-----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, OGAC0A0Dwpe08/magHUvlCsuXG1xh3F4ocuCK4Y9dWoBBd3vQ1kRML+IAuX6bhK8 gHfSAxrG7e3tas3agkLN2Q== 0000950153-97-000500.txt : 19970515 0000950153-97-000500.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950153-97-000500 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97604977 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 PERIOD ENDED MARCH 31, 1997 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 March 31, 1997 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 (State or other jurisdiction of incorporation or organization) 86-0746929 (I.R.S. Employer 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 May 9, 1997 there were 11,875,158 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 9 Part II. Other Information Item 2(c). Changes in Securities 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14
-2- 3 RURAL/METRO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND JUNE 30, 1996 (IN THOUSANDS)
March 31, June 30, 1997 1996 --------- --------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 730 $ 1,388 Accounts receivable, net 96,836 68,642 Inventories 6,638 5,170 Prepaid expenses and other 6,418 5,710 --------- --------- Total current assets 110,622 80,910 PROPERTY AND EQUIPMENT, net 58,411 48,401 INTANGIBLE ASSETS, net 117,218 96,373 OTHER ASSETS 7,096 4,430 --------- --------- $ 293,347 $ 230,114 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,843 $ 4,092 Accrued liabilities 14,046 14,806 Current portion of long-term debt 7,027 6,610 --------- --------- Total current liabilities 24,916 25,508 LONG-TERM DEBT, net of current portion 101,475 60,731 NON-REFUNDABLE SUBSCRIPTION INCOME 12,955 12,582 DEFERRED INCOME TAXES 10,042 9,060 OTHER LIABILITIