SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
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[ ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Under Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
RURAL/METRO CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NOT APPLICABLE.
(NAME OF PERSON(S) FILING PROXY STATEMENT,
IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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(1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11. (Set forth the amount on which
the filing fee is calculated and state how it was determined.):
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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CONTACT: Liz Merritt, Rural/Metro Corporation
(480) 606-3337
FD Morgen-Walke
Jim Byers (Investor Relations)
(415) 439-4504
Christopher Katis (Media)
(415) 439-4518
For immediate release
RURAL/METRO REACHES FINAL AGREEMENT WITH BANKS
Amended Credit Facility Brings Company Into Full Compliance
SCOTTSDALE, ARIZ. (Sept. 30, 2002) - Rural/Metro Corporation (Nasdaq:
RURLC), a leading national provider of ambulance and fire protection services,
announced today that it has reached an agreement in principle with its banks to
amend and extend its credit facility.
Jack Brucker, President and Chief Executive Officer, said, "We are pleased
to present a solution that allows us to further strengthen the business, while
at the same time preserve significant value for our existing stockholders. This
is an important step toward ensuring the long-term success of the company by
helping to maintain financial flexibility while positioning us for future growth
opportunities."
The proposed agreement includes the following key points: maturity date
extended to December 31, 2004; no required principal amortization until
maturity; adjustable LIBOR-based rate, initially anticipated to be 8.8 percent;
full covenant compliance; and, lenders receive 10-percent equity stake in the
company through a grant of preferred shares automatically convertible, with
stockholder approval, to common shares.
The company has been engaged in discussions with its banks since February
2000, when it entered into non-compliance with three, ratio-driven covenants of
its revolving credit agreement. During that time, the company focused on
strengthening cash flow, restructuring its base of domestic ambulance
operations, enhancing billing and collections systems to expedite payment for
services, and creating same-service-area growth.
Brucker continued, "We have achieved measurable progress in the last two
years and believe opportunities exist for continued success. The amended
facility contains several new provisions that we believe make it the best choice
for the company and its stakeholders at this time."
THE NEW INTEREST RATE WILL BE AN ADJUSTABLE RATE, BASED ON A 30-DAY LIBOR
RATE PLUS 7 PERCENT, FOR AN INITIAL RATE OF APPROXIMATELY 8.8 PERCENT. THE
COMPANY CURRENTLY PAYS A COMBINED RATE OF APPROXIMATELY 7.0 PERCENT. UNDER THE
NEW AGREEMENT, DEFERRED INTEREST OF APPROXIMATELY $7.0 MILLION ACCRUED SINCE
MARCH 31, 2000 AND CERTAIN OTHER AMOUNTS WILL BE ADDED TO THE PRINCIPAL BALANCE
OF THE LOAN. TOTAL BALANCE OF THE FACILITY WILL BE APPROXIMATELY $152 MILLION,
WITH A NEW MATURITY DATE OF DECEMBER 31, 2004.
Brucker continued, "We believe the rate under the amended agreement is
reasonable, especially when we consider today's lending environment. That the
facility will remain unsecured and requires no mandated principal payments are
added points in the company's favor."
The agreement also provides for the company's banks to be given an equity
stake in the enterprise through a grant of preferred stock. The preferred shares
will be convertible into 10 percent of the post-conversion common stock on a
diluted basis (as defined), subject to stockholder approval. If the company
fails to convert lenders' preferred shares into common shares by the time the
facility matures, lenders will be paid at least $15 million in recognition of
the potential appreciation of the company's common stock during that time
period. Similarly, absent conversion to common, the preferred stockholders will
be eligible to receive a preference over common stockholders ranging from $10
million to $15 million in the event of certain other corporate transactions.
Rural/Metro's preferred shares cannot be traded on the open market, although
lenders will have registration rights.
Brucker continued, "We are hopeful that stockholders will recognize the
benefits provided under this agreement. As equity holders in Rural/Metro, we
believe the banks take on a greater interest in the Company's success and
long-term equity value because they, too, will benefit from future
achievements."
Stockholder approval to convert the lenders' preferred shares to fully
diluted common stock will be sought at the company's next annual meeting. "We
are confident our stockholders will recognize the long-term benefits of this
agreement and the financial flexibility it provides to the company," Brucker
explained.
Brucker continued, "The Company will be in full covenant compliance under
its amended credit facility, and can continue to build the financial strength
necessary to refinance or renegotiate the line at its new maturity date. All in
all, we believe the potential upsides to be significant."
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Rural/Metro Corporation provides mobile health services, including
emergency and non-emergency ambulance transportation, fire protection and other
safety-related services to municipal, residential, commercial and industrial
customers in approximately 400 communities in the United States.
EXCEPT FOR HISTORICAL INFORMATION HEREIN, THIS PRESS RELEASE CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY. THESE RISKS AND UNCERTAINTIES INCLUDE THE
COMPANY'S ABILITY TO CONCLUDE A DEFINITIVE AGREEMENT WITH ITS BANK GROUP;
MAINTAIN COMPLIANCE WITH COVENANT AND OTHER REQUIREMENTS OF THE AMENDED
AGREEMENT; EFFECTIVELY MANAGE COLLATERAL REQUIREMENTS AND COSTS RELATED TO THE
COMPANY'S INSURANCE COVERAGE; RETAIN EXISTING CONTRACTS; SECURE NEW CONTRACTS;
EFFECTIVELY CONTROL LABOR AND OTHER COSTS; INCREASE THE EFFICIENCY OF THE
COLLECTIONS PROCESS; AND IMPROVE OPERATING MARGINS. THE COMPANY DISCLAIMS ANY
OBLIGATION TO UPDATE ITS FORWARD-LOOKING STATEMENTS.
###
Additional Information and Where to Find It
The Company intends to file a preliminary proxy statement regarding the
conversion proposal with the Securities and Exchange Commission, and it intends
to mail a definitive proxy statement to its stockholders regarding the proposal.
Investors and stockholders of the Company are urged to read the definitive proxy
statement when it becomes available because it will contain important
information about the Company and the conversion proposal. Investors and
stockholders may obtain a free copy of the definitive proxy statement (when it
is available) and all of the Company's annual, quarterly and special reports at
the SEC's web site at www.sec.gov. The Company and its executive officers and
directors may be deemed to be participants in the solicitation of proxies from
the Company's stockholders in favor of the conversion proposal. Information
regarding the security ownership and other interests of the Company's executive
officers and directors will be included in the definitive proxy statement.
3
CONTACT: Liz Merritt, Rural/Metro Corporation, (480) 606-3337
FD Morgen-Walke, Investor Relations
Jim Byers (investors), (415) 439-4504
Christopher Katis (media), (415) 439-4515
FOR IMMEDIATE RELEASE
RURAL/METRO ANNOUNCES FOURTH-QUARTER AND FISCAL 2002 RESULTS, AMENDED CREDIT
FACILITY AND DIVESTITURE OF LATIN AMERICAN OPERATIONS
* 7.0% same-service-area revenue growth for fiscal 2002
* 7.9% increase in domestic EMS cash collections over prior year
* DSO holds steady at 74 days
SCOTTSDALE, ARIZ. (Sept. 30, 2002) - Rural/Metro Corporation (Nasdaq:
RURLC), a leading national provider of ambulance and fire protection services,
announced today unaudited results for the fourth quarter ended June 30, 2002 and
fiscal year 2002.
Results for the fiscal year ended June 30, 2002 reflect revenue of $497.0
million and earnings before interest, taxes, depreciation and amortization
(EBITDA) of $43.0 million. Net income for fiscal 2002 was $3.9 million, or $0.25
cents per fully diluted share, before the effect of a cumulative change in
accounting principle.
The company recorded a non-cash charge to earnings of $49.5 million ($3.14
per share) related to the adoption of Statement of Financial Accounting
Standards (FAS) No. 142, "Goodwill and Other Intangibles." This amount was
recorded as a cumulative effect of a change in accounting principle as of July
1, 2001. The company also recorded a charge of $2.0 million during the quarter
to increase its reserve for workers' compensation claims.
In total, the company reported a fiscal 2002 net loss of $45.6 million, or
$2.89 per fully diluted share, including the effect of a cumulative change in
accounting principle. This compares to a net loss of $226.7 million, or $15.38
per share, for fiscal 2001.
