AMERICAN MEDICAL RESPONSE INC, 10-Q, 1996-11-14

AMERICAN MEDICAL RESPONSE INC
10-Q, 1996-11-14
LOCAL & SUBURBAN TRANSIT & INTERURBAN HWY PASSENGER TRANS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
---------
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED SEPTEMBER 30, 1996 COMMISSION FILE NUMBER: 1-11196

AMERICAN MEDICAL RESPONSE, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 04-3147881
- -------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)

2821 SOUTH PARKER ROAD, 10TH FLOOR, AURORA, COLORADO 80014
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

(303) 614-8500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

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.

X YES NO
----- ----

The number of shares outstanding of each of the issuer's classes of common stock
as of November 11, 1996 is: Common Stock, $0.01 par value, 21,042,012 shares.
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AMERICAN MEDICAL RESPONSE, INC.

INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets at September 30, 1996 (unaudited) and
December 31, 1995.............................................................. 3

Consolidated Statements of Earnings for the Three Months and Nine Months
Ended September 30, 1996 and 1995 (unaudited).................................. 4

Consolidated Statement of Stockholders' Equity for the
Nine Months Ended September 30, 1996 (unaudited)............................... 5

Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 (unaudited)...................... 6

Notes to Interim Consolidated Financial Statements.............................. 7

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................... 9

PART II. OTHER INFORMATION

Item 1. Legal Proceedings............................................................... 15

Item 2. Changes in Securities........................................................... 15

Item 3. Defaults Upon Senior Securities................................................. 15

Item 4. Submission of Matters to a Vote of Security Holders............................. 15

Item 5. Other Information............................................................... 15

Item 6. Exhibits and Reports on Form 8-K................................................ 15

Signature................................................................................. 16

Exhibit Index............................................................................. 17

</TABLE>

Page 2
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AMERICAN MEDICAL RESPONSE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

September 30, December 31,
1996 1995
--------------- -------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 15,042 $ 8,804
Accounts receivable, net of allowance for uncompensated care of
$58,408 and $47,654.................................................... 129,873 98,215
Inventories.................................................................... 4,611 3,927
Prepaid expenses and other receivables......................................... 9,960 7,678
Deferred income taxes.......................................................... 30,646 30,646
-------- --------
Total current assets........................................................ 190,132 149,270
-------- --------

Property and equipment, net....................................................... 76,458 64,669
-------- --------

Non-current assets:
Goodwill, net.................................................................. 307,951 258,877
Covenants not to compete, net.................................................. 239 423
Other.......................................................................... 9,205 3,142
-------- --------
Total non-current assets.................................................... 317,395 262,442
-------- --------
TOTAL....................................................................... $583,985 $476,381
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable............................................................... $ 18,228 $ 15,378
Accrued compensation, benefits and taxes....................................... 24,997 20,387
Accrued expenses............................................................... 31,675 31,405
Accrued restructuring charge................................................... 6,173 20,349
Income taxes payable........................................................... 13,465 15,651
Current maturities of debt..................................................... 23,660 13,919
-------- --------
Total current liabilities................................................... 118,198 117,089
-------- --------

Non-current liabilities:
Long-term debt................................................................. 34,824 101,660
Convertible subordinated notes................................................. 125,000 --
Deferred income taxes.......................................................... 11,492 7,905
Other liabilities.............................................................. 129 163
-------- --------
Total non-current liabilities............................................... 171,445 109,728
-------- --------
Total liabilities........................................................... 289,643 226,817
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value, 500,000 shares authorized, none issued........ -- --
Common stock, $.01 par value, 75,000,000 shares authorized, 21,029,705
and 19,868,337 shares issued and outstanding.................................. 210 199
Additional paid-in capital..................................................... 215,136 194,948
Retained earnings.............................................................. 78,996 54,417
-------- --------
Total stockholders' equity.................................................. 294,342 249,564
-------- --------
Commitments and contingencies
TOTAL....................................................................... $583,985 $476,381
======== ========
</TABLE>

See accompanying notes to interim consolidated financial statements.

Page 3
<PAGE>

AMERICAN MEDICAL RESPONSE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>

Total revenue....................................... $167,582 $117,080 $490,177 $337,647

Operating Expenses:
Salaries and benefits............................. 82,947 58,905 244,296 171,396
Uncompensated care................................ 32,289 22,353 93,862 64,938
Other............................................. 25,728 19,170 76,805 54,743
Depreciation...................................... 5,451 3,733 16,158 10,756
Amortization of intangibles....................... 2,501 1,065 7,086 3,004
-------- -------- -------- --------
Total operating expenses........................ 148,916 105,226 438,207 304,837
-------- -------- -------- --------
Earnings from operations............................ 18,666 11,854 51,970 32,810
Interest (income) expense, net.................... 2,918 (29) 7,587 1,403
-------- -------- -------- --------
Earnings before income taxes........................ 15,748 11,883 44,383 31,407
Income taxes...................................... 6,976 5,331 19,804 14,527
-------- -------- -------- --------
Net earnings.................................... $ 8,772 $ 6,552 $ 24,579 $ 16,880
======== ======== ======== ========
PRO FORMA DATA

Historical net earnings............................. $ 8,772 $ 6,552 $ 24,579 $ 16,880
Salaries and benefits............................... -- -- -- (96)
Income taxes........................................ -- -- -- (417)
-------- -------- -------- --------
Net earnings.................................... $ 8,772 $ 6,552 $ 24,579 $ 17,393
======== ======== ======== ========
Net earnings per common share:
Primary........................................... $ 0.42 $ 0.34 $ 1.21 $ 0.99
======== ======== ======== ========
Fully diluted..................................... $ 0.41 $ 0.34 $ 1.18 $ 0.99
======== ======== ======== ========
Weighted average common shares outstanding:
Primary........................................... 20,819 19,488 20,398 17,622
======== ======== ======== ========
Fully diluted..................................... 24,131 19,488 23,299 17,622
======== ======== ======== ========
</TABLE>

See accompanying notes to interim consolidated financial statements.

Page 4
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AMERICAN MEDICAL RESPONSE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
-------- ------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>

Balance at December 31, 1995................. 19,868 $199 $194,948 $54,417 $249,564
Issuance of stock in connection
with acquisitions........................ 517 5 3,209 -- 3,214
Stock options exercised, including
related tax benefit...................... 570 6 15,451 -- 15,457
Stock issued for employee stock
purchase plan............................ 75 -- 1,528 -- 1,528
Net earnings............................... -- -- -- 24,579 24,579
------ ---- -------- ------- --------
Balance at September 30, 1996................ 21,030 $210 $215,136 $78,996 $294,342
====== ==== ======== ======= ========
</TABLE>

See accompanying notes to interim consolidated financial statements.

Page 5
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AMERICAN MEDICAL RESPONSE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings................................................................. $ 24,579 $ 16,880
Adjustments to reconcile net earnings to net cash provided (used) by
operating activities:
Depreciation............................................................... 16,158 10,756
Amortization of intangibles................................................ 7,086 3,004
Deferred income taxes...................................................... 2,788 2,782
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable........................................................ (27,615) (13,479)
Other current assets....................................................... (2,276) (1,710)
Other assets............................................................... (2,322) (1,559)
Accounts payable and accrued expenses...................................... (7,060) (3,551)
Accrued compensation, benefits and taxes................................... 2,844 1,515
Accrued restructuring charge............................................... (12,804) --
Income taxes payable....................................................... 357 1,627
Other liabilities.......................................................... (39) 476
-------- --------
Net cash provided by operating activities................................ 1,696 16,741
-------- --------
Cash flows from investing activities:
Acquisitions, net of cash acquired........................................... (24,713) (21,812)
Capital expenditures, net.................................................... (25,701) (14,571)
-------- --------
Net cash used by investing activities..................................... (50,414) (36,383)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options...................................... 12,737 2,715
Proceeds from employee stock purchase plan................................... 1,528 1,849
Proceeds from issuance of common stock....................................... -- 90,225
Net borrowings (repayments) under credit facility............................ (70,430) (38,305)
Proceeds from convertible subordinated notes, net of offering costs.......... 121,375 --
Repayment of borrowings...................................................... (10,254) (4,409)
-------- --------
Net cash provided by financing activities................................. 54,956 52,075
-------- --------
Increase in cash and cash equivalents......................................... 6,238 32,433
Cash and cash equivalents at beginning of period.............................. 8,804 6,543
-------- --------
Cash and cash equivalents at end of period.................................... $ 15,042 $ 38,976
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.................................................................. $ 6,892 $ 2,234
======== ========
Income taxes.............................................................. $ 17,365 $ 10,224
======== ========
Acquisitions:
Assets acquired.............................................................. $ 59,241 $ 46,920
Liabilities assumed and issued............................................... (33,267) (21,227)
Common stock issued.......................................................... (277) (3,638)
-------- --------
Cash paid.................................................................... 25,697 22,055
Less cash acquired........................................................... (984) (243)
-------- --------
Net cash paid for acquisitions............................................. $ 24,713 $ 21,812
======== ========
</TABLE>

See accompanying notes to interim consolidated financial statements.

Page 6
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AMERICAN MEDICAL RESPONSE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The interim consolidated financial statements include the accounts of
American Medical Response, Inc. and its subsidiaries (the "Company"). All
intercompany balances and transactions have been eliminated in consolidation.

The interim consolidated financial statements are unaudited, but in the
opinion of management include all adjustments, which consist only of normal and
recurring adjustments, necessary for a fair presentation of its financial
position and results of operations. Results of operations for the interim
periods are not necessarily indicative of the results to be expected for the
full year. These financial statements should be read in conjunction with the
consolidated financial statements of the Company as of and for the year ended
December 31, 1995.

2. ACQUISITIONS

During the first nine months of 1996, the Company acquired 16 ambulance
service providers in transactions accounted for as purchases and one ambulance
service provider in a transaction accounted for as a pooling-of-interests. The
acquisition accounted for as a pooling-of-interests is not material to the
consolidated operations of the Company, and therefore, the Company's
consolidated financial statements have not been restated. The aggregate purchase
price paid in connection with these acquisitions consisted of $23.2 million in
cash, $17.0 million in promissory notes of which $12.4 million were
subordinated, 429,260 shares of Common Stock, and future contingent payments
aggregating $1.5 million in cash.

During the first nine months of 1996, the Company also made payments for
contingent consideration earned consisting of $450,000 in cash, $3.2 million in
promissory notes and 88,000 shares of Common Stock. At September 30, 1996,
possible outstanding future contingent payments aggregated approximately $3.4
million.

In July 1996, the Company entered into a joint venture by purchasing a
49.9% limited partnership interest in Regional Emergency Services, L.P. ("RES")
which manages hospital-based ambulance services in Florida and Texas. The
purchase price for the Company's interest in RES was $2.0 million in cash with
future payments over 18 months of $4.0 million in cash or 108,000 shares of the
Company's Common Stock, at the option of the seller. In addition, the Company
has the right to purchase, and the joint venture partners have the right to
require the Company to purchase, the remaining interests in RES for a price
based on a multiple of pre-tax earnings beginning in July 2001 or earlier based
on the occurrence of certain events. The Company accounts for its interest in
RES under the equity method. The purchase price in excess of the Company's
equity interest in the net assets of RES was recorded as goodwill.

3. DEBT

On February 9, 1996, the Company amended its line of credit to increase
borrowing availability to $200 million, increase letter of credit availability
to $25 million, and extend the maturity date to September 30, 2000.
Additionally, the maximum LIBOR spread on borrowings has been reduced to 1.25%
from 1.5%. The maximum commitment fee on the unused portion remains at 0.375%
of the average daily amount of the line which is unused. Borrowings under the
line of credit are limited to $200 million less outstanding letters of credit.
In addition, the total amount of debt the Company may incur, including
borrowings under the line of credit, is limited to a percentage of the Company's
earnings before interest, income taxes, depreciation, and amortization for the
most recent twelve months, which percentage equals 350% through December 30,
1996, 325% through December 30, 1997 and 300% thereafter. The line of credit is
secured by a pledge of the stock of the Company's subsidiaries.

On February 1, 1996, the Company completed an offering of $125 million of
convertible subordinated notes. The notes bear interest at 5.25% and mature on
February 1, 2001. Net proceeds to the Company after underwriters' discounts and
expenses totaled approximately $121.4 million. The notes are convertible into
Common Stock of the Company at the option of the holder, at a conversion price
of $37.75 per share. The notes are redeemable, at the option of the Company,
after February 15, 1999.

Page 7
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AMERICAN MEDICAL RESPONSE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

4. PRO FORMA ADJUSTMENTS

The pro forma data in the Consolidated Statements of Earnings include
adjustments to salaries and benefits and income taxes related to a subsidiary
that was acquired in a transaction accounted for as a pooling-of-interests in
February 1995. Prior to its acquisition by the Company, this subsidiary was
taxed as an S Corporation on the cash basis method of accounting. Income tax
expense for the nine months ended September 30, 1995 includes $610,000
attributable to the termination of this subsidiary's S Corporation status. The
pro forma amounts reflect a contractual adjustment made to officers' salaries
and the adjustment to income tax expense to what would have been recorded had
this subsidiary been a C Corporation prior to its acquisition.

5. RESTRUCTURING

In November 1995, the Company announced a strategic restructuring
initiative designed to create operating efficiencies, cost savings and revenue
enhancement opportunities. This initiative involves the consolidation of the
Company's operations into six regional units and will be substantially completed
by the end of 1996. In connection with this plan, the Company recorded a
restructuring charge of $23.0 million during the fourth quarter of 1995, which
consisted primarily of $14.4 million of severance and other employee costs, $4.6
million of fixed asset disposals and $4.0 million of lease abandonment costs
related to consolidating the corporate and regional offices. Under this
initiative, there were approximately 350 positions affected, including senior
and middle management positions and certain clerical positions. A substantial
number of these positions have been replaced in corporate and regional
locations. At September 30, 1996, the remaining restructuring accrual was
$6.2 million.

6. SUBSEQUENT EVENTS

On October 7, 1996, the Company entered into a merger agreement with STAT
Healthcare, Inc. ("STAT"). STAT provides emergency physician and disease
management services. STAT provides contract management services to affiliated
physician groups that currently staff the emergency departments of 24 hospitals,
primarily in southeast Texas. STAT's disease management program includes kidney
dialysis, hyperbaric oxygen therapy, and home health services primarily for
diabetic patients. Each share of STAT Common Stock will be converted into 0.25
shares of the Company's Common Stock. Based upon this exchange ratio and the
number of shares of STAT Common Stock and the number of exercisable options and
warrants to purchase STAT Common Stock outstanding as of November 11, 1996, the
Company would issue approximately 3,975,000 shares of Common Stock in this
merger. In addition, options to purchase STAT Common Stock which are
outstanding but not exercisable as of November 11, 1996 would be converted into
options to purchase approximately 54,000 shares of the Company's Common Stock.
The merger is subject to approval by STAT's shareholders at a special meeting
scheduled for December 10, 1996. If the merger agreement is terminated due to a
breach or a failure to fulfill a closing condition, the breaching party may be
required to pay $4.5 million plus reasonable, documented out-of-pocket expenses
to the other party. The proposed merger will be accounted for as a pooling-of-
interests. Accordingly, the consolidated financial statements of the Company
for the periods prior to the acquisition will be restated to give retroactive
effect to the merger. The financial data of the Company as presently reported
and as will be restated is summarized below:
<TABLE>
<CAPTION>

For the Nine Months Ended September 30,
----------------------------------------
1996 1995
-------------------------- ----------------------------
As Presently As Will Be As Presently As Will Be
Reported Restated Reported Restated
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>

Total revenue......................... $ 490,177 $ 528,381 $ 337,647 $ 360,779
Pro forma net earnings................ $ 24,579 $ 26,582 $ 17,393 $ 19,117
Pro forma net earnings per share,
fully diluted.................... $ 1.18 $ 1.08 $ 0.99 $ 0.89
Weighted average common shares
outstanding, fully diluted....... 23,299 27,274 17,622 21,597
</TABLE>

Page 8
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

INTRODUCTION

For all periods presented, the following financial information includes the
consolidated results of the four ambulance service providers the Company
acquired concurrent with its initial public offering in August 1992 and the
three ambulance service providers the Company acquired in June 1993, February
1994 and February 1995 in transactions accounted for as poolings-of-interests.
The results of the other ambulance service providers acquired by the Company
through September 30, 1996 are included from their respective dates of
acquisition.

The Company's total revenue, which is comprised primarily of fees charged
for ambulance services, is presented net of contractual adjustments. Contractual
adjustments represent the difference between gross billable charges and the
amounts paid under contractual arrangements with third party payors. The
provision for uncompensated care represents the difference between net ambulance
service fees and expected collections from patients and third party payors.

This quarterly report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on current plans and expectations of the Company and
involve risks and uncertainties that could cause actual future activities and
results of operations to be materially different from those set forth in the
forward-looking statements. Important factors that could cause actual results to
differ include, among others, risks associated with acquisitions, fluctuations
in operating results because of acquisitions and variations in stock prices,
changes in reimbursement practices or rates or in applicable government
regulations, competitions, and risks of operations and growth of the newly
acquired business of STAT Healthcare, Inc. For more information regarding such
factors, refer to Exhibit 99 filed with the Company's Form 10-Q for the quarter
ended September 30, 1996.

THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1995

Overview

The Company's net earnings amounted to $8.8 million or $0.41 per share
on a fully diluted basis for the three months ended September 30, 1996, based on
24,131,000 weighted average shares outstanding, as compared with net earnings
of $6.6 million or $0.34 per share on a fully diluted basis for the three months
ended September 30, 1995, based on 19,488,000 weighted average shares
outstanding. The increase in net earnings was a result of incremental earnings
provided from acquisitions and internal growth. The increase in earnings per
share on a fully diluted basis, results from the increase in net earnings,
offset by an increase in the weighted average number of shares outstanding. This
increase in the weighted average number of shares outstanding is primarily due
to the issuance of the convertible subordinated notes in February 1996, and
shares issued in connection with acquisitions.

Results of Operations

The Company's total revenue amounted to $167.6 million for the three
months ended September 30, 1996 as compared with $117.1 million for 1995, an
increase of $50.5 million or 43.1%. The largest single contributor to the
increase in total revenue was the incremental revenue provided from
acquisitions. Also contributing to the increase was internal growth resulting
from an increase in the number of transports and rate increases.

Salaries and benefits expense was 49.5% of total revenue for the three
months ended September 30, 1996, as compared with 50.3% for the three months
ended September 30, 1995. This decrease in salary-related costs as a percentage
of total revenue resulted from acquisitions in the Company's existing markets
(sometimes referred to as "lock-on" acquisitions) where revenues are added while
administrative and support costs are reduced by folding such functions into
existing operations. In addition, at the end of 1995, the Company restructured
operations into six regions and is consolidating many administrative functions
such as patient billing services, accounting, dispatch and human resources. This
decrease was partly offset by salaries and benefits of certain new corporate
management and staff hired in connection with the Company's growth, as well as
general wage increases. In addition, the Company continued to incur overtime
wages during the quarter ended September 30, 1996 in connection with its
contract to provide paramedic transport services to the City of San Jose in
Santa Clara County, California.

Page 9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

Uncompensated care expense as a percentage of total revenue was 19.3% and
19.1% for the three months ended September 30, 1996 and 1995, respectively. The
uncompensated care rate increase is primarily attributable to an increase in
uncompensated care expense in the Company's Northern California division.
During 1996, this division has experienced a growth in accounts receivables as a
result of billing delays caused by completing the consolidation of four separate
patient billing offices into one and the implementation of a new accounts
receivable system. The Company expects cash receipts for this division will
ultimately improve through efficiencies realized by the consolidation of the
patient billing offices and enhancements provided by the new accounts receivable
system. Until such cash receipts are realized in the division, the Company has
increased the uncompensated care rate in the event some of the accounts
receivable increase is uncollectible. The uncompensated care rate increase has
been partly offset by the favorable impact of certain acquisitions, which have
experienced lower uncompensated care expense as a percentage of total revenue,
as compared with the subsidiaries included in the prior period. These
acquisitions have a greater mix of basic life support or scheduled ambulance
transport revenue, which in general, has lower uncompensated care expense than
advanced life support or emergency transport revenue.

Other operating expenses were $25.7 million in the three months ended
September 30, 1996 as compared with $19.2 million in the three months ended
September 30, 1995. As a percentage of total revenue, other operating expenses
decreased to 15.4% in the three months ended September 30, 1996 as compared to
16.4% in the three months ended September 30, 1995. The decrease as a percentage
of total revenue resulted from "lock-on" acquisitions in existing markets which,
in general, expanded the Company's operations without the duplication of certain
administrative and support expenses. The increase of $6.5 million was a result
of incremental operating expenses of acquisitions, development costs for future
managed care products, costs associated with the new accounts receivable system,
and inflation.

Amortization of intangibles increased to $2.5 million for the three months
ended September 30, 1996 from $1.1 million for the three months ended September
30, 1995, an increase of $1.4 million. This increase was a result of goodwill
recorded in connection with the Company's acquisitions accounted for as
purchases. Amortization of intangibles will increase in the future as a result
of goodwill recorded in connection with the Company's recent and likely future
acquisitions.

Net interest expense increased by $2.9 million for the three months ended
September 30, 1996 as compared to the same period in 1995. This increase was
the result of interest expense related to the convertible subordinated notes
issued in February 1996 and debt incurred to finance acquisitions. In addition,
the quarter ended September 30, 1995, included interest income derived from the
remaining net proceeds of the Company's Public Offering of 3.75 million shares
in May 1995.

The effective income tax rate remained relatively constant at 44.3% for
the three months ended September 30, 1996 compared to the pro forma
effective income tax rate of 44.9% for the three months ended September 30,
1995.

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1995

Overview

The Company's net earnings amounted to $24.6 million or $1.18 per share
on a fully diluted basis for the nine months ended September 30, 1996, based on
23,299,000 weighted average shares outstanding, as compared with pro forma net
earnings of $17.4 million or $0.99 per share on a fully diluted basis for the
nine months ended September 30, 1995, based on 17,622,000 weighted average
shares outstanding. The increase in net earnings, was a result of incremental
earnings provided from acquisitions and internal growth. The increase in
earnings per share on a fully diluted basis, results from the increase in net
earnings, offset by an increase in the weighted average number of shares
outstanding. This increase in the weighted average number of shares outstanding
is primarily due to the issuance of the convertible subordinated notes in
February 1996, the Company's public offering of 3.75 million shares in May 1995,
and shares issued in connection with acquisitions.

Page 10
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

Results of Operations

The Company's total revenue amounted to $490.2 million for the nine
months ended September 30, 1996 as compared with $337.6 million for 1995, an
increase of $152.6 million or 45.2%. The largest single contributor to the
increase in total revenue was the incremental revenue provided from
acquisitions. Also contributing to the increase was internal growth resulting
from an increase in the number of transports and rate increases.

Salaries and benefits expense was 49.8% of total revenue for the nine
months ended September 30, 1996, as compared with 50.7% on a pro forma basis
for the nine months ended September 30, 1995. The pro forma adjustments were
made for contractual reductions in officers' salaries related to the acquisition
of Paramed, Inc. which was accounted for as a pooling-of-interests. This
decrease in salary-related costs as a percentage of total revenue resulted from
"lock-on" acquisitions in the Company's existing markets where revenues are
added while numerous administrative and support costs are reduced by folding
such functions into existing operations. In addition, at the end of 1995, the
Company restructured operations into six regions and is consolidating many
administrative functions such as patient billing services, accounting, dispatch
and human resources. This decrease was partly offset by salaries and benefits of
certain new corporate management and staff hired in connection with the
Company's growth, as well as general wage increases. In addition, the Company
continued to incur overtime wages during the quarter ended September 30, 1996 in
connection with its contract to provide paramedic transport services to the City
of San Jose in Santa Clara County, California.

Uncompensated care expense as a percentage of total revenue was 19.1% for
the nine months ended September 30, 1996 and 19.2% for the nine months ended
September 30, 1995. The uncompensated care rate has decreased primarily due to
the favorable impact of certain acquisitions, which have experienced lower
uncompensated care expense as a percentage of total revenue, as compared with
the subsidiaries included in the prior period. These acquisitions have a
greater mix of basic life support or scheduled ambulance transport revenue,
which in general has lower uncompensated care expense than advanced life support
or emergency transport revenue. However, this has been negated by an increase
in the uncompensated care expense in the Company's Northern California division.
During 1996, this division has experienced a growth in accounts receivables as a
result of billing delays caused by completing the consolidation of four separate
patient billing offices into one and the implementation of a new accounts
receivable system. The Company expects cash receipts for this division will
ultimately improve through efficiencies realized by the consolidation of the
patient billing offices and enhancements provided by the new accounts receivable
system. Until such cash receipts are realized in the division, the Company has
increased the uncompensated care rate in the event some of the accounts
receivable increase is uncollectible.

Other operating expenses were $76.8 million in the nine months ended
September 30, 1996 as compared with $54.7 million in the nine months ended
September 30, 1995. As a percentage of total revenue, other operating expenses
decreased to 15.7% in the nine months ended September 30, 1996 as compared to
16.2% in the nine months ended September 30, 1995. The decrease as a percentage
of total revenue resulted from "lock-on" acquisitions in existing markets which,
in general, expanded the Company's operations without the duplication of certain
overhead expenses. The increase of $22.1 million was a result of incremental
operating expenses of acquisitions, development costs for future managed care
products, costs associated with the new accounts receivable system, and
inflation.

Amortization of intangibles increased to $7.1 million for the nine months
ended September 30, 1996 from $3.0 million for the nine months ended September
30, 1995, an increase of $4.1 million. This increase was a result of goodwill
recorded in connection with the Company's acquisitions accounted for as
purchases. Amortization of intangibles will increase in the future as a result
of goodwill recorded in connection with the Company's recent and likely future
acquisitions.

Net interest expense increased by $6.2 million for the nine months ended
September 30, 1996 as compared to the first nine months of 1995. This increase
was the result of interest expense related to the convertible subordinated notes
issued in February 1996 and debt incurred to finance acquisitions. In addition,
the quarter ended September 30, 1995 included interest income derived from the
remaining net proceeds of the Company's public offering of 3.75 million shares
in May 1995.

Page 11
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

The effective income tax rate remained relatively constant at 44.6% for
the nine months ended September 30, 1996 compared to 44.8% on a pro forma basis
for the nine months ended September 30, 1995. A subsidiary acquired in a
transaction accounted for as pooling-of-interest was taxed as an S Corporation
prior to its acquisition. The pro forma income tax expense adjusts income tax
expense to what would have been recorded if this subsidiary had been a C
Corporation during the period. If this subsidiary had been subject to corporate
income taxes on an ongoing basis, the Company's income tax expense would have
been $14.1 million for the nine months ended September 30, 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its cash needs, including cash used for
acquisitions, from the net proceeds of its public offerings of equity and
convertible subordinated debt, borrowings under its revolving line of credit,
and cash from operations.

In May 1995, the Company completed a public offering of 4,250,000 shares of
Common Stock at $25.50 per share. The offering included 3,750,000 shares of
Common Stock issued by the Company and 500,000 shares sold by a group of selling
stockholders. Net proceeds to the Company after underwriters' discounts and
expenses totaled approximately $90.2 million. Such proceeds were used to repay
approximately $50 million of debt under the Company's line of credit and for
general corporate purposes, including acquisitions.

On February 9, 1996, the Company amended its line of credit to increase the
amount available under the line to $200 million from $150 million. Borrowings
bear interest at either prime or LIBOR plus a spread of up to 1.25%. At
September 30, 1996, under the $200 million line there were $20.0 million of
borrowings outstanding, $16.1 million of letters of credit outstanding and $98.4
million available for future borrowings based on current total debt limitations.
As of November 11, 1996, under the $200 million line, the Company had $16.5
million of borrowings outstanding, $16.1 million in letters of credit
outstanding, and $101.9 million available for future borrowings.

Cash provided by operations during the nine months ended September 30, 1996
was $1.7 million. Excluding cash payments resulting from the Company's
restructuring initiative, cash generated from operations during the nine months
ended September 30, 1996 was $14.5 million as compared with $16.7 million for
1995. The decrease in cash provided by operations as compared to cash generated
in the prior year was a result of cash payments related to the restructuring and
an increase in accounts receivable. This increase in accounts receivables was
primarily attributable to the Company's Northern California operations, which
experienced billing delays caused by the consolidation of four separate patient
billing offices into one and the implementation of a new accounts receivable
system. The Company expects cash receipts for this division will ultimately
improve through efficiencies realized by the consolidation of the patient
billing offices and enhancements provided by the new accounts receivable system.
Also contributing to the increase in accounts receivables were recent
acquisitions where working capital was not acquired. Working capital at
September 30, 1996 amounted to $71.9 million as compared to $32.2 million at
December 31, 1995. Capital expenditures made primarily for new ambulances and
other operating equipment amounted to $25.7 million and $14.6 million for the
nine months ended September 30, 1996 and 1995, respectively. The growth in
capital expenditures correlates with the growth in total revenue. The
restructuring charge the Company recorded during the fourth quarter of 1995 is
expected to reduce cash flow by approximately $10.9 million, after tax, during
1996. Current financial resources, including amounts available under the line of
credit and anticipated funds generated by operations, are expected to be
adequate to meet the Company's operating cash requirements in the foreseeable
future.

Page 12
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

During the nine months ended September 30, 1996, the Company made
acquisitions and contingent payments for a total of approximately $25.7 million
in cash, $20.2 million in notes, of which $12.4 million were subordinated, and
517,260 shares of Common Stock. At September 30, 1996, potential outstanding
future contingent payments aggregated approximately $3.4 million. The Company's
growth strategy depends in large measure on its ability to acquire additional
service providers. Although the Company has acquired many ambulance service
providers since its initial acquisition of four providers in August 1992, there
can be no assurance that additional acquisition candidates can be identified,
consummated or successfully integrated into the Company's operations. The
Company has used a combination of cash, Common Stock and subordinated debt as
consideration for past acquisitions and plans to continue to use these sources
in the future. In the event that the Company's Common Stock does not maintain
sufficient valuation or if potential acquisition candidates are unwilling to
accept the Company's securities as consideration, the Company will be required
to use more cash resources to continue its acquisition program. In addition, if
sufficient financing is not available as needed on terms acceptable to the
Company, the Company's acquisition program could be adversely affected.

The Company has two Shelf Registration Statements on file with the
Securities and Exchange Commission covering a total of 5,000,000 shares of
which, 2,026,915 were available at September 30, 1996 in connection with
acquisitions of other businesses.

The Company's decision to merge with STAT was based upon consideration of a
number of factors, including:

. The Company's desire to diversify its business into related healthcare
services,
. The suitability of STAT's business to the Company's business,
including the nature of STAT's business, STAT's approach to emergency
practice management and disease management; and the quality of STAT's
management team,
. STAT's business strategy, and the potential growth rates for STAT's
business,
. The complementary nature of the business of the Company and STAT and
the possible integration of their businesses, and
. The expectation that the Company and STAT could achieve synergistic
benefits from the Merger, including reduced costs of insurance and
capital, and reduced accounting and public reporting costs.

Medicare and Medicaid

In October 1995, both houses of Congress passed separate versions of
Medicare and Medicaid reform. During the budget reconciliation process, Congress
adopted the Senate provisions for Medicare and Medicaid reform which called for
a seven-year freeze on rates for ambulance services. However, in December 1995,
the bill was vetoed by the President. Although a budget compromise has not been
reached, there exists a potential for a freeze of Medicare reimbursement rates
for ambulance services in future periods. Any long term freeze in Medicare
reimbursement, which represents 37% of the Company's revenues, could have an
adverse impact on the Company's future operating results.

Page 13
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

In addition, Congressional hearings in December 1994 focused attention on
efforts within the Health Care Financing Administration ("HCFA") to control
Medicare expenditures for ambulance services. In November 1995, HCFA published
a pre-rule stage notice announcing its intention to revise ambulance coverage
policies. The proposed rule would revise HCFA's policy on Medicare coverage of
ambulance services. It focuses on the medical necessity for ambulance service,
redefines an ambulance as an "emergency vehicle" and revises the policy on
coverage of non-emergency ambulance transportation for beneficiaries with end-
stage renal disease. These changes would prevent use of ambulance transportation
in non-emergency situations where the medical need has not clearly been
determined. These changes require the use of emergency vehicles as ambulances
and would focus on the medical treatment rather than the level of medical
transportation provided as the primary concern for furnishing ambulance
services.

With respect to reimbursement for non-emergency transportation to and from
dialysis treatment facilities for patients with end-stage renal disease, the
Company believes it is in substantial compliance with current regulations in
this area, which require documentation of medical necessity. The Company does
not believe that any rule changes in this area would have a material adverse
effect on its business.

Any rule changes which focus reimbursement based on the medical treatment
rather than the level of medical transportation provided would affect virtually
all providers of emergency ambulance services, including the Company. Under
current rules, Advanced Life Support ("ALS") service is reimbursed at ALS rates
if, based on an assessment of the patient's condition, it is determined that ALS
service is medically necessary or if ALS response is required under "911"
contracts or state or local law. Under the proposed rule change, an ambulance
provider would only be reimbursed at ALS rates if ALS services were medically
necessary at the time the service is provided. The proposed rule HCFA is
currently considering would likely receive substantial opposition from many
interested groups, including public and private ambulance providers, state and
local governments that mandate ALS responses and patient advocacy groups. In
addition, the Company believes that any change in ALS reimbursement would not
become final until late-1997 and, if adopted, would be phased in or otherwise
structured so as to minimize any adverse effect on ambulance service providers.
The Company could make adjustments to mitigate the effect of any HCFA proposal
in this area. For example, most of the Company's "911" contracts provide for a
renegotiation of rates in the event of a change in reimbursement policy. In
addition, the Company could potentially offset reduced Medicare revenue by
negotiating for increases in local operating subsidies. The Company could also
attempt to change the staffing of its ambulance crews and negotiate for longer
response times. Because of the preliminary nature of this proposal, the Company
is unable to predict whether HCFA will adopt the current proposal or determine
the impact of any proposal adopted by HCFA. However, if a proposal like the one
HCFA is currently considering were to become law without any phase-in period and
if the Company were unable to mitigate the effect by implementing one or more of
the changes described above, it would at least in the short term have an adverse
effect on the Company's profitability.

In addition, the regional Medicare carrier in the Company's Mid-Atlantic
region, which includes Pennsylvania, New Jersey, and Delaware, has recently
changed its criteria for determining the payment rate for ambulance services to
an approach based upon the fee schedule for the location at which an ambulance
is garaged as compared to the previous practice for determining the payment rate
based upon the location of a company's administrative offices. This change in
payment rates, which became effective in October of 1996, has and will continue
to reduce the Company's reimbursement for certain transports in its Mid-Atlantic
region. The Company has taken steps to mitigate the effect of this change,
including requesting an increase in the allowable Medicare reimbursement rate
through the inherent reasonableness process in certain areas, and relocating
certain garage facilities. The Company is also considering billing services
directly to patients instead of accepting Medicare assignment. If the Company is
unable to mitigate the effect of this change, such change in reimbursement
practice could have a material adverse effect on the Company's business,
financial condition and results of operation.

Page 14
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 2. CHANGES IN SECURITIES

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

10.1 Employment Agreement of Carol J. Burt dated September 6,
1996*.

10.2 Amendment No. 2 dated August 22, 1996 to Employment
Agreement of Michael J. McClymont*.

11. Statement Regarding Computation of Earnings per Share.

27. Financial Data Schedule.

99. Cautionary Factors Relevant to Forward-Looking Statements.

(b) REPORTS ON FORM 8-K

The Company filed a Form 8-K dated October 11, 1996 relating to
its merger agreement with STAT Healthcare, Inc.

- ------------------------
*Management contract or compensatory plan or arrangement.

Page 15
<PAGE>

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

AMERICAN MEDICAL RESPONSE, INC.
---------------------------------------------
(Registrant)

November 13, 1996 /s/ David C. Colby
- ------------------------ ---------------------------------------------
(Date) David C. Colby
Director, Executive Vice President and
Chief Financial Officer

November 13, 1996 /s/ Gino L. Porazzo
- ------------------------ ---------------------------------------------
(Date) Gino L. Porazzo
Vice President and Corporate Controller

Page 16
<PAGE>

AMERICAN MEDICAL RESPONSE, INC.
EXHIBIT INDEX
-------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EXHIBIT 10
----------

10.1 Employment Agreement of Carol J. Burt dated September 6, 1996.* 18

10.2 Amendment No. 2 dated August 22, 1996 to Employment Agreement of
Michael J. McClymont.* 23

EXHIBIT 11
----------

11 Statement Regarding Computation of Earnings per Share. 24

EXHIBIT 27
----------

27 Financial Data Schedule. 25

EXHIBIT 99
----------

99 Cautionary Factors Relevant to Forward-Looking Information. 26
</TABLE>

- --------------------------
*Management contract or compensatory plan or arrangement.

Page 17

<PAGE>

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This Agreement among American Medical Response, Inc., a Delaware
corporation (the "Company") and Carol J. Burt ("Executive") is hereby entered
into as of September 6, 1996.

Recitals:
---------

As of the date of this Agreement, the Company and its affiliates are
engaged in the business of medical transportation services.

Executive is or will be employed by the Company in a confidential
relationship wherein Executive, in the course of her employment with the
Company, will become familiar with and aware of information as to the specific
manner of doing business and the customers of the Company, and its subsidiaries
and future plans with respect thereto, all of which will be established and
maintained at great expense to the Company and its subsidiaries; this
information is a trade secret and constitutes the valuable goodwill of the
Company and its subsidiaries.

Executive recognizes that the business of the Company and its subsidiaries
depends upon a number of trade secrets, including secret techniques, methods and
data. The protection of these trade secrets is of critical importance to the
Company and its subsidiaries.

The Company and its subsidiaries will sustain great loss and damage if
Executive should violate the provisions of paragraph 3 of this Agreement.
Further, monetary damages for such losses would be extremely difficult to
measure.

NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:

1. Employment and Duties.
---------------------

(a) The Company hereby employs Executive in an executive
position initially as Senior Vice President-Finance and Treasurer. In this
capacity, Executive shall report to the Company's Chief Financial Officer, and
shall supervise, under the direction of the Chief Financial Officer, the
Company's acquisition programs and financial strategies. Executive hereby
accepts this employment upon the terms and conditions herein contained and
agrees to devote her full time, attention and efforts to promote and further the
business and services of the Company. Executive shall faithfully adhere to,
execute and fulfill all policies established by the Company.

(b) Employee shall perform such duties, assume such
responsibilities and devote such time and energy to the business of the Company
as the Board of Directors and Chief Executive Officer of the Company shall from
time to time require and shall not, during the term of her employment hereunder,
be engaged in any other business activity pursued for gain, profit or other
pecuniary advantage without the prior approval of the Company. However, the
foregoing limitations shall not be construed as prohibiting Executive from
making personal investments in such form and manner as will neither require her
services in the operation or affairs of the companies or enterprises in which
such investments are made nor violate the terms of paragraph 3 hereof.

(c) All funds received by Executive on behalf of the Company, if
any, shall be held in trust for the Company and shall be delivered to the
Company as soon as practicable.

2. Compensation and Expenses. For all services rendered by Executive to
-------------------------
the Company, the Company shall compensate the Executive as follows:

(a) Base Salary. The base salary payable to Executive shall be
-----------
not less than $190,000 per year payable in accordance with the Company's
customary pay practices.

(b) Annual Bonus. Executive shall be eligible for an annual
------------
performance bonus subject to the evaluation and approval of the Chief Executive
Officer and the Compensation Committee of the Board of Directors.

Page 18
<PAGE>

(c) Expenses. Executive shall be entitled to reimbursement for
--------
expenses incurred on behalf of the Company in the performance of her duties
hereunder, consistent with the Company's reimbursement policies.

(d) Disability. Executive shall be entitled to receive for a
----------
period of up to six (6) months her base salary and a pro rata portion of her
bonus during such time as, because of illness or physical or mental disability
or other incapacity, she is unable to perform her duties under this Agreement.
Such amounts payable shall be offset by any amounts paid to Executive under
disability insurance policies maintained by the Company.

(e) Signing Bonus. Within 30 days of the execution of this
-------------
Agreement the Company shall pay to Executive a one-time signing bonus of
$30,000.

(f) Change of Control. The Company agrees that at the next
-----------------
meeting of the Compensation Committee of the Company's Board of Directors, the
Company shall recommend that the Executive be made subject to the provisions of
and entitled to one year's worth of benefits under the Company's Executive
Separation Allowance Plan. The Executive acknowledges and agrees that in
addition to this Agreement, her inclusion in the Company's Executive Separation
Allowance Plan constitutes good and valuable consideration for her covenants
under Paragraph 3 of this Agreement.

3. Non-Competition Agreement; Trade Secrets.
----------------------------------------

(a) Executive agrees that, during the term of her employment
with the Company and for a two-year period following termination of her
employment with the Company for any reason, she shall not, directly or
indirectly, for herself or on behalf of, or in conjunction with, any other
person, company, partnership, corporation or business of whatever nature:

(i) knowingly call upon any past or present customer
of the Company or any of its subsidiaries (including any such
customer obtained by the Executive) for the purpose of soliciting
or selling any services or products in competition with those of
the Company or any of its subsidiaries;

(ii) knowingly call upon any employee of the Company
or any of its subsidiaries for the purpose or with the intent of
enticing them away from or out of the employ of the Company or
any of its subsidiaries for any reason whatsoever;

(iii) establish, enter into, be employed by or for,
advise, consult with or become an owner in or a part of, any
company, partnership, corporation or other business entity or
venture, or in any way engage in business for herself or for
others, that competes in the business of providing medical
transportation services with the Company or any of its
subsidiaries, within the United State of America or within 100
miles of any location in which the Company or any of its
subsidiaries conducts business; or

(iv) call upon any prospective acquisition candidates
on Executive's own behalf or on behalf of any competitor, which
candidate was either called upon by the Executive or for which
Executive made an acquisition analysis for the Company.

Ownership of not more than one percent of the voting stock of a
corporation whose stock is traded on a national securities exchange or over-the-
counter shall not of itself constitute a violation of this paragraph 3(a).

(b) Executive agrees that she will not, during or after the term
of her employment with the Company, disclose or use for her personal benefit
information relating to the customers or other trade secrets (whether in
existence or proposed) of the Company or any of its subsidiaries, or any other
confidential information of the Company or its subsidiaries to any person, firm,
partnership, corporation or business for any reason or purpose whatsoever.

(c) Because of the difficulty of measuring economic losses to
the Company and its subsidiaries as a result of the breach of any of the
foregoing covenants, and because of the immediate and irreparable damage that
would be caused to the Company and its subsidiaries for which they may have no
other adequate remedy, Executive agrees that, in the event of a breach by her of
any of the foregoing covenants, the Company or any of its subsidiaries may, in
addition to obtaining any other remedy or relief available to it, enforce the
foregoing covenants by all equitable relief, including injunctions and
restraining orders.

Page 19
<PAGE>

(d) The covenants in this paragraph 3 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and this Agreement shall thereby be reformed.

(e) It is specifically agreed that the post-termination non-
competition period referred to in paragraph 3(a) shall be computed by excluding
from such computation any time during which Executive is in violation of any
provision of this paragraph 3 as determined by a final and nonappealable decree
of a court of competent jurisdiction.

4. Return of Company Property. All records, plans, memoranda, lists and
--------------------------
other property delivered to Executive by or on behalf of the Company or any of
its subsidiaries or by a customer of any of them (including but not limited to,
any such customers obtained by Executive), and all records compiled by the
Executive which pertain to the business of the Company or any of its
subsidiaries shall be and remain the property of the Company or such subsidiary,
as the case may be, and be subject at all times to its discretion and control.
Likewise, all correspondence with customers or representatives, reports,
records, charts, advertising materials, and any data collected by Executive, or
by or on behalf of the Company, any of its respective subsidiaries or any
representative of any of them shall be delivered promptly to the Company without
request by them upon termination of Executive's employment.

5. Inventions. Executive shall disclose promptly to the Company any and
----------
all conceptions and ideas for inventions, improvements, discoveries and works,
whether or not patentable or copyrightable, which are conceived or made by
Executive solely or jointly with another during the period of employment or
within one (1) year thereafter and which are related to the business or
activities of the Company or any of is subsidiaries or which Executive conceives
as a result of her employment by the Company (collectively, "Proprietary
Rights"), and Executive hereby assigns and agrees to assign all her interests
therein to the Company or its nominee. All copyrightable Proprietary Rights
shall be considered to be "works made for hire". Whenever requested to do so by
the Company, Executive shall execute any and all applications, assignments or
other instruments and do such other acts that the Company shall request to apply
for and obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company's interest therein. These obligations shall
continue beyond the termination of employment with respect to inventions,
improvements, discoveries and works, whether or not patentable or copyrightable,
conceived, made or acquired by Executive during the period of employment or
within one (1) year thereafter, and shall be binding upon Executive's assigns,
executors, administrators and other legal representatives

6. Term; Termination; Rights of Termination.
----------------------------------------

(a) The initial term of Executive's employment with the Company
hereunder shall, unless terminated as herein provided, continue for a term of
two (2) years ending on the second anniversary of the date of this Agreement.
The Executive's employment with the Company may be terminated in any one of the
following ways:

(i) The death of Executive or the inability of
Executive, because of illness or physical or mental disability or
other incapacity which continues for a period in excess of six
months, to perform her duties under this Agreement shall
terminate Executive's employment.

(ii) The Company may terminate the Executive's
employment after ten-days' written notice to Executive for good
cause, including without limitation:

(A) Executive's willful and knowing material
breach of this Agreement;

(B) Executive's fraud with respect to the
business or affairs of the Company or if Executive is
convicted of a felony involving fraud, dishonesty or
moral turpitude;

(C) Executive's exclusion from participation
in Medicare, Medicaid or any other third party
reimbursement program, for any reason, or if Executive
has had material civil money penalties or assessments
imposed on her under any federal or state law involving
Medicare, Medicaid, or any other third party
reimbursement program; or

(D) alcohol or drug abuse, or sexual
harassment by Executive.

Page 20
<PAGE>

(iii) At any time after the commencement of Executive's
employment with the Company, the Company or Executive may,
without cause, terminate the Executive's employment thirty days
after written notice is provided to the other party.

(b) Upon termination of Executive's employment pursuant to
clause (i) of paragraph 6(a) or by the Company pursuant to clause (iii) of
paragraph 6(a), or by the Executive in the event her duties and responsibilities
are significantly diminished, Executive shall be entitled to receive (i) all
cash compensation earned under this Agreement to the date of termination plus
----
(ii) an amount equal to last year's cash bonus, if any, prorated for any partial
year prior to termination plus (iii) base compensation as in effect on the date
----
prior to termination for an additional period of twelve months plus (iv) an
----
amount equal to the prior year's cash bonus, if any. In connection with a
termination for disability under clause (i) of paragraph 6(a), the amount to be
paid as set forth in this paragraph 6(b) shall be decreased by any payments made
under the Company's disability programs during the twelve months following such
termination.

(c) Upon termination of Executive's employment by the Company
pursuant to clause (ii) of paragraph 6(a), or by the Executive pursuant to
clause (iii) of paragraph 6(a), Executive shall be entitled, upon execution of a
standard release, to receive all base cash compensation earned under this
Agreement to the date of termination, together with an amount equal to a pro
rata portion of last year's cash bonus based on the number of days worked in the
year of such termination. Such termination of the Executive's employment shall
not otherwise accelerate the payment date of any monies accrued or accruing to
the account of Executive as a result of any bonuses or other compensation, nor
shall termination vest in Executive any right in connection therewith.

(d) In the event of termination of Executive's employment for
any reason provided in this paragraph 6, all rights and obligations of the
Company and Executive under this Agreement shall cease immediately, except that
Executive's obligations under paragraphs 1(c), 3, 4, 5 and 7 hereof shall
survive such termination, and thereafter Executive shall have the right to
receive, and the Company shall be obligated to pay, the compensation as set
forth in paragraphs 6(b) or 6(c).

7. Representations of Executive. Executive has represented and hereby
----------------------------
represents and warrants to the Company that she is not subject to any
restriction or non-competition covenant in favor of a former employer or any
other person or entity, and that the execution of this Agreement by Executive
and her employment by the Company and the performance of her duties hereunder
will not violate or be a breach of any agreement with a former employer or any
other person or entity and Executive agrees to indemnify the Company for any
claim by any third party that such third party may now have or may hereafter
come to have against the Company based upon or arising out of any non-
competition agreement or invention and secrecy agreement between Executive and
such third party.

8. Complete Agreement. There are no oral representations,
------------------
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement and this
Agreement supersedes any prior agreement or understanding between the Company
and the Executive with respect to her employment. This Agreement is the final,
complete and exclusive statement and expression of this Agreement among the
Company and Executive and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This Agreement may not be later modified except by a
further writing signed by the parties, and no term of this Agreement may be
waived except by writing signed by the party waiving the benefit of such terms.

9. No Waiver. No waiver by the parties hereto of any default or breach
---------
of any term, condition or covenant of this Agreement shall be deemed to be a
waiver of any subsequent default or breach of the same or any other term,
condition or covenant contained herein.

10. Assignment: Binding Effect. Executive understands that she has been
--------------------------
selected for employment by the Company on the basis of her personal
qualifications, experience and skills. Executive agrees, therefore, that she
cannot assign all or any portion of this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon and inure to the benefit of the
parties thereto and their respective heirs, successors and assigns.

Page 21
<PAGE>

11. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:

To the Company: American Medical Response, Inc.
2821 South Parker Road, 10th Floor
Aurora, CO 80014
Attention: General Counsel

To Executive: Carol J. Burt
714 Humboldt Street
Denver, CO 80218

Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this paragraph 12.

12. Severability: Headings. If any portion of this Agreement is held
-----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of this
Agreement or of any part hereof.

13. Miscellaneous. This Agreement shall in all respects be construed
-------------
according to the laws of The State of Colorado. This Agreement may be executed
in any one or more counterparts, each of which shall be deemed to be an original
but all of which together shall constitute one and the same instrument.

AMERICAN MEDICAL RESPONSE, INC.

/s/ Paul T. Shirley
-----------------------------------
Paul T. Shirley
Chief Executive Officer

EXECUTIVE:

/s/ Carol J. Burt
- -------------------
Carol J. Burt

Page 22

<PAGE>

EXHIBIT 10.2

AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT

This Amendment No. 2 to EMPLOYMENT AGREEMENT ("Amendment 2") is made as of
the 22nd day of August, 1996, among American Medical Response, Inc., a Delaware
corporation ("American") and Michael J. McClymont ("Employee"). The parties
hereto agree as follows:

1. REFERENCE TO EMPLOYMENT AGREEMENT AND AMENDMENT. Reference is made to
the Employment Agreement dated as of August 12, 1992, as in effect on the date
hereof (the "Agreement") between American and Employee. Terms defined in the
Agreement and not otherwise defined herein are used herein with the meanings so
defined.

2. AMENDMENT TO AGREEMENT. Section 6(d) of the Agreement is hereby
amended to read in its entirety as follows:

" (d) Upon termination of Employee's employment by the Company
pursuant to clause (iii) of paragraph 6(a), or by Employee at any time
after December 31, 1999 pursuant to clause (iii) of paragraph 6(a),
Employee shall be entitled to receive (i) all base compensation owing
under this Agreement through the date of termination plus (ii) any
----
accrued but unpaid bonus attributable to him for work prior to
termination plus (iii) base compensation as in effect on the date
----
prior to termination for an additional period of twelve months plus
----
(iv) an amount equal to his prior year annual cash incentive bonus,
and, any outstanding unvested options which were previously granted to
Employee shall immediately vest, and, subject to any employee
contribution applicable on the date of termination, and to the extent
such coverage is not duplicative of other coverage in effect, the
Company shall pay COBRA payments for an additional twelve month period
after the termination date."

3. MISCELLANEOUS. Except to the extent specifically amended hereby, the
provisions of the Agreement, as amended, shall remain unmodified, and the
Agreement as amended hereby is confirmed as being in full force and effect.
This Amendment may be executed in any number of counterparts which together
shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment 2 as of
the day and year first written above.

AMERICAN MEDICAL RESPONSE, INC.

/s/ Paul T. Shirley /s/ Michael J. McClymont
- --------------------- --------------------------
Paul T. Shirley, President Michael J. McClymont

Page 23

<PAGE>

EXHIBIT 11

AMERICAN MEDICAL RESPONSE, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY
Pro forma net earnings.......................... $ 8,772 $ 6,552 $24,579 $17,393
======= ======= ======= =======
Weighted average common shares outstanding...... 20,819 19,488 20,398 17,622
======= ======= ======= =======
Pro forma net earnings per share................ $ 0.42 $ 0.34 $ 1.21 $ 0.99
======= ======= ======= =======
FULLY DILUTED
Pro forma net earnings.......................... $ 8,772 $ 6,552 24,579 $17,393
Add: Interest expense on
convertible subordinated notes,
net of income taxes................... 1,075 -- 2,866 --
------- ------- ------- -------
Pro forma net earnings used to calculate
fully diluted earnings per share............ $ 9,847 $ 6,552 $27,445 $17,393
======= ======= ======= =======
Weighted average common shares outstanding...... 20,819 19,488 20,398 17,622
Add: Weighted average shares of
convertible subordinated notes
assuming conversion................... 3,312 -- 2,901 --
------- ------- ------- -------
Weighted average shares used to compute fully
diluted earnings per share.................. 24,131 19,488 23,299 17,622
======= ======= ======= =======
Fully diluted pro forma net earnings per share.. $ 0.41 $ 0.34 $ 1.18 $ 0.99
======= ======= ======= =======
</TABLE>

Page 24

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,042
<SECURITIES> 0
<RECEIVABLES> 129,873
<ALLOWANCES> 58,408
<INVENTORY> 4,611
<CURRENT-ASSETS> 190,132
<PP&E> 76,458<F2>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 583,985
<CURRENT-LIABILITIES> 118,198
<BONDS> 0
0
0
<COMMON> 210
<OTHER-SE> 294,132
<TOTAL-LIABILITY-AND-EQUITY> 583,985
<SALES> 490,177
<TOTAL-REVENUES> 490,177
<CGS> 0
<TOTAL-COSTS> 344,345<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 93,862
<INTEREST-EXPENSE> 7,587
<INCOME-PRETAX> 44,383
<INCOME-TAX> 19,804
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,579
<EPS-PRIMARY> $1.21
<EPS-DILUTED> $1.18

<FN>
<F1> Amounts inapplicable or not disclosed as a separate line in the interim
consolidated financial statements are reported as "0" herein.

<F2> Property, plant, and equipment are reported net of accumulated depreciation
in the interim consolidated financial statements.

<F3> Does not include provision for doubtful accounts.
</FN>

</TABLE>

<PAGE>

EXHIBIT 99

CAUTIONARY FACTORS RELEVANT TO FORWARD-LOOKING STATEMENTS

IN CONSIDERING WHETHER TO PURCHASE OR OTHERWISE ENGAGE IN TRANSACTIONS IN
THE STOCK OF AMERICAN MEDICAL RESPONSE, INC. ("AMERICAN") INVESTORS SHOULD
CONSIDER THE FOLLOWING FACTORS, AMONG OTHERS, WHICH COULD AFFECT THE RESULTS OF
AMERICAN.

GROWTH STRATEGY-ACQUISITION OF AMBULANCE PROVIDERS. American's growth
strategy depends in large measure on its ability to acquire additional ambulance
service providers. Competition for the acquisition of ambulance service
providers is increasing as the ambulance service industry continues to undergo
consolidation. Certain of American's existing and potential competitors have
significantly greater capital resources than American. Although American has
acquired numerous ambulance service providers, there can be no assurance that
suitable additional acquisition candidates can be identified, acquired or
successfully integrated into American's operations. American has used a
combination of cash, American Common Stock and subordinated debt as
consideration for past acquisitions and plans to continue to use these forms of
consideration in the future. In the event that the American Common Stock does
not maintain a sufficient valuation or if potential acquisition candidates are
unwilling to accept American's securities as consideration, American will be
required to use more cash resources to continue its acquisition program. In
addition, if sufficient financing is not available as needed on terms acceptable
to American, American's growth strategy could be adversely affected.

POSSIBLE ADVERSE CHANGES IN REIMBURSEMENT RATES OR COVERAGE. A substantial
majority of American's revenues are attributable to payments received from
third-party payors, including Medicare, Medicaid and private insurers. The
revenues, cash flows and profitability of American, like those of other
companies in the healthcare industry, are affected by the continuing efforts of
third-party payors to control expenditures for healthcare. Medicare and
Medicaid reforms adopted by Congress in 1995 called for a seven-year freeze on
rates for ambulance services. Although these reforms were vetoed by the
President, there exists a potential for a freeze of Medicare reimbursement rates
for ambulance services in the future. Any freeze in Medicare reimbursement or
insufficient increases in rates to compensate for increases in inflation could
have an adverse impact on American's business, financial condition and results
of operation. In addition, Congressional hearings in December 1994 focused
attention on efforts within the Health Care Financing Administration ("HCFA") to
control Medicare expenditures for ambulance services. The hearings specifically
addressed two areas: provision of ambulance services to and from dialysis
facilities and reimbursement at advanced life support ("ALS") rates for
ambulance transports where ALS services are made available to the patient but
not needed at the time in the service is provided. Although the application of
these risks is subject to continued interpretation, American believes that it is
in substantial compliance with current regulations for reimbursement for
ambulances services to and from dialysis treatment facilities which require
documentation of medical necessity. Any initiative to address the ALS
reimbursement issue would affect virtually all providers of emergency ambulance
service, including American. Under current rules, ALS service is reimbursed at
ALS rates if, based on an assessment of he patient's condition, it is determined
that ALS service is medically necessary or if ALS response is required under
"911" contracts or state or local law. Under a new proposal that HCFA is
considering for proposed rule-making in late 1996 or early 1997, an ambulance
provider would only be reimbursed at ALS rates, if ALS services were medically
necessary at the time the service is provided. American believes that any
change in ALS reimbursement would likely receive opposition from many interest
groups, would not become final prior to the spring of 1997 and, if adopted,
would be phased in or otherwise structured so as to minimize any adverse effect
on ambulance service providers. American could make adjustments to mitigate the
effect of any such HCFA proposal. For example, most of American's 911 contracts
provide for renegotiation of rates in the event of a change in reimbursement
policy. In addition, American could potentially offset reduced Medicare revenue
by negotiating for increases in local operating subsidies. American could also
attempt to change the staffing of its ambulance crews or negotiate for longer
response times both of which would reduce operating costs. American is unable
to predict whether HCFA will adopt the current proposal and is unable to
determine the impact of any proposal adopted by the HCFA. However, if a
proposal like the one HCFA is currently considering were to become law without
any phase-in period and if American were unable to mitigate its effect, it would
at least in the short term have an adverse effect on American's profitability.
Reimbursement can also be influenced by the financial instability of private
third-party payors and by budget pressures and cost shifting by governmental
payors. A reduction in coverage or reimbursement rates and efforts by third-
party payors to decrease utilization could have a material adverse effect on
American's business. Some states are also considering various healthcare and
insurance reform proposals. No assurance can be given that any such reforms
will not have a material adverse effect on American. In addition, the regional
Medicare carrier in American's Mid-Atlantic Region, which includes Pennsylvania,
New Jersey and Delaware, has recently changed its practice or reimbursement
based on the location of the

Page 26
<PAGE>

administrative offices of the ambulance service provider to the location of the
facility where the transporting ambulance is garaged. This change in
reimbursement rates, which became effective in October of 1996, has and will
continue to reduce American's reimbursement for certain transports in its Mid-
Atlantic Region. American has taken steps to mitigate the effect of this change,
including requesting an increase in the allowable Medicare reimbursement rate
through the inherent reasonableness process, and relocating the location of
certain garage facilities. American is also considering billing services
directly to patients instead of accepting Medicare assignment. If American is
unable to mitigate the effect of this change, such change in reimbursement
practice could have a material adverse effect on American's business, financial
condition and results of operation.

GOVERNMENT REGULATION. Various state and federal laws regulate ambulance
providers, physicians and other clinicians and other providers of healthcare
services. These laws include the fraud and abuse provisions of the Social
Security Act, which prohibit the solicitation, payment, receipt or offering of
any direct or indirect remuneration for the referral of Medicare or Medicaid
patients, or for the ordering or providing of Medicare or Medicaid covered
services, items or equipment. Violations of these laws may result in
substantial civil or criminal penalties for individuals or entities, including
large civil monetary penalties and exclusion from participation in the Medicare
and Medicaid programs. Such exclusion, if applied to American or, after the
proposed acquisition of STAT Healthcare, Inc., to its affiliated physician
groups, could result in significant loss of reimbursement to American.

COMPETITION. The ambulance service industry is highly competitive.
Principal participants include government entities, large regional ambulance
service providers, hospitals and numerous local providers. In some areas in
which American operates, American has begun to experience intense competition
from fire departments, particularly for emergency services. The entry by local
fire districts into markets for ambulance transport services in areas in which
American operates could have a material adverse effect on American's business,
financial condition and results of operation. Certain existing and potential
competitors of American have significantly greater capital resources than
American. There can be no assurance that municipalities or healthcare
facilities that presently contract for ambulance services will not choose to
provide ambulance services directly in the future.

RISKS OF OPERATIONS AND GROWTH OF STAT BUSINESS. American has agreed to
purchase all of the stock of STAT Healthcare, Inc. American has not previously
operated an emergency department physician management service business or a
disease management business. Such businesses present risks that are in some
ways different from the risks of operating an ambulance service business,
including the following:

Growth Strategy. Following the consummation of the Merger between American
Medical Response, Inc. and STAT Healthcare, Inc., American's growth strategy
will depend in part on its ability to develop or acquire dialysis facilities and
to enter into additional hospital-based HBO therapy and physician practice
management contracts, particularly through strategic relationships with hospital
networks. There can be no assurance that American will be able to develop new
dialysis facilities or identify, acquire or successfully integrate acquired
dialysis facilities, or that American will be able to identify, enter into or
successfully integrate additional HBO therapy or physician practice management
contracts. In addition, the regulatory framework of certain jurisdictions in
which STAT does not operate, or changes in the regulatory framework of the
jurisdiction in which STAT currently operates, may limit American's ability to
expand the operations of STAT into, or its ability to continue STAT's operations
within, new and existing geographical markets if American is unable to modify
the operational structure of STAT to conform with such regulatory framework or
such changes.

Corporate Exposure to Professional Liabilities. STAT's affiliated
physician groups and certain physicians who provide services on their behalf may
be the subject of medical malpractice claims with the attendant risk of
substantial damage awards. To the extent that physicians placed by affiliated
physician groups at hospitals are regarded as agents of STAT in the practice of
medicine, STAT could be held liable for any medical malpractice claims against
such physicians. STAT also could be found in certain instances to have been
negligent in performing its contract management services for the hospitals even
if no agency relationship between STAT, the affiliated physician groups or such
physician exists. In addition, any liability for malpractice claims incurred by
an affiliated physician group that was not covered by insurance would reduce the
earnings of the affiliated physician group and thereby reduce any management fee
based on net profits payable to STAT. There can be no assurance that any future
claim will not exceed the scope or limits of available insurance coverage
maintained by STAT's affiliated physician groups or by STAT or that such
coverage will continue to be available.

Page 27
<PAGE>

Government Regulation. After the Merger between American Medical Response,
Inc. and STAT Healthcare, Inc., American's business will be subject to
additional regulation at both the federal and state level applicable to STAT,
including federal laws governing rates paid for reimbursement for dialysis
treatment and restrictions on physician referrals and state law prohibitions on
the corporate practice of medicine. STAT is reimbursed for dialysis services
primarily at fixed rates established under the Medicare ESRD program. Under
this ESRD program, which is administered by HCFA, once a patient becomes
eligible for Medicare reimbursement, Medicare is responsible for payment of 80%
of the composite rate determined by HCFA for dialysis treatments and secondary
payor (usually Medicare supplemental insurance or the State Medicaid or ESRD-
type program) pays approximately 20% of the composite rate. There
can be no assurance that future legislation or regulations that may
significantly modify the Medicare program or substantially reduce the amount
paid for STAT's services will not be adopted or that there will be sufficient
increases in rates to compensate for future increases in STAT's operating costs.
In addition, federal and state laws also impose restrictions on referrals by
healthcare providers for designated healthcare services to entities with which
they have a financial relationship. Any future governmental reform that
includes additional prohibitions on ownership, directly or indirectly, of
facilities to which they refer patients could adversely affect the combined
businesses, financial condition and results of operations of American and STAT.
After the Merger between American Medical Response, Inc. and STAT Healthcare,
Inc., STAT will continue to also be subject to state laws prohibiting physicians
from splitting fees with non-physicians and prohibit non-physician entities from
practicing medicine. Although STAT believes its operations are in material
compliance with existing laws, STAT's operations have not been the subject to
judicial or regulatory interpretation or review, and there can be no assurance
that any such interpretation or review would not adversely affect STAT's
operations.

Integration of AMHealth. In June 1996, STAT acquired AMHealth Corporation
and its related healthcare entities (collectively, "AMHealth") in exchange for
11,200,000 shares of STAT Common Stock. AmHealth operated kidney dialysis
facilities, managed HBO therapy facilities and provided home healthcare
management and related ancillary services primarily in the Rio Grande Valley of
south Texas. STAT did not conduct any such operations prior to June 1996. The
continuing process of integrating the operations of AmHealth into STAT will
require the dedication of STAT's management resources. There can be no
assurance that STAT's management will be able to integrate successfully
AmHealth's operations and oversee the combined entity. Failure to integrate
successfully AmHealth's operation into STAT's operations could have a material
adverse effect on STAT's business, financial condition and results of
operations.

NONREALIZATION OF SYNERGIES. The Merger between American Medical Response,
Inc. and STAT Healthcare, Inc. involves the integration of two companies that
have previously operated independently. No assurance can be given that American
will not encounter difficulties in integrating the respective operations of
American and STAT or that the benefits expected from such integration will be
realized. In addition, there can be no assurance that American will not
experience the loss of key STAT personnel. Among the factors considered by the
Boards of Directors of American and STAT in connection with their respective
approval of the Merger Agreement were the opportunities for synergies that could
result from the Merger. Although American expects to achieve significant annual
savings in operating costs as a result of the Merger, no assurance can be given
that such savings

Page 28