SCHEDULE 14A
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Rule14a-6(e)(2))
RURAL/METRO CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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The following is a press release issued by Rural/Metro Corporation on November
14, 2002.
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 POSTS $3.8 MILLION NET INCOME FOR FISCAL 2003
FIRST QUARTER; EPS $0.21 CENTS FROM CONTINUING OPERATIONS
* 8% GAIN IN DOMESTIC REVENUE OVER PRIOR YEAR
* 33% INCREASE IN DOMESTIC EBITDA OVER PRIOR YEAR
* DAYS' SALES OUTSTANDING DROPS TO 71 DAYS
SCOTTSDALE, ARIZ. (Nov. 14, 2002) - Rural/Metro Corporation (Nasdaq: RURL),
a leading national provider of medical transportation and fire protection
services, announced today the results of its fiscal 2003 first quarter, which
ended September 30, 2002.
The company reported the following first-quarter results from continuing
operations: Net revenue of $125.6 million, compared to $116.5 million in net
revenue for the same period of the prior year. Net income was $3.8 million, and
earnings before interest, taxes, depreciation and amortization (EBITDA) was
$13.2 million, compared to a net loss of $990,000 and EBITDA of $9.9 million in
the first quarter of fiscal 2002. The company generated earnings per fully
diluted share of $0.21 cents, compared to a loss of $0.07 cents per share for
the same period of last year.
The company posted $12.3 million in net income from discontinued operations
in Latin America, which included a $12.5 million gain from the first-quarter
divestiture of those operations. The transaction was finalized on September 27,
2002 and included the company's operations in Argentina and Bolivia for
consideration of assumed liabilities. Including the Latin American transaction,
the company's first-quarter net income was $16.1 million, with corresponding
EBITDA of $25.6 million, and fully diluted earnings per share of $0.91 cents.
The company attributed its progress to continuing advancements in
operational and billing efficiencies, as well as revenue growth in medical
transportation and wildland firefighting services. Same-service-area revenue
growth among the company's medical transportation divisions increased 9 percent
over fiscal 2002 levels.
Jack Brucker, President and Chief Executive Officer, said, "First-quarter
results reflect our ongoing efforts to enhance operational efficiencies and
leverage our reputation and presence in growing regional marketplaces. We are
pleased with the progress and will continue to devote our full attention to
achieving our goals throughout fiscal 2003."
A series of significant contract renewals were awarded during the quarter,
in addition to the start of a new, 911 EMS contract in Forsyth County, Georgia.
Medical transportation contract renewals included Rochester, New York; and Knox
County, Tennessee. Additionally, the company's National Fire Safety Division won
a new contract to provide aircraft rescue and fire fighting services to
McClellen-Palomar Airport in Carlsbad, California, and renewed key fire
protection contracts with CITGO Petroleum Corp., Sikorsky Aircraft Corp., and
the Port Columbus (Ohio) International Airport.
Cash collection performance continued to trend positively during the
quarter, with average days' sales outstanding (DSO) improving to 71 days,
compared to an average of 76 days for the same period a year ago. "We continue
to strengthen and enhance our billing and collections systems, placing
particular emphasis on pre-screening non-emergency requests for medical
transports and redoubling our collections efforts on private-pay accounts,"
Brucker said.
At the close of the first quarter, the company also finalized an agreement
to amend its $152 million credit facility and extend the maturity date to
December 31, 2004. The facility requires no principal amortization until
maturity, is unsecured, and returns the company to full covenant compliance.
Additionally, it carries an adjustable LIBOR-based interest rate, which was
approximately 8.8 percent at the commencement of the loan. In conjunction with
the agreement, the company's bank group became 10-percent equity holders through
a grant of preferred shares that are automatically convertible, with stockholder
approval, to common shares.
Brucker continued, "This solution is a very important step in our ongoing
plan to maintain financial strength while positioning the company to capitalize
on future growth opportunities, particularly in the medical transportation
sector."
Stockholder approval to convert lenders' preferred shares to fully diluted
common shares will be sought at the company's next annual meeting. "Management
believes the amended credit facility is a key link in the company's long-term
path to success," Brucker explained. "It will enable us to continue to
strengthen the fundamentals of our core business, expand in good-performing
regional service areas, and selectively pursue contract opportunities in new
markets. For these reasons, we believe it is vital that the Company's
stockholders approve the upcoming proposal."
Q1 `02 Q2 `02 Q3 `02 Q4 `02 Q1 `03
(9/30/01) (12/31/01) (3/31/02) (6/30/02) (9/30/02)
--------- ---------- --------- --------- ---------
REVENUE FROM
CONTINUING $116.5 $114.3 $120.5 $120.3 $125.6
OPERATIONS million million million million million
AVERAGE EMS
PATIENT CHARGE
(NET/NET) $267 $271 $281 $284 $287
DOMESTIC EMS
TRANSPORTS 265,076 256,292 265,207 259,090 263,194
AVERAGE
DSO (YTD) 76 75 74 74 71
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 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.
RURAL/METRO CORPORATION
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2002 AND JUNE 30, 2002
(In Thousands)
September 30, June 30,
2002 2002
--------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 4,417 $ 9,828
Accounts receivable, net 97,736 99,115
Inventories 11,666 12,220
Prepaid expenses and other 8,750 9,015
--------- ---------
Total current assets 122,569 130,178
--------- ---------
PROPERTY AND EQUIPMENT, net 46,524 48,532
GOODWILL 41,167 41,244
OTHER ASSETS 23,703 17,484
--------- ---------
Total assets $ 233,963 $ 237,438
========= =========
LIABILITIES, REDEEMBABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 10,135 11,961
Accrued liabilities 53,934 73,719
Deferred subscription fees 15,632 15,409
Current portion of long-term debt 1,543 1,633
--------- ---------
Total current liabilities 81,244 102,722
--------- ---------
LONG-TERM DEBT, net of current portion 306,288 298,529
OTHER LIABILTIES 408 477
DEFERRED INCOME TAXES 650 650
--------- ---------
Total liabilities 388,590 402,378
--------- ---------
MINORITY INTEREST 379 379
--------- ---------
REDEEMABLE PREFERRED STOCK 4,189 --
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 164 159
Additional paid-in capital 138,760 138,470
Accumulated deficit (296,880) (313,025)
Accumulated other comprehensive income -- 10,316
Treasury stock (1,239) (1,239)
--------- ---------
Total stockholders' deficit (159,195) (165,319)
--------- ---------
$ 233,963 $ 237,438
========= =========
RURAL/METRO CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended September 30, 2002 and 2001
(Unaudited)
(In thousands, except per share amounts)
2002 2001
--------- ---------
NET REVENUE $ 125,565 $ 116,474
--------- ---------
OPERATING EXPENSES
Payroll and employee benefits 71,112 68,321
Provision for doubtful accounts 18,725 16,738
Depreciation and amortization 3,440 4,031
Other operating expenses 22,534 21,530
--------- ---------
Total operating expenses 115,811 110,620
--------- ---------
OPERATING INCOME 9,754 5,854
Interest expense, net (5,886) (6,824)
Other -- --
--------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES AND THE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 3,868 (970)
INCOME TAX PROVISION (55) (20)
--------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 3,813 (990)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (including
gain on disposal of Latin American operations of
$12,488 in 2002) 12,332 (200)
--------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 16,145 (1,190)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- (49,513)
--------- ---------
NET INCOME (LOSS) $ 16,145 $ (50,703)
========= =========
INCOME (LOSS) PER SHARE
Basic-
Income (loss) from continuing operations before
cumulative effect of change in accounting principle $ 0.24 $ (0.07)
Income (loss) from discontinued operations 0.77 (0.01)
--------- ---------
Income (loss) before cumulative effect of change in
accounting principle 1.01 (0.08)
Cumulative effect of change in accounting principle -- (3.29)
--------- ---------
Net income (loss) $ 1.01 $ (3.37)
========= =========
Diluted-
Income (loss) from continuing operations before cumulative
effect of change in accounting principle $ 0.21 $ (0.07)
Income (loss) from discontinued operations 0.70 (0.01)
--------- ---------
Income (loss) before cumulative effect of change in
accounting principle $ 0.91 $ (0.08)
Cumulative effect of change in accounting principle -- (3.29)
--------- ---------
Net income (loss) $ 0.91 $ (3.37)
========= =========
AVERAGE NUMBER OF
SHARES OUTSTANDING -BASIC 15,994 15,031
========= =========
AVERAGE NUMBER OF
SHARES OUTSTANDING - DILUTED 17,778 15,031
========= =========
RURAL/METRO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)
(In thousands)
2002 2001
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) $ 16,145 $(50,703)
Adjustments to reconcile net income (loss) to cash
used in operating activities--
Non-cash portion of gain on disposition of Latin American operations (13,732) --
Cumulative effect of a change in accounting principle -- 49,513
Depreciation and amortization 3,448 4,331
(Gain) loss on sale of property and equipment (172) 57
Provision for doubtful accounts 18,725 16,886
Equity earnings net of distributions received (877) (104)
Amortization of debt discount 6 6
Change in assets and liabilities -
Increase in accounts receivable (17,926) (19,045)
Decrease in inventories 493 23
Decrease in prepaid expenses 71 88
(Increase) decrease in other assets 708 (965)
Increase (decrease) in accounts payable (1,791) 2,490
Decrease in accrued liabilities and other liabilities (8,324) (7,856)
Increase (decrease) in non-refundable subscription income 224 (49)
-------- --------
Net cash used in operating activities (3,002) (5,328)
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (2,011) (1,501)
Proceeds from the sale of property and equipment 214 332
-------- --------
Net cash used in investing activities (1,797) (1,169)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Repayments on revolving credit facility -- (13)
Repayment of debt and capital lease obligations (356) (443)
Cash paid for debt issuance costs (391) --
Issuance of common stock 156 153
-------- --------
Net cash used in financing activities (591) (303)
-------- --------
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH (21) (40)
-------- --------
DECREASE IN CASH (5,411) (6,840)
CASH, beginning of period 9,828 8,699
-------- --------
CASH, end of period $ 4,417 $ 1,859
======== ========