The company reported fourth-quarter revenue of $123.0 million, a net loss
of $454,000, and EBITDA of $9.0 million, excluding the charge for workers'
compensation expenses. Including the charge, the company reported a
fourth-quarter net loss of $2.5 million, or $0.16 per fully diluted share,
compared to a net loss of $177.4 million, or $11.91 per share for the same
period of the prior year.
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Jack Brucker, President and Chief Executive Officer, said, "The company
maintained positive operating trends throughout fiscal 2002, demonstrated by
consistent improvements in billing and collections, cash flow, and
same-service-area growth. Our objective is to sustain these achievements while
continuing to provide the finest care and protection to our patients and
customers." Same-service-area medical transportation and related revenue
increased 7.0 percent overall for the year, compared to the prior year.
Brucker continued, "We also entered into more than a dozen new and renewal
agreements during the fiscal year to provide emergency and non-emergency
ambulance and fire protection services, representing more than $46 million in
revenue annually. In the first few weeks of fiscal 2003, we have been awarded
significant renewal contracts totaling approximately $52 million in annual
revenue."
Billing and collections initiatives continued to result in historically low
average days' sales outstanding (DSO). Average DSO was 74 days for the fourth
quarter and fiscal year ended June 30, 2002, compared to 89 days for the same
period of fiscal 2001. Brucker added, "We are very pleased that the system
enhancements we have introduced are continuing to expedite and maximize
reimbursement for ambulance services."
Effective billing and collections efforts also contributed to improved
cash-flow performance. Cash collected in excess of domestic EMS revenue for
fiscal 2002 was $5.8 million. Cash collections from ongoing operations improved
7.9 percent during the fourth quarter, compared to the same quarter of the prior
year.
"Looking ahead to fiscal 2003, we are off to a solid start," Brucker said.
"New initiatives are under way to further enhance and refine our billing and
collections systems, to target additional market share in order to sustain
profitable growth, and to create greater operational efficiencies. We are
excited about the possibilities and look forward to achieving our objectives in
the coming year."
The company is releasing unaudited fiscal year 2002 results at this time
pending the finalization of an amended credit facility with its lenders. The
company released a separate announcement today that outlines the terms of the
proposed agreement. The company will file its annual Form 10-K and audited
financial statements on or before October 14, 2002, with results expected to
remain consistent with today's announcement.
Brucker continued, "We are very pleased to bring our bank discussions to a
close and announce the proposed terms of our amended credit facility. We have
worked diligently to create a solution that we believe will support the
company's long-term operational and financial objectives."
The agreement provides for the company's banks to receive an equity stake
in the company through a grant of preferred stock. Rural/Metro stockholders will
be asked at the company's next annual meeting to approve additional common
shares in connection with the agreement.
"From a practical standpoint, as equity holders, our lenders will share a
greater interest in the company's long-term success. From a financial
standpoint, the agreement allows for increased flexibility and future growth,"
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he said. "We believe this is the best solution for the company at this time and
ask that stockholders give the proposal to authorize additional shares their
full consideration."
The company also announced today that it has divested its Latin American
operations in Argentina and Bolivia to management of those operations for
consideration of assumed liabilities. The transaction includes the company's
ambulance and urgent home medical care business in Argentina, known as
Emergencias Cardio Coronarias (ECCO), and its aircraft rescue and fire fighting
operations in Bolivia. The company will record the effect of the transaction in
the first quarter of fiscal 2003.
Brucker continued, "The economic decline in Latin America, coupled with our
strategic objective to focus on domestic growth, were primary factors in our
decision to divest the operations at this time. We believe the interests of all
stakeholders are best served through this transaction."
Rural/Metro Corporation provides emergency and non-emergency ambulance
transportation, fire protection, and other safety services to municipal,
residential, commercial and industrial customers in approximately 400
communities throughout the United States.
