until April 1, 2015. On April 16, 2015, the Medicare Access and CHIP Reauthorization Act of 2015 (the “MACRA”) was enacted, which further extends any reductions to the Ambulance Fee Schedule through calendar year 2017.

Although we have been able to substantially mitigate the phased-in reductions of the BBA through additional fee and subsidy increases, we may not be able to continue to do so.

Prior to April 2015, Medicare law has required CMS to adjust the Physician Fee Schedule (“PFS”) payment rates annually based on a formula which included an application of the Sustainable Growth Rate (the “SGR”) that was adopted in the BBA. This formula yielded negative updates every year beginning in 2002, although CMS was able to take administrative steps to avoid a reduction in 2003 and Congress took a series of legislative actions to prevent reductions each year from 2004 through 2013. Legislative action by Congress in December 2013 resulted in a delay of the Physician Fee Schedule SGR cuts until April 1, 2014. In the first quarter of 2014, Congress passed a bill to avoid reductions in Medicare payments to physicians due to the Physician Fee Schedule SGR until April 1, 2015. The recent enactment of the MACRA replaces the SGR formula with a new payment model for calculating annual updates under the PFS. The MACRA payment model provides that PFS payments will remain at their current levels through June 30, 2015, will increase by 0.5% from July 1, 2015 through December 31, 2015, and will increase 0.5% annually from January 1, 2016 through 2019. Rates will remain at their 2019 level from 2020 through 2025, as Medicare transitions toward a payment model in which physicians are paid based on a merit-based incentive system, or based on their participation in alternative payment model programs.

The MACRA also extends the Ambulance Fee Schedule add-on payments through December 31, 2017.

On August 2, 2011, the Budget Control Act of 2011 (Public Law 112-25) (the “Budget Control Act”) was enacted. Under the Budget Control Act, a Joint Select Committee on Deficit Reduction (the “Joint Committee”) was established to develop recommendations to reduce the deficit, over 10 years, by $1.2 trillion to $1.5 trillion, and was required to report its recommendations to Congress by November 23, 2011. Under the Budget Control Act, Congress was then required to consider the Joint Committee’s recommendations by December 23, 2011. If the Joint Committee failed to refer agreed upon legislation to Congress or did not meet the required savings threshold set out in the Budget Control Act, a sequestration process would be put into effect, government-wide, to reduce Federal outlays by the proposed amount. Because the Joint Committee failed to report the requisite recommendations for deficit reduction, the sequestration process was set to automatically start, impacting Medicare and certain other government programs beginning in January 2013. Congress passed the American Taxpayer Relief Act, signed into law on January 2, 2013, delaying the start of sequestration until March 1, 2013. In order to provide its contractors and providers sufficient lead time to implement the cuts in Medicare, CMS delayed implementation of Medicare cuts until April 1, 2013. As there has been no further Congressional action with respect to the sequestration, reimbursements were cut by 2% for Medicare providers, including physicians and ambulance providers, starting April 1, 2013, and cuts are scheduled annually through 2021. A subsequent round of budget sequestration cuts took effect in January 2014 further reducing Medicare provider reimbursements by another 2% for 2014. The Continuing Appropriations Resolution 2014 (Public Law 113-67), enacted December 26, 2013, extends the annual budget sequestration cuts to Medicare provider payments for an additional two years through 2023.

On November 1, 2012, CMS released the final regulation which implements Section 1202 of the Patient and Affordable Care Act. This section increases Medicaid payments for specified primary care services in both the fee for service and managed care settings to Medicare levels for certain primary care physicians in 2013 and 2014. This resulted in an increase to our net revenue of approximately $7.3 million for the three months ended March 31, 2014. Federal funding for the enhanced Medicaid payments expired on December 31, 2014.

Changes in Net New Contracts

Our operating results are affected directly by the number of net new contracts we have in a period, reflecting the effects of both new contracts and contract expirations. We regularly bid for new contracts, frequently in a formal competitive bidding process that often requires written responses to a request for proposal (“RFP”), and, in any fiscal period, certain of our contracts will expire. We may elect not to seek extension or renewal of a contract if we determine that we cannot do so on favorable terms. With respect to expiring contracts we would like to renew, we may be required to seek renewal through an RFP, and we may not be successful in retaining any such contracts, or retaining them on terms that are as favorable as present terms.

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The following tables set forth a reconciliation of Adjusted EBITDA to net income (loss):

Consolidated Results of Operations and as a Percentage of Net Revenue

(dollars in thousands, unaudited)

	Three months ended March 31,
	2015			% of net revenue		2014			% of net revenue
Net revenue	$	1,244,502		100.0	%	$	1,014,211		100.0	%
Compensation and benefits	907,657			72.9		743,661			73.3
Operating expenses	151,726			12.2		114,635			11.3
Insurance expense	35,526			2.9		30,981			3.1
Selling, general and administrative expenses	26,449			2.1		19,375			1.9
Equity-based compensation expense	(1,353		)	(0.1	)	(1,062		)	(0.1	)
Transaction costs	(3,100		)	(0.3	)	(773		)	(0.1	)
Severance and related costs	(1,694		)	(0.1	)	—			—
Interest income from restricted assets	(130		)	(0.0	)	(86		)	(0.0	)
Net income (loss) attributable to noncontrolling interest	555			0.0		(3,300		)	(0.3	)
Adjusted EBITDA	128,866			10.4		110,780			10.9
Equity-based compensation expense	(1,353		)	(0.1	)	(1,062		)	(0.1	)
Transaction costs	(3,100		)	(0.3	)	(773		)	(0.1	)
Severance and related costs	(1,694		)	(0.1	)	—			—
Depreciation and amortization expense	(39,881		)	(3.2	)	(36,432		)	(3.6	)
Restructuring charges	—			—		(809		)	(0.0	)
Interest expense, net	(26,687		)	(2.1	)	(30,049		)	(3.0	)
Realized gains (losses) on investments	—			—		606			0.0
Other income (expense), net	(332		)	(0.0	)	(808		)	(0.0	)
Income tax benefit (expense)	(22,516		)	(1.8	)	(16,675		)	(1.7	)
Equity in earnings of unconsolidated subsidiary	72			0.0		47			0.0
Net income (loss) attributable to noncontrolling interest	555			0.0		(3,300		)	(0.3	)
Net income (loss)	$	33,930		2.8	%	$	21,525		2.1	%

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Segment Results of Operations and as a Percentage of Net Revenue

(in thousands, unaudited)

EmCare

	Three months ended March 31,
	2015			% of net revenue		2014			% of net revenue
Net revenue	$	825,108		100.0	%	$	644,566		100.0	%
Compensation and benefits	676,301			82.0		525,085			81.4
Operating expenses	38,006			4.6		23,636			3.7
Insurance expense	23,341			2.8		16,967			2.6
Selling, general and administrative expenses	14,756			1.8		11,257			1.7
Interest income from restricted assets	(19		)	(0.0	)	25			0.0
Equity-based compensation expense	(609		)	(0.1	)	(478		)	(0.0	)
Transaction costs	(3,094		)	(0.4	)	(308		)	(0.0	)
Severance and related costs	(1,224		)	(0.1	)	—			—
Net income (loss) attributable to noncontrolling interest	555			0.1		(3,300		)	(0.5	)
Adjusted EBITDA	77,095			9.3		71,682			11.1	%
Depreciation and amortization expenses	(20,529		)	(2.5	)	(16,281		)	(2.5	)
Restructuring charges	—			—		(105		)	(0.0	)
Interest income from restricted assets	(19		)	(0.0	)	25			0.0
Equity-based compensation expense	(609		)	(0.1	)	(478		)	(0.1	)
Transaction costs	(3,094		)	(0.4	)	(308		)	(0.0	)
Severance and related costs	(1,224		)	(0.1	)	—			—
Net income (loss) attributable to noncontrolling interest	555			0.1		(3,300		)	(0.5	)
Income from operations	$	52,175		6.3	%	$	51,235		8.0	%

Segment Results of Operations and as a Percentage of Net Revenue

(in thousands, unaudited)

AMR

	Three months ended March 31,
	2015			% of net revenue		2014			% of net revenue
Net revenue	$	419,394		100.0	%	$	369,645		100.0	%
Compensation and benefits	231,356			55.2		218,576			59.1
Operating expenses	113,720			27.1		90,999			24.6
Insurance expense	12,185			2.9		14,014			3.8
Selling, general and administrative expenses	11,693			2.8		8,118			2.2
Interest income from restricted assets	(111		)	(0.0	)	(111		)	(0.0	)
Equity-based compensation expense	(744		)	(0.2	)	(584		)	(0.2	)
Transaction costs	(6		)	(0.0	)	(465		)	(0.1	)
Severance and related costs	(470		)	(0.1	)	—			—
Adjusted EBITDA	51,771			12.3		39,098			10.6
Depreciation and amortization expenses	(19,352		)	(4.6	)	(20,151		)	(5.5	)
Restructuring charges	—			—		(704		)	(0.2	)
Interest income from restricted assets	(111		)	(0.0	)	(111		)	(0.0	)
Equity-based compensation expense	(744		)	(0.2	)	(584		)	(0.2	)
Transaction costs	(6		)	(0.0	)	(465		)	(0.1	)
Severance and related costs	(470		)	(0.1	)	—			—
Income from operations	$	31,088		7.4	%	$	17,083		4.6	%

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Three months ended March 31, 2015 compared to the Three months ended March 31, 2014

Consolidated

Our results for the three months ended March 31, 2015 reflect an increase in net revenue of $230.3 million and an increase in net income of $12.4 million compared to the three months ended March 31, 2014. The increase in net income is attributable primarily to operational growth and the decrease in interest expense from the redemption of the 2019 Notes in June of 2014.

Net revenue. For the three months ended March 31, 2015, we generated net revenue of $1,244.5 million compared to $1,014.2 million for the three months ended March 31, 2014, representing an increase of 22.7%. The increase is attributable primarily to increases in rates and volumes on existing contracts combined with increased volume from net new contracts and acquisitions, partially offset by the impact of markets exited.

Adjusted EBITDA. For the three months ended March 31, 2015, Adjusted EBITDA was $128.9 million, or 10.4% of net revenue, compared to $110.8 million, or 10.9% of net revenue for the three months ended March 31, 2014.

Restructuring charges. For the three months ended March 31, 2015, restructuring charges were zero compared to $0.8 million for the three months ended March 31, 2014.

Interest expense, net. For the three months ended March 31, 2015, interest expense was $26.7 million compared to $30.0 million for the three months ended March 31, 2014. The decrease was due to the redemption of the 2019 Notes on June 18, 2014.

Other income (expense), net . For the three months ended March 31, 2015, other (income) expense, net was $0.3 million of expense compared to $0.8 million of expense for the three months ended March 31, 2014.

Income tax benefit (expense). For the three months ended March 31, 2015, income tax expense was $22.5 million compared to income tax expense of $16.7 million for the three months ended March 31, 2014. Our effective tax rate was 39.9% and 43.7% for the three months ended March 31, 2015 and 2014, respectively.

EmCare

Net revenue. For the three months ended March 31, 2015, EmCare generated net revenue of $825.1 million compared to $644.6 million for the three months ended March 31, 2014, representing an increase of $180.5 million, or 28.0%. The increase was due to an increase in patient encounters from net new hospital contracts and net revenue increases in existing contracts.

Net new contracts since March 31, 2014 accounted for a net revenue increase of $56.3 million for the three months ended March 31, 2015, of which $44.6 million came from net new contracts added in 2014, with the remaining increase in net revenue from those added in 2015. Approximately 40% of the contracts started since last year were with existing EmCare customers, primarily from cross-selling opportunities from the expansion of our hospitalist practices that have been integrated with ED services.

Net revenue under our same store contracts (contracts in existence for the entirety of both periods) increased $29.4 million, or 5.0%, for the three months ended March 31, 2015. The change was due to a 6.3% increase in same store weighted patient encounters, offset by a 1.3% decrease in revenue per weighted patient encounter primarily attributable to the loss of $7.3 million of Medicaid parity revenue, which was discontinued on January 1, 2015. While we had a rate growth of approximately 1.5% from our ED services, there was a corresponding decrease in rate for other service lines, primarily anesthesia. Although anesthesia volume was at expected levels, we experienced lower than expected collections as a result of billing and collection challenges for certain anesthesia contracts billed by third party billing companies. Revenue from recent acquisitions was $94.8 million during the three months ended March 31, 2015.

Compensation and benefits. For the three months ended March 31, 2015, compensation and benefits costs were $676.3 million, or 82.0% of net revenue, compared to $525.1 million, or 81.4% of net revenue, for the three months ended March 31, 2014. Provider compensation costs increased $102.7 million from net new contract additions and acquisitions and $25.7 million from same store contracts. Non-provider compensation and total benefits costs increased by $22.8 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 due primarily to organic growth.

Operating expenses. For the three months ended March 31, 2015, operating expenses were $38.0 million, or 4.6% of net revenue, compared to $23.6 million, or 3.7% of net revenue, for the three months ended March 31, 2014 due primarily from recent acquisitions.

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Insurance expense. For the three months ended March 31, 2015, professional liability insurance expense was $23.3 million, or 2.8% of net revenue, compared to $17.0 million, or 2.6% of net revenue, for the three months ended March 31, 2014. We recorded an increase of prior year insurance provisions of $2.3 million during the three months ended March 31, 2015 compared to an increase of $2.0 million for the three months ended March 31, 2014.

Selling, general and administrative. For the three months ended March 31, 2015, selling, general, and administrative expense was $14.8 million, or 1.8% of net revenue, compared to $11.3 million, or 1.7 % of net revenue, for the three months ended March 31, 2014.

Depreciation and amortization. F or the three months ended March 31, 2015, depreciation and amortization expense was $20.5 million, or 2.5% of net revenue, compared to $16.3 million, or 2.5% of net revenue, for the three months ended March 31, 2014.

AMR

Net revenue. For the three months ended March 31, 2015, AMR generated net revenue of $419.4 million compared to $369.6 million for the three months ended March 31, 2014, representing an increase of $49.8 million, or 13.5%. The increase in net revenue was due primarily to an increase in net revenue per weighted transport of 3.3%, or $12.0 million, primarily from increased managed transportation revenue which has no associated transport volume and increased rates in existing markets and an increase of 10.2%, or $37.8 million, in weighted transport volume. Weighted transports increased 76,500 from the same quarter last year. The change was due to an increase of 20,000 weighted transports from our entry into new markets and recent acquisitions and an increase of 7.8%, or 57,600 weighted transports, in existing markets, offset by a decrease of 1,100 weighted transports from exited markets.

Compensation and benefits. For the three months ended March 31, 2015, compensation and benefits costs were $231.4 million, or 55.2% of net revenue, compared to $218.6 million, or 59.1% of net revenue, for the three months ended March 31, 2014. The increase was primarily due to additional compensation and benefits costs from new markets and recent acquisitions. As a percentage of net revenue, the decrease primarily relates to managed transportation and the transition of the AMR billing function to a third-party service provider in which we do not directly employ the providers and therefore; such provider costs are included within operating expenses. Ambulance crew wages per ambulance unit hour increased by approximately 1.5%, or $2.0 million, and ambulance unit hours increased period over period by 8.5%, or $10.3 million. Non-crew compensation decreased $1.2 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to decreased costs associated with the transition of the AMR billing function to a third-party service provider, offset by increased costs associated with organic growth of our existing business. Total benefits related costs increased $1.1 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014. Other compensation costs, including severance and related costs, increased $0.5 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014.

Operating expenses. For the three months ended March 31, 2015, operating expenses were $113.7 million, or 27.1% of net revenue, compared to $91.0 million, or 24.6% of net revenue, for the three months ended March 31, 2014. The change was due primarily to increased costs of $6.6 million associated with our existing managed transportation business, increased costs of $8.5 million primarily due to external provider fees for our AMR billing function, increased costs of $5.1 million associated with the net impact from markets entered and exited, increased costs of $1.0 million from recent acquisitions, and increased other miscellaneous net operating costs of $1.5 million.

Insurance expense. For the three months ended March 31, 2015, insurance expense was $12.2 million, or 2.9% of net revenue, compared to $14.0 million, or 3.8% of net revenue, for the three months ended March 31, 2014. We recorded an increase of prior year insurance provisions of $0.3 million during the three months ended March 31, 2015 compared to an increase of $3.2 million during the three months ended March 31, 2014.

Selling, general and administrative. For the three months ended March 31, 2015, selling, general, and administrative expense was $11.7 million, or 2.8% of net revenue, compared to $8.1 million, or 2.2% of net revenue, for the three months ended March 31, 2014.

Depreciation and amortization. For the three months ended March 31, 2015, depreciation and amortization expense was $19.4 million, or 4.6% of net revenue, compared to $20.2 million, or 5.5% of net revenue, for the three months ended March 31, 2014.

Liquidity and Capital Resources

Our primary source of liquidity is cash flows provided by the operating activities of our subsidiaries. The Company and its subsidiaries also have the ability to use the ABL Facility, described below, to supplement cash flows provided by our operating activities if we decide to do so for strategic or operating reasons. Our liquidity needs are primarily to service long-term debt and to

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fund working capital requirements, capital expenditures related to the acquisition of vehicles and medical equipment, technology-related assets and insurance-related deposits.

Based on our current assumptions, we believe that our cash and cash equivalents, cash provided by our operating activities and amounts available under our ABL Facility will be adequate to meet the liquidity requirements of our business through at least the next 12 months. If our assumptions prove to be incorrect, if there are other factors that adversely affect our cash position or cash flows, or if we make substantial acquisitions in the future, we may need to seek additional funds through financing activities.

On May 25, 2011, Corporation entered into $1.8 billion of senior secured credit facilities (“Senior Secured Credit Facilities”), consisting of the $1.44 billion Term Loan Facility and the $350 million ABL Facility that was subsequently increased to $550 million, which are further described below and in Note 7 of the accompanying unaudited consolidated financial statements.

Term Loan Facility

On February 7, 2013, Corporation, the borrower under the Term Loan Facility, entered into the Term Loan Amendment to the Term Loan Credit Agreement. Under the Term Loan Amendment, the Company incurred an additional $150 million in incremental borrowings under the Term Loan Facility, the proceeds of which were used to pay down the ABL Facility. In addition, the rate at which the loans under the Term Loan Credit Agreement bear interest was amended to equal (i) the higher of (x) LIBOR and (y) 1.00%, plus, in each case, 3.00% (with a step-down to 2.75% in the event that we meet a consolidated first lien net leverage ratio of 2.50:1.00), or (ii) the alternate base rate, which will be the highest of (w) the corporate base rate established by the administrative agent from time to time, (x) 0.50% in excess of the overnight federal funds rate, (y) the one-month LIBOR (adjusted for maximum reserves) plus 1.00% and (z) 2.00%, plus, in each case, 2.00% (with a step-down to 1.75% in the event that the Company meets a consolidated first lien net leverage ratio of 2.50:1.00).

ABL Facility

On February 27, 2013, Corporation entered into the ABL Credit Agreement, under which the Company increased its commitments under the ABL Facility to $450 million and extended the term to 2018. In addition, the rate at which the loans under the ABL Credit Agreement bear interest was amended to equal (i) LIBOR plus, (x) 2.00% in the event that average daily excess availability is less than or equal to 33% of availability, (y) 1.75% in the event that average daily excess availability is greater than 33% but less than or equal to 66% of availability and (z) 1.50% in the event that average daily excess availability is greater than 66% of availability, or (ii) the alternate base rate, which will be the highest of (x) the corporate base rate established by the administrative agent from time to time, (y) 0.50% in excess of the overnight federal funds rate and (z) the one-month LIBOR (adjusted for maximum reserves) plus 1.00% plus, in each case, (A) 1.00% in the event that average daily excess availability is less than or equal to 33% of availability, (B) 0.75% in the event that average daily excess availability is greater than 33% but less than or equal to 66% of availability and (C) 0.50% in the event that average daily excess availability is greater than 66% of availability.

On February 6, 2015, Corporation entered into a Second Amendment to the ABL Credit Agreement, under which certain lenders under the ABL Facility increased the commitments available to Corporation to $550 million. The ABL Facility provides for up to $550 million of senior secured first priority borrowings, subject to a borrowing base of $550.0 million as of March 31, 2015. The ABL Facility is available to fund working capital and for general corporate purposes. As of March 31, 2015, we had available borrowing capacity of $194.4 million and $120.6 million of letters of credit issued under the ABL Facility.

While the ABL Facility generally does not contain financial maintenance covenants, a springing fixed charge coverage ratio of not less than 1.0 to 1.0 will be tested if our excess availability (as defined in the credit agreement governing the ABL Facility) falls below specified thresholds at any time. If we require additional financing to meet cyclical increases in working capital needs, to fund acquisitions or unanticipated capital expenditures, we may need to access the financial markets.

The credit agreements governing the ABL Facility and the Term Loan Facility contain significant covenants, including prohibitions on our ability to incur certain additional indebtedness and to make certain investments and to pay dividends.

2022 Notes

On June 18, 2014, Corporation issued $750.0 million in aggregate principal amount of the 2022 Notes the proceeds of which were used to redeem the then outstanding 2019 Notes and for general corporate purposes.

The indenture governing the 2022 Notes contains significant covenants, including prohibitions on our ability to incur certain additional indebtedness and to make certain investments and to pay dividends.

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We may from time to time repurchase or otherwise retire or extend our debt and/or take other steps to reduce our debt or otherwise improve our financial position. These actions may include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt, and/or opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired or refinanced, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. Our affiliates may also purchase our debt from time to time, through open market purchases or other transactions. In such cases, our debt may not be retired, in which case we would continue to pay interest in accordance with the terms of the debt, and we would continue to reflect the debt as outstanding in our consolidated statements of financial position.

Cash Flow

The table below summarizes cash flow information derived from our consolidated statements of cash flows for the periods indicated, amounts in thousands.

	Three months ended March 31,
	2015			2014
Net cash provided by (used in):
Operating activities	$	45,315		$	30,220
Investing activities	(517,438		)	(39,973		)
Financing activities	246,103			(3,963		)

Operating activities . Net cash provided by operating activities was $45.3 million for the three months ended March 31, 2015 compared to net cash provided by operating activities of $30.2 million for the three months ended March 31, 2014. Operating cash flows for the three months ended March 31, 2014 includes a payment of $9.7 million in settlement of prior period insurance claims. Cash flow from operating activities for three months ended March 31, 2014 excluding this item was $39.9 million. Further, the increase of $15.1 million in net cash provided by operating activities relates primarily to lower interest payments in 2015.

Accounts receivable increased $56.2 million and $35.4 million during three months ended March 31, 2015 and 2014, respectively. Days sales outstanding (“DSO”) increased 1 day during the three months ended March 31, 2015. While EmCare’s DSO increased two days primarily as a result of reduced collections for certain anesthesia contracts billed by third party billing companies, AMR’s DSO decreased two days.

We regularly analyze DSO, which is calculated by dividing our net revenue for the quarter by the number of days in the quarter. The result is divided into net accounts receivable at the end of the period. DSO provides us with a gauge to measure receivables, revenue and collection activities.

The following table outlines our DSO by segment and in total excluding the impact of acquisitions completed within the specific quarter:

	Q1 2015	Q4 2014	Q3 2014	Q2 2014	Q1 2014	Q4 2013	Q3 2013	Q2 2013
EmCare	80	78	77	79	82	82	77	71
AMR	68	70	66	62	62	63	64	64
Company	76	75	73	73	74	75	73	68

Investing activities . Net cash used in investing activities was $517.4 million for the three months ended March 31, 2015 compared to $40.0 million for three months ended March 31, 2014. The increase was primarily related to the increase in cash outflow for acquisitions of $498.3 million.

Financing activities. Net cash provided by financing activities was $246.1 million for the three months ended March 31, 2015 compared to cash used in financing activities of $4.0 million for the three months ended March 31, 2014. For the three months ended March 31, 2015, we borrowed $285.0 million under our ABL Facility to fund recent acquisitions, offset by our partial repayment of $50 million. Additionally, we received $3.5 million in proceeds from the exercise of stock options.

For the three months ended March 31, 2014, we paid $14.4 million of employee related taxes related to the exercise of stock options in connection with the secondary offering in February of 2014, offset by the excess tax benefit from these stock option exercises of $14.8 million.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary exposure to market risk consists of changes in fuel prices, changes in interest rates on certain of our borrowings, and changes in stock prices. While we have from time to time entered into transactions to mitigate our exposure to both changes in fuel prices and interest rates, we do not use these instruments for speculative or trading purposes.

We manage our exposure to changes in fuel prices and, as appropriate, use highly effective derivative instruments to manage well-defined risk exposures. As of March 31, 2015, we were party to a series of fuel hedge transactions with a major financial institution under one master agreement. Each of the transactions effectively fixes the cost of diesel fuel at prices ranging from $3.30 to $3.58 per gallon. We purchase the diesel fuel at the market rate and periodically settle with our counterparty for the difference between the national average price for the period published by the Department of Energy and the agreed upon fixed price. The transactions fix the price for a total of 2.6 million gallons during the periods hedged through December 2016.

On October 17, 2011, we entered into interest rate swap agreements which mature on August 31, 2015. The swap agreements are with major financial institutions and effectively convert a notional amount of $400 million in variable rate debt to fixed rate debt with an effective rate of 4.49%. We will continue to make interest payments based on the variable rate associated with the debt (based on LIBOR, but not less than 1.0%) and will periodically settle with our counterparties for the difference between the rate paid and the fixed rate.

As of March 31, 2015, we had $2,268.6 million of debt, excluding capital leases, of which $1,283.2 million was variable rate debt under our senior secured credit facility and the balance was fixed rate debt. An increase or decrease in interest rates of 1.0%, above our LIBOR floor of 1.0%, will impact our interest costs by $18.4 million annually.

We are exposed to changes in stock prices primarily as a result of our holdings in publicly traded securities. We believe that changes in stock prices can be expected to vary as a result of general market conditions, specific industry changes, and other factors. As of March 31, 2015, the fair value of our available-for-sale securities was $31.6 million. Had the market price of such securities been 10% lower as of March 31, 2015, the aggregate fair value of such securities would have been $3.2 million lower.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains systems of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the reports that they file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or furnishes under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As previously disclosed under “Item 9A-Controls and Procedures” in the Company’s 2014 Form 10-K, in connection with management’s assessment of the Company’s internal control over financial reporting as of December 31, 2014, management identified a material weakness in the Company’s internal control over estimates of unbilled revenue for patient encounters in its EmCare segment. Based on the evaluation of the Company’s management of the Company’s disclosure controls and procedures conducted as of the end of the period covered by this Report on Form 10-Q, the Company’s principal executive officer and principal financial officer have concluded that, as of the date of their evaluation, the Company’s disclosure controls and procedures (as defined in Rules 13e-15(e) promulgated under the Exchange Act) were not effective as of March 31, 2015 as a result of the previously identified material weakness, which continued to exist as of March 31, 2015.

Management’s Plan for Remediation of the Material Weakness in Internal Control over Financial Reporting

Management has made substantial progress to remediate the previously identified material weakness in internal control over financial reporting and continues to take actions implementing the following measures:

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For information regarding legal proceedings, please refer to Note 11 to the accompanying consolidated financial statements included herein and the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, other than as set forth below.

Changes in the rates or methods of third-party reimbursements, including due to political discord in the budgeting process outside our control, may adversely affect our revenue and operations.

We derive a majority of our revenue from direct billings to patients and third- party payors such as Medicare, Medicaid and private health insurance companies. As a result, any changes in the rates or methods of reimbursement for the services we provide could have a significant adverse impact on our revenue and financial results. The Patient Protection and Affordable Care Act (“PPACA”) could ultimately result in substantial changes in Medicare and Medicaid coverage and reimbursement, as well as changes in coverage or amounts paid by private payors, which could have an adverse impact on our revenues from those sources.

In addition to changes from the PPACA, government funding for healthcare programs is subject to statutory and regulatory changes, administrative rulings, interpretations of policy and determinations by intermediaries and governmental funding restrictions, all of which could materially impact program coverage and reimbursements for both ambulance and physician services. In recent years, Congress has consistently attempted to curb spending on Medicare, Medicaid and other programs funded in whole or part by the federal government. For example, Congress has mandated that the Medicare Payment Advisory Commission, commonly known as “MedPAC”, provide it with a report making recommendations regarding certain aspects of the Medicare ambulance fee schedule. MedPAC issued a Report to the Congress on Medicare and the Health Care Delivery System in June 2013. In that report, MedPAC recommended reductions in payment for some types of ambulance services and increases in others. If Congress implements these recommendations it is possible that the resultant changes in the ambulance fee schedule will decrease payments by Medicare for our ambulance services. State and local governments have also attempted to curb spending on those programs for which they are wholly or partly responsible. This has resulted in cost containment measures such as the imposition of new fee schedules that have lowered reimbursement for some of our services and restricted the rate of increase for others, and new utilization controls that limit coverage of our services. For example, we estimate that the impact of the ambulance service rate decreases under the national fee schedule mandated under the Balanced Budget Act of 1997 (the “BBA”), as modified by the phase-in provisions of the Medicare Modernization Act, resulted in a decrease in AMR’s net revenue of approximately $18 million in 2010, an increase of less than $1 million in 2011, and an increase of $6 million in 2012. In 2013, we expected an increase of approximately $3 million from the provisions outlined above, but the sequestration cuts implemented on April 1, 2013 offset the increase resulting in a reduction of approximately $2 million for the full year 2013. In addition, state and local government regulations or administrative policies regulate ambulance rate structures in some jurisdictions in which we conduct transport services. We may be unable to receive ambulance service rate increases on a timely basis where rates are regulated, or to establish or maintain satisfactory rate structures where rates are not regulated.

Legislative provisions at the national level impact payments received by EmCare physicians under the Medicare program. Historically, physician services were reimbursed under the Physician Fee Schedule. Physician payments under the Physician Fee Schedule were updated on an annual basis according to a Sustainable Growth Rate (“SGR”). Because application of the statutory formula for the update factor would result in a decrease in total physician payments for the past several years, Congress has previously intervened with interim legislation to prevent the reductions under the SGR adjustment methodology. On April 16, 2015, the President signed into law the Medicare Access and CHIP Reauthorization Act of 2015. One of the primary provisions of the Medicare Access and CHIP Reauthorization Act of 2015 removed the SGR methodology from the determination of annual conversion factors in the formula for payment for physicians’ services. It replaced the SGR system with a merit based incentive payment system and other alternative payment models. In light of its recent passage, the Medicare Access and CHIP Reauthorization Act of 2015 is still being analyzed and we cannot estimate the impact of this legislation on our future revenues.

		Page Number
PART I — FINANCIAL INFORMATION


Item 1.	Consolidated Financial Statements (unaudited):

	Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	3

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014	4

	Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	5

	Notes to Unaudited Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 5.	Other Information	47

Item 6.	Exhibits	47

Signatures		48

	ENVISION HEALTHCARE HOLDINGS, INC.

	(registrant)

May 8, 2015	By:	/s/ William A. Sanger
Date		William A. Sanger
		Chairman, President and Chief Executive Officer

	By:	/s/ Randel G. Owen
		Randel G. Owen
		Chief Financial Officer, Chief Operating Officer and Executive Vice President

10.1*		Second Amendment to ABL Credit Agreement, dated as of February 6, 2015, among the Corporation, Deutsche Bank AG New York Branch, as administrative agent and an additional lender, and Barclays Bank PLC, as additional lender.

31.1*		Certification of the Chief Executive Officer of Envision Healthcare Holdings, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of the Chief Financial Officer of Envision Healthcare Holdings, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of the Chief Executive Officer and the Chief Financial Officer of Envision Healthcare Holdings, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed on May 8, 2015, formatted in eXtensible Business Reporting Language (“XBRL”): (1) Consolidated Balance Sheets, (2) Consolidated Statements of Operations and Comprehensive Income (Loss), (3) the Consolidated Statements of Cash Flows and (4) related notes to these financial statements.

	ENVISION HEALTHCARE CORPORATION


	By:	/s/ Randel G. Owen
	Name:	Randel G. Owen
	Title:	Chief Financial Officer

	DEUTSCHE BANK AG NEW YORK BRANCH,
	as Administrative Agent and as an Additional Lender


	By:	/s/ Kirk L. Tashjian
	Name:	Kirk L. Tashjian
	Title:	Vice President


	By:	/s/ Michael Shannon
	Name:	Michael Shannon
	Title:	Vice President

	BARCLAYS BANK PLC,
	as an Additional Lender


	By:	/s/ Marguerite Sutton
	Name:	Marguerite Sutton
	Title:	Vice President

	GUARANTORS :

	ENVISION HEALTHCARE INTERMEDIATE CORPORATION


	By:	/s/ William A. Sanger
	Name:	William A. Sanger
	Title:	Chief Executive Officer


	CLINICAL PARTNERS MANAGEMENT COMPANY, LLC NORTHWOOD ANESTHESIA ASSOCIATES, L.L.C.


	By:	/s/ William A. Sanger
	Name:	William A. Sanger
	Title:	Manager

	GUARANTORS (cont’d)

	A1 LEASING, INC.
	ABBOT AMBULANCE, INC.
	ACCENT HOME HEALTH CARE, INC.
	ADAM TRANSPORTATION SERVICE, INC.
	AFFILION, INC.
	AIR AMBULANCE SPECIALISTS, INC.
	AMBULANCE ACQUISITION, INC.
	AMERICAN EMERGENCY PHYSICIANS MANAGEMENT, INC.
	AMERICAN INVESTMENT ENTERPRISES, INC.
	AMERICAN MEDICAL PATHWAYS, INC.
	AMERICAN MEDICAL RESPONSE AMBULANCE SERVICE, INC.
	AMERICAN MEDICAL RESPONSE HOLDINGS, INC.
	AMERICAN MEDICAL RESPONSE MANAGEMENT, INC.
	AMERICAN MEDICAL RESPONSE MID-ATLANTIC, INC.
	AMERICAN MEDICAL RESPONSE NORTHWEST, INC.
	AMERICAN MEDICAL RESPONSE OF COLORADO, INC.
	AMERICAN MEDICAL RESPONSE OF CONNECTICUT INCORPORATED
	AMERICAN MEDICAL RESPONSE OF GEORGIA, INC
	AMERICAN MEDICAL RESPONSE OF ILLINOIS, INC.


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d)

	AMERICAN MEDICAL RESPONSE OF INLAND EMPIRE
	AMERICAN MEDICAL RESPONSE OF MASSACHUSETTES, INC.
	AMERICAN MEDICAL RESPONSE OF NORTH CAROLINA, INC
	AMERICAN MEDICAL RESPONSE OF OKLAHOMA, INC.
	AMERICAN MEDICAL RESPONSE OF SOUTH CAROLINA, INC
	AMERICAN MEDICAL RESPONSE OF SOUTHERN CALIFORNIA
	AMERICAN MEDICAL RESPONSE OF TENNESSEE, INC.
	AMERICAN MEDICAL RESPONSE OF TEXAS, INC.
	AMERICAN MEDICAL RESPONSE WEST
	AMERICAN MEDICAL RESPONSE, INC.
	AM HOLDCO, INC.
	APH LABORATORY SERVICES, INC.
	ASSOCIATED AMBULANCE SERVICE, INC.
	ATLANTIC AMBULANCE SERVICES ACQUISITION, INC.
	ATLANTIC/KEY WEST AMBULANCE, INC.
	ATLANTIC/PALM BEACH AMBULANCE, INC.
	BESTPRACTICES, INC.
	BLYTHE AMBULANCE SERVICE
	BROWARD AMBULANCE, INC.
	DESERT VALLEY MEDICAL TRANSPORT, INC.
	EHR MANAGEMENT CO.
	EMCARE ANESTHESIA PROVIDERS, INC.
	EMCARE HOLDCO, INC.
	EMCARE HOLDINGS INC.
	EMCARE OF CALIFORNIA, INC.
	EM CARE PHYSICIAN PROVIDERS, INC.
	EMCARE PHYSICIAN SERVICES, INC.
	EMCARE, INC.
	EMERGENCY MEDICAL SERVICES LP CORPORATION
	EMERGENCY MEDICINE EDUCATION SYSTEMS, INC.
	EVERGREEN EMERGENCY SERVICES OF ALLENTOWN, INC.
	FIVE COUNTIES AMBULANCE SERVICE, INC.
	FLORIDA EMERGENCY PARTNERS, INC.
	FOUNTAIN AMBULANCE SERVICE, INC.


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	GOLD COAST AMBULANCE SERVICE
	GREATER PINELLAS TRANSPORTATION MANAGEMENT SERVICES, INC.
	GUARDIAN HEALTH CARE, INC.
	GUARDIAN HEALTHCARE GROUP, INC.
	GUARDIAN HEALTHCAREHOLDINGS, INC.
	HANK’S ACQUISITION CORP.
	HEALTH PRIORITY HOME CARE, INC.
	HEALTHCARE ADMINISTATIVE SERVICES, INC.
	HEMET VALLEY AMBULANCE SERVICE, INC.
	HERREN ENTERPRISES, INC.
	HOLIDAY ACQUISITION COMPANY, INC.
	INTERNATlONAL LIFE SUPPORT, INC.
	JLM HEALTHCARE, INC.
	KMAC, INC.
	KUTZ AMBULANCE SERVICE, INC.
	LIFE LINE AMBULANCE SERVICE, INC.
	LIFECARE AMBULANCE SERVICE, INC.
	LIFEFLEET SOUTHEAST, INC.
	MEDEVAC MEDICAL RESPONSE, INC.
	MEDEVAC MIDAMERICA, INC.
	MEDIC ONE AMBULANCE SERVICES, INC.
	MEDIC ONE OF COBB, INC.
	MEDI-CAR AMBULANCE SERVICE, INC.
	MEDI-CAR SYSTEMS, INC.
	MEDICS AMBULANCE SERVICE (DADE), INC.
	MEDICS AMBULANCE SERVICE, INC.
	MEDICS AMBULANCE, INC.
	MEDICS EMERGENCY SERVICES OF PALM BEACH COUNTY, INC.
	MEDICS SUBSCRIPTION SERVICES, INC.
	MEDICS TRANSPORT SERVICES, INC.
	MEDICWEST AMBULANCE, INC.
	MEDICWEST HOLDINGS, INC.
	MEDLIFE EMERGENCY MEDICAL SERVICE, INC.
	MEDSTAT EMS, INC.
	MERCY AMBULANCE OF EVANSVILLE, INC

	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	MERCY LIFE CARE
	MERCY, INC.
	METRO AMBULANCE SERVICE (RURAL), INC.
	METRO AMBULANCE SERVICE, INC.
	METRO AMBULANCE SERVICES, INC.
	METROPOLITAN AMBULANCE SERVICE
	MIDWEST AMBULANCE MANAGEMENT COMPANY
	MOBILE MEDIC AMBULANCE SERVICE, INC.
	NEVADA RED ROCK AMBULANCE, INC.
	NEVADA RED ROCK HOLDINGS, INC.
	OHERBST, INC.
	PARAMED, INC.
	PARK AMBULANCE SERVICE INC.
	PHYSICIAN ACCOUNT MANAGEMENT, INC.
	PHYSICIANS & SURGEONS AMBULANCE SERVICE, INC.
	PROVIDER ACCOUNT MANAGEMENT, INC.
	PUCKETT AMBULANCE SERVICE, INC.
	RADIOLOGY STAFFING SOLUTIONS, INC.
	RADSTAFFING MANAGEMENT SOLUTIONS, INC.
	RANDLE EASTERN AMBULANCE SERVICE, INC.
	REIMBURSEMENT TECHNOLOGIES, INC.
	RIVER MEDICAL INCORPORATED
	S. FISHER & S. THOMAS INC.
	SEMINOLE COUNTY AMBULANCE, INC.
	SPRINGS AMBULANCE SERVICE, INC.
	STAT HEALTH CARE, INC.
	SUNRISE HANDICAP TRANSPORT CORP.
	T.M.S. MANAGEMENT GROUP INC.
	TEK AMBULANCE, INC.
	TIDEWATER AMBULANCE SERVICE, INC.
	TKG, INC.
	TRANSPORTATION MANAGEMENT SERVICES OF BREVARD, INC.
	TROUP COUNTY EMERGENCY MEDICAL SERVICES, INC.
	VELITA SMITH HOME HEALTH, INC.
	V.I.P. PROFESSIONAL SERVICES, INC.


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	ACCESS 2 CARE, LLC

	By: MISSION CARE SERVICES, LLC, as Manager of Access 2 Care, LLC

	By: AMERICAN MEDICAL RESPONSE, INC., as Manager of Mission Care Service, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	ACUTE MANAGEMENT, LLC

	By: BAWKEYE HOLDCO LLC, as Sole Member of Acute Management, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	AGAPE HEALTH CARE AGENCY, LLC.
	CARE CONNECTION OF CINCINNATI LLC
	GEM CITY HOME CARE, LLC
	GUARDIAN OHIO NEWCO, LLC

	By: GUARDIAN HEALTHCARE HOLDINGS, INC., as Sole Member of Agape Health Care Agency, LLC, Care Connection of Cincinnati LLC, Gem City Home Care, LLC and Guardian Ohio NewCo, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	AMERICAN MEDICAL RESPONSE DELAWARE VALLEY, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	AMERICAN MEDICAL RESPONSE HPPP, LLC

	By: AMERICAN MEDICAL RESPONSE, INC., as Sole Member of American Medical Response HPPP, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	AMERICAN MEDICAL RESPONSE OF MARICOPA, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	AMERICAN MEDICAL RESPONSE OF PIMA, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	AMR BROCKTON, L.L.C.


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	APEX ACQUISITION LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	ARKANSAS RIVER EMERGENCY SERVICES, LLC

	By: PHOENIX EMERGENCY PHYSICIANS OF THE NORTHEAST, LLC, as Sole Member of Arkansas River Emergency Services, LLC

	By: PHOENIX PHYSICIANS, LLC, as Sole Member of Phoenix Emergency Physicians of the Northeast, LLC

	By: EMCARE, INC., as Sole Member of Phoenix Physicians, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	CMORX, LLC

	By: EMCARE, INC., as Sole Member of CMORx, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	DAN RIVER EMERGENCY SERVICES, LLC
	EMERGENCY SERVICES OF CENTRAL OHIO, LLC
	PHOENIX EMERGENCY MEDICINE OF BROWARD, LLC
	PHOENIX EMERGENCY PHYSICIANS OF THE MIDWEST, LLC
	PHOENIX EMERGENCY PHYSICIANS OF THE NORTHEAST, LLC
	PHOENIX EMERGENCY PHYSICIANS OF THE SOUTHEAST, LLC
	PHOENIX EMERGENCY SERVICES OF INVERNESS, LLC
	PHOENIX EMERGENCY SERVICES OF LEESBURG, LLC
	PHOENIX OBSTETRICS/GYNECOLOGY, LLC
	PHOENIX PEDIATRICS OF BROWARD, LLC

	By: PHOENIX PHYSICIANS, LLC, as Sole Member of Dan River Emergency Services, LLC, Emergency Services of Central Ohio, LLC, Phoenix Emergency Medicine of Broward, LLC, Phoenix Emergency Physicians of the Midwest, LLC, Phoenix Emergency Physicians of the Northeast, LLC, Phoenix Emergency Physicians of the Southeast, LLC, Phoenix Emergency Services of Inverness, LLC, Phoenix Emergency Services of Leesburg, LLC, Phoenix Obstetrics/Gynecology, LLC and Phoenix Pediatrics of Broward, LLC

	By: EMCARE, INC., as Sole Member of Phoenix Physicians, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	EMS MANAGEMENT LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	EMS OFFSHORE MEDICAL SERVICES, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	EMSC SERVICESCO, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	EVERRAD, LLC

	By: TEMPLETON READINGS, LLC, as Sole Member of EverRad, LLC

	By: EMCARE, INC., as Sole Member of Templeton Readings, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	EVOLUTION HEALTH LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	EVOLUTION MOBILE IMAGING, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	HAWKEYE HOLDCO LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	MEDASSOCIATES, LLC

	By: EMCARE, INC., as Sole Member of MedAssociates, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	MISSION CARE OF ILLINOIS, LLC

	By: MISSION CARE SERVICES, LLC, as Manager of Mission Care of Illinois, LLC

	By: AMERICAN MEDICAL RESPONSE, INC., as Manager of Mission Care Services, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	MISSION CARE OF MISSOURI, LLC

	By: MISSION CARE SERVICES, LLC, as Manager of Mission Care of Missouri, LLC

	By: AMERICAN MEDICAL RESPONSE, INC, as Manager of Mission Care Services, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	MISSION CARE SERVICES, LLC

	By: AMERICAN MEDICAL RESPONSE, INC., as Manager of Mission Care Services, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	MSO NEWCO, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	PHOENIX PHYSICIANS, LLC
	STREAMLINED MEDICAL SOLUTIONS LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	PINNACLE CONSULTANTS MID-ATLANTIC, L.L.C.


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	PROVIDACARE, L.L.C.

	By: AMERICAN MEDICAL PATHWAYS, INC., as Sole Member of ProvidaCare, L.L.C.


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	REGIONAL EMERGENCY SERVICES, L.P.

	By: FLORIDA EMERGENCY PARTNERS, INC., as General Partner of Regional Emergency Services, L.P.


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	ROSE RADIOLOGY, LLC

	By: SPOTLIGHT HOLDCO LLC, as Sole Member of Rose Radiology, LLC

	By: EMCARE, INC., as Sole Member of EmCare, Inc.


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	SEAWALL ACQUISITION, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	SPOTLIGHT HOLDCO LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	GUARANTORS (cont’d):

	SUN DEVIL ACQUISITION LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary


	TEMPLETON READINGS, LLC

	By: EMCARE, INC., as Sole Member of Templeton Readings, LLC


	By:	/s/ Craig A. Wilson
		Name: Craig A. Wilson
		Title: Secretary

	DEUTSCHE BANK AG NEW YORK BRANCH
	in its capacity as ABL Agent


	By:	/s/ Kirk L. Tashjian
	Name:	Kirk L. Tashjian
	Title:	Vice President


	By:	/s/ Michael Shannon
	Name:	Michael Shannon
	Title:	Vice President


	DEUTSCHE BANK AG NEW YORK BRANCH
	in its capacity as Term Loan Agent


	By:	/s/ Kirk L. Tashjian
	Name:	Kirk L. Tashjian
	Title:	Vice President


	By:	/s/Michael Shannon
	Name:	Michael Shannon
	Title:	Vice President

Date: May 8, 2015

/s/ WILLIAM A. SANGER
Name: William A. Sanger
Title: Chief Executive Officer

Date: May 8, 2015

/s/ RANDEL G. OWEN
Name: Randel G. Owen
Title: Chief Financial Officer