-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DV7d0nsOw8x9qSSV1lm3lqrVL5cyS8xc8JliaJ5JcVvIKgJTtQ+Xm3CGhAtb7W2t LUrSmThw2I9qb0M6m9Rkgw== 0000950153-96-000883.txt : 19961118 0000950153-96-000883.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950153-96-000883 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RURAL METRO CORP /DE/ CENTRAL INDEX KEY: 0000906326 STANDARD INDUSTRIAL CLASSIFICATION: LOCAL & SUBURBAN TRANSIT & INTERURBAN HWY PASSENGER TRAINS [4100] IRS NUMBER: 860746929 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22056 FILM NUMBER: 96663989 BUSINESS ADDRESS: STREET 1: 8401 EAST INDIAN SCHOOL RD CITY: SCOTTSDALE STATE: AZ ZIP: 85251 BUSINESS PHONE: 6029443886 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED 09/30/96 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ Commission file number 0-22056 RURAL/METRO CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 86-0746929 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 8401 EAST INDIAN SCHOOL ROAD SCOTTSDALE, ARIZONA 85251 (Address of principal executive offices) (Zip Code) (602) 994-3886 (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. Yes X No --- --- At November 12, 1996 there were 11,450,108 shares of Common Stock outstanding, exclusive of treasury shares held by the Registrant. 2 RURAL/METRO CORPORATION INDEX TO QUARTERLY REPORT ON FORM 10-Q Page Part I. Financial Statements Item 1. Consolidated Financial Statements: Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 -2- 3 RURAL/METRO CORPORATION CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1996 AND JUNE 30, 1996 (IN THOUSANDS)
September 30, June 30, 1996 1996 --------- --------- (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 745 $ 1,388 Accounts receivable, net 76,532 68,642 Inventories 5,556 5,170 Prepaid expenses and other 5,933 5,710 --------- --------- Total current assets 88,766 80,910 PROPERTY AND EQUIPMENT, net 49,205 48,401 INTANGIBLE ASSETS, net 95,385 96,373 OTHER ASSETS 4,956 4,430 --------- --------- $ 238,312 $ 230,114 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,484 $ 4,092 Accrued liabilities 14,083 14,806 Current portion of long-term debt 6,651 6,610 --------- --------- Total current liabilities 24,218 25,508 LONG-TERM DEBT, net of current portion 63,228 60,731 NON-REFUNDABLE SUBSCRIPTION INCOME 12,893 12,582 DEFERRED INCOME TAXES 9,017 9,060 OTHER LIABILITIES 1,801 2,267 --------- --------- Total liabilities 111,157 110,148 --------- --------- STOCKHOLDERS' EQUITY Preferred stock -- -- Common stock 115 113 Additional paid-in capital 96,084 92,359 Retained earnings 33,480 30,181 Deferred compensation (1,285) (1,448) Treasury stock (1,239) (1,239) --------- --------- Total stockholders' equity 127,155 119,966 --------- --------- $ 238,312 $ 230,114 ========= =========
The accompanying notes are an integral part of these consolidated balance sheets. -3- 4 RURAL/METRO CORPORATION CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three months ended September 30, -------------------------------- 1996 1995 ------- ------- (Unaudited) REVENUE Ambulance services $59,028 $43,404 Fire protection services 10,305 9,255 Other 4,661 3,104 ------- ------- Total revenue 73,994 55,763 ------- ------- OPERATING EXPENSES Payroll and employee benefits 40,634 30,462 Provision for doubtful accounts 9,755 6,818 Depreciation 2,733 2,138 Amortization of intangibles 1,090 829 Other operating expenses 13,190 10,702 ------- ------- Total expenses 67,402 50,949 ------- ------- OPERATING INCOME 6,592 4,814 INTEREST EXPENSE, net 1,010 1,149 ------- ------- INCOME BEFORE INCOME TAXES 5,582 3,665 PROVISION FOR INCOME TAXES 2,283 1,563 ------- ------- NET INCOME $ 3,299 $ 2,102 ======= ======= EARNINGS PER COMMON STOCK AND COMMON STOCK EQUIVALENT $ 0.28 $ 0.23 ======= ======= WEIGHTED AVERAGE NUMBER OF COMMON STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING 11,944 9,307
The accompanying notes are an integral part of these consolidated financial statements. -4- 5 RURAL/METRO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) (IN THOUSANDS)
Three months ended September 30, -------------------------------- 1996 1995 -------- -------- CASH FLOW FROM OPERATING ACTIVITIES Net income $ 3,299 $ 2,102 Adjustments to reconcile net income to cash provided by (used in) operations -- Depreciation and amortization 3,823 2,967 Amortization of deferred compensation 163 137 Amortization of gain on sale of real estate (26) (9) Provision for doubtful accounts 9,755 6,818 Change in assets and liabilities, net of effect of businesses acquired -- Increase in accounts receivable (17,645) (11,386) Increase in inventories (386) (2) Increase in prepaid expenses and other (325) (1,218) Decrease in accounts payable (608) (1,697) Increase (decrease) in accrued liabilities and other (1,163) 2,080 Increase in nonrefundable subscription income 311 210 Increase (decrease) in deferred income taxes (43) 477 -------- -------- Net cash provided by (used in) operating activities (2,845) 479 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on revolving credit facilities, net 4,000 15,600 Repayments of debt and capital lease obligations (1,462) (10,577) Borrowings of debt -- 2,016 Issuance of common stock 3,727 855 -------- -------- Net cash provided by financing activities 6,265 7,894 -------- -------- CASH FLOW FROM INVESTING ACTIVITIES Capital expenditures (3,537) (3,295) Increase in other assets (526) (54) Cash paid for businesses acquired -- (1,857) -------- -------- Net cash used in investing activities (4,063) (5,206) -------- -------- INCREASE (DECREASE) IN CASH AND CASH (643) 3,167 EQUIVALENTS CASH AND CASH EQUIVALENTS, beginning of period 1,388 900 -------- -------- CASH AND CASH EQUIVALENTS, end of period $ 745 $ 4,067 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. -5- 6 RURAL/METRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. INTERIM RESULTS In the opinion of management, the consolidated financial statements for the three month periods ended September 30, 1996 and 1995 include all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the consolidated financial position and results of operations for that period. The results of operations for the three month periods ended September 30, 1996 and 1995 are not necessarily indicative of the results of operations for a full fiscal year. -6- 7 ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company derives its revenue primarily from fees charged for ambulance and fire protection services. The Company provides ambulance services in response to emergency medical calls ("911" emergency ambulance services) and non-emergency transport services (general transport services) to patients on both a fee-for-service basis and non-refundable subscription fee basis. Per transport revenue depends on various factors, including the mix of rates between existing markets and new markets and the mix of activity between "911" emergency ambulance services and general transport services as well as other competitive factors. Fire protection services are provided either under contracts with municipalities or fire districts or on a non-refundable subscription fee basis to individual homeowners or commercial property owners. Ambulance service fees are recorded net of Medicare, Medicaid and other reimbursement limitations and are recognized when services are provided. Payments received from third-party payors represent a substantial portion of the Company's ambulance service fee receipts. Provision for doubtful accounts is made for the expected difference between ambulance services fees and amounts actually collected. The Company's provision for doubtful accounts generally is higher with respect to collections to be derived directly from patients than for collections to be derived from third-party payors and generally is higher for "911" emergency ambulance services than for general ambulance transport services. Because of the nature of the Company's ambulance services, it is necessary to respond to a number of calls, primarily "911" emergency ambulance service calls, which may not result in transports. Results of operations are discussed below on the basis of actual transports since transports are more directly related to revenue. Expenses associated with calls that do not result in transports are included in operating expenses. The percentage of calls not resulting in transports varies substantially depending upon the mix of general transport and "911" emergency ambulance service calls in the Company's markets and is generally higher in markets in which the calls are primarily "911" emergency ambulance service calls. Rates in the Company's markets take into account the anticipated number of calls that may not result in transports. The Company does not separately account for expenses associated with calls that do not result in transports. Revenue generated under fire protection services contracts is recognized over the life of the contract. Subscription fees received in advance are deferred and recognized over the term of the subscription agreement, which is generally one year. Other revenue consists primarily of fees associated with alternative transportation services and is recognized when the services are provided. Other operating expenses consist primarily of rent and related occupancy expenses, maintenance and repairs, insurance, fuel and supplies, travel and professional fees. -7- 8 THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1995 REVENUE Total revenue increased $18.2 million, or 32.6%, from $55.8 million for the three months ended September 30, 1995 to $74.0 million for the three months ended September 30, 1996. Approximately $11.3 million of this increase resulted from the acquisition of ambulance service providers during the last three quarters of fiscal 1996. Ambulance service revenue in markets served by the Company in both of the three month periods ended September 30, 1995 and 1996 increased by 9.9%. Fire protection services revenue increased by $1.0 million, or 10.8%, from $9.3 million for the three months ended September 30, 1995 to $10.3 million for the three months ended September 30, 1996. Other revenue increased by $1.6 million, or 51.6%, in the three months ended September 30, 1996. Total ambulance transports increased by 43,000, or 26.2%, from 164,000 for the three months ended September 30, 1995 to 207,000 for the three months ended September 30, 1996. The acquisition of fourteen ambulance service companies during the last three quarters of fiscal 1996 accounted for 36,000 of these additional transports. Fire protection services revenue increased due to revenue generated from new fire protection contracts awarded to the