Q4 Q1 Q2 Q3 Q4
(6/30/01) (9/30/01) (12/31/01) (3/31/02) (6/30/02)
--------- --------- ---------- --------- ---------
REVENUE $124.2 $125.7 $123.8 $124.7 $123.0
million million million million million
AVERAGE EMS
PATIENT CHARGE
(NET/NET) $252 $267 $271 $281 $284
DOMESTIC EMS
TRANSPORTS 266,730 265,076 256,292 265,207 259,090
AVERAGE
DSO (YTD) 89 76 75 74 74
EXCEPT FOR HISTORICAL INFORMATION HEREIN, THIS PRESS RELEASE CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY. THESE RISKS AND UNCERTAINTIES INCLUDE,
AMONG OTHERS, THE SUFFICIENCY OF THE COMPANY'S CASH RESOURCES; THE ABILITY TO
SUSTAIN OPERATING CASH FLOW; SECURE NEW CONTRACTS; RETAIN EXISTING CONTRACTS;
IMPROVE EARNINGS AND OPERATING MARGINS; FURTHER ENHANCE THE EFFICIENCY OF THE
COLLECTION PROCESS; THE COMPANY'S ABILITY TO CONCLUDE A DEFINITIVE AGREEMENT
6
WITH ITS BANK GROUP; MAINTAIN COMPLIANCE WITH COVENANT AND OTHER REQUIREMENTS OF
ITS CREDIT FACILITY; AND EFFECTIVELY MANAGE COLLATERAL REQUIREMENTS AND COSTS
RELATED TO ITS INSURANCE COVERAGE. THE COMPANY DISCLAIMS ANY OBLIGATION TO
UPDATE ITS FORWARD-LOOKING STATEMENTS.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
The Company intends to file a preliminary proxy statement regarding the
conversion proposal with the Securities and Exchange Commission, and it intends
to mail a definitive proxy statement to its stockholders regarding the proposal.
Investors and stockholders of the Company are urged to read the definitive proxy
statement when it becomes available because it will contain important
information about the Company and the conversion proposal. Investors and
stockholders may obtain a free copy of the definitive proxy statement (when it
is available) and all of the Company's annual, quarterly and special reports at
the SEC's web site at www.sec.gov. The Company and its executive officers and
directors may be deemed to be participants in the solicitation of proxies from
the Company's stockholders in favor of the conversion proposal. Information
regarding the security ownership and other interests of the Company's executive
officers and directors will be included in the definitive proxy statement.
(Tables to Follow)
###
7
RURAL/METRO CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2002 AND JUNE 30, 2001
(IN THOUSANDS)
JUNE 30, JUNE 30,
2002 2001
--------- ---------
(UNAUDITED)
ASSETS
CURRENT ASSETS
CASH $ 9,828 $ 8,699
ACCOUNTS RECEIVABLE, NET 99,115 103,260
INVENTORIES 12,220 13,173
PREPAID EXPENSES AND OTHER 9,597 6,753
--------- ---------
TOTAL CURRENT ASSETS 130,760 131,885
--------- ---------
PROPERTY AND EQUIPMENT, NET 48,532 57,999
GOODWILL 41,244 90,757
OTHER ASSETS 16,902 17,893
--------- ---------
TOTAL ASSETS $ 237,438 $ 298,534
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 11,961 $ 12,915
ACCRUED LIABILITIES 73,719 96,340
NON-REFUNDABLE SUBSCRIPTION FEE INCOME 15,409 14,707
CURRENT PORTION OF LONG-TERM DEBT 1,633 294,439
--------- ---------
TOTAL CURRENT LIABILITIES 102,722 418,401
--------- ---------
LONG-TERM DEBT, NET OF CURRENT PORTION 298,529 1,286
OTHER LIABILTIES 477 994
DEFERRED INCOME TAXES 650 --
--------- ---------
TOTAL LIABILITIES 402,378 420,681
--------- ---------
MINORITY INTEREST 379 8,379
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK 159 152
ADDITIONAL PAID-IN CAPITAL 138,470 137,948
ACCUMULATED DEFICIT (313,025) (267,401)
ACCUMULATED OTHER COMPREHENSIVE INCOME 10,316 14
TREASURY STOCK (1,239) (1,239)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (165,319) (130,526)
--------- ---------
$ 237,438 $ 298,534
========= =========
8
RURAL/METRO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND YEAR ENDED JUNE 30, 2002 AND 2001
(In thousands, except per share amounts)
THREE MONTHS ENDED JUNE 30, YEAR ENDED JUNE 30,
--------------------------- ----------------------
2002 2001 2002 2001
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
NET REVENUE $ 122,951 $ 124,147 $ 497,038 $ 504,316
OPERATING EXPENSES
Payroll and employee benefits 71,234 80,999 287,307 301,055
Provision for doubtful accounts 18,238 34,944 69,900 102,470
Depreciation 2,974 5,346 15,155 21,809
Amortization of intangibles 986 1,799 1,055 7,352
Other operating expenses 27,066 50,037 97,639 142,009
Asset impairment charges -- 94,353 -- 94,353
Loss on disposition of clinic
operations -- 9,374 -- 9,374
Contract termination costs and
related asset impairment (107) 4,066 (107) 9,256
Restructuring charge and other (493) 9,091 (718) 9,091
--------- --------- --------- ---------
Total expenses 119,898 290,009 470,231 696,769
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 3,053 (165,862) 26,807 (192,453)
Interest expense, net (6,157) (6,706) (24,976) (30,001)
Other income (expense), net -- (3,699) 9 (2,402)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (3,104) (176,267) 1,840 (224,856)
Income tax (provision) benefit 650 (1,159) 2,050 (1,875)
--------- --------- --------- ---------
NET INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (2,454) (177,426) 3,890 (226,731)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- (49,514) --
--------- --------- --------- ---------
NET LOSS $ (2,454) $(177,426) $ (45,624) $(226,731)
========= ========= ========= =========
INCOME (LOSS) PER SHARE:
BASIC
Income (loss) before cumulative
effect of a change in accounting
principle $ (0.16) $ (11.91) $ 0.26 $ (15.38)
Cumulative effect of change in
accounting principle -- -- (3.26) --
--------- --------- --------- ---------
Net loss $ (0.16) $ (11.91) $ (3.00) $ (15.38)
========= ========= ========= =========
DILUTED
Income (loss) before cumulative
effect of a change in accounting
principle $ (0.16) $ (11.91) $ 0.25 $ (15.38)
Cumulative effect of change in
accounting principle -- -- (3.14) --
--------- --------- --------- ---------
Net loss $ (0.16) $ (11.91) $ (2.89) $ (15.38)
========= ========= ========= =========
AVERAGE NUMBER OF
SHARES OUTSTANDING -
BASIC 15,508 14,900 15,190 14,744
========= ========= ========= =========
AVERAGE NUMBER OF
SHARES OUTSTANDING -
DILUTED 15,508 14,900 15,773 14,744
========= ========= ========= =========
9
RURAL/METRO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2002
(IN THOUSANDS)
2002 2001
--------- ---------
(UNAUDITED)
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (45,624) $(226,731)
Adjustments to reconcile net income to cash
provided by operations--
Non-cash portion of restructuring charge -- 4,092
Non-cash portion of contract termination -- 8,086
Asset impairment charges -- 94,353
Loss on disposal of clinic operations -- 9,374
Cumulative effect of change in accounting principle 49,514 --
Depreciation and amortization 16,210 29,161
Amortization of gain on sale of real estate -- (101)
Gain on sale of property and equipment (285) (326)
Provision for doubtful accounts 69,900 102,470
Deferred income taxes 650 --
(Undistributed earnings) losses of minority shareholder (9) 3,019
(Undistributed earnings) distributions in excess of
earnings of public/private partnership (249) 118
Amortization of discount on Senior Notes 26 26
Change in assets and liabilities -
Increase in accounts receivable (67,322) (62,099)
Decrease in inventories 948 5,811
(Increase) decrease in prepaid expenses (3,018) 1,072
(Increase) decrease in other assets (1,896) 2,463
Increase (decrease) in accounts payable 1,337 (2,654)
Increase (decrease) in accrued liabilities and other
liabilities (11,629) 40,007
Increase (decrease) in non-refundable subscription income 702 (282)
--------- ---------
Net cash provided by operating activities 9,255 7,859
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (6,854) (5,774)
Proceeds from the sale of property and equipment 1,022 1,969
--------- ---------
Net cash used in investing activities (5,832) (3,805)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Repayments on revolving credit facility (1,263) (3,765)
Repayment of debt and capital lease obligations (1,862) (2,773)
Borrowings under capital lease obligations -- 283
Issuance of common stock 529 348
--------- ---------
Net cash used in financing activities (2,596) (5,907)
--------- ---------
EFFECT OF CURRENCY EXCHANGE RATE CHANGE 302 265
--------- ---------
INCREASE (DECREASE) IN CASH 1,129 (1,588)
CASH, beginning of period 8,699 10,287
--------- ---------
CASH, end of period $ 9,828 $ 8,699
========= =========
10