Company through competitive bidding and due to rate increases for fire protection services. OPERATING EXPENSES Payroll and employee benefit expenses increased $10.1 million, or 33.1%, from $30.5 million for the three months ended September 30, 1995 to $40.6 million for the three months ended September 30, 1996. This increase was primarily due to the acquisition of fourteen ambulance service providers during the last three quarters of fiscal 1996. Provision for doubtful accounts increased $3.0 million, or 44.1%, from $6.8 million for the three months ended September 30, 1995 to $9.8 million for the three months ended September 30, 1996. Provision for doubtful accounts increased from 12.2% of total revenue for the three months ended September 30, 1995 to 13.2% of total revenue for the three months ended September 30, 1996, reflecting the effect of the acquisition of ambulance service providers during the second half of fiscal 1996 operating in markets with a greater mix of "911" emergency activity. Depreciation increased $0.6 million, or 28.6%, from $2.1 million for the three months ended September 30, 1995 to $2.7 million for the three months ended September 30, 1996, primarily as a result of increased property and equipment caused primarily by recent acquisition activity. Depreciation decreased from 3.8% of total revenue for the three months ended September 30, 1995 to 3.7% of total revenue for the three months ended September 30, 1996. Amortization of intangibles increased by $0.3 million, or 37.5%, from $0.8 million for the three months ended September 30, 1995 to $1.1 million for the three months ended September 30, 1995. This increase is primarily a result of increased intangible assets caused by recent acquisition activity. Amortization of intangibles was 1.5% of total revenue for the three months ended September 30, 1995 and 1996. Other operating expenses increased approximately $2.5 million, or 23.3%, from $10.7 million for the three months ended September 30, 1995 to $13.2 million for the three months ended September 30, 1996, primarily due to increased expenses associated with the operation of the fourteen -8- 9 ambulance service providers acquired during the last three quarters of fiscal 1996. Other operating expenses decreased from 19.2% of total revenue for the three months ended September 30, 1995 to 17.8% of total revenue for the three months ended September 30, 1996 as a result of operational efficiencies. Interest expense decreased by $0.1 million from $1.1 million for the three months ended September 30, 1995 to $1.0 million for the three months ended September 30, 1996. This decrease was attributable to lower interest rates on the Company's $125 million revolving credit facility which was funded in September 1995. The Company's effective tax rate decreased from 42.6% for the three months ended September 30, 1995 to 40.9% for the three months ended September 30, 1996, primarily the result of tax planning strategies implemented by the Company during fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has financed its cash requirements principally through cash flow from operating activities, term and revolving indebtedness, capital equipment lease financing, the sale of stock through an initial public offering in July 1993, subsequent public stock offerings in May 1994 and April 1996, and the on-going exercise of stock options. During the three months ended September 30, 1996 the Company used cash flow from operations of $2.8 million. This compares to cash flow provided by operations of $0.5 million for the three months ended September 30, 1995. This change resulted primarily from increases in accounts receivable, inventories and prepaid expenses and a decrease in accounts payable and other accrued liabilities. Approximately $54.0 million was outstanding on the Company's revolving credit facility at September 30, 1996. The Company expects that cash flow from operations and additional borrowing capacity will be sufficient to meet its operating and capital needs for existing operations as well as to fund certain service area expansion and acquisitions for the twelve months subsequent to September 30, 1996. The Company is engaged in an active acquisition program. The Company intends to fund any acquisitions that it consummates through the use of cash from operations, credit facilities, seller notes payable and the issuance of common stock. In addition, the Company may seek to raise additional capital through public or private debt or equity financing. The availability of these capital sources will depend upon prevailing market conditions, interest rates and the financial condition of the Company. -9- 10 RURAL/METRO CORPORATION AND SUBSIDIARIES PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - none (b) Reports on Form 8-K - none -10- 11 SIGNATURES 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. RURAL/METRO CORPORATION Date: November 14, 1996 By /s/ W. R. Crowell ------------------ W. R. Crowell, Vice President and Principal Accounting Officer -11- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 YEAR JUN-30-1997 JUL-01-1996 SEP-30-1996 745 0 100,764 24,232 5,556 88,766 88,863 39,658 238,312 24,218 69,879 0 0 115 127,040 238,312 73,994 73,994 0 57,647 0 9,755 1,010 5,582 2,283 3,299 0 0 0 3,299 .28 .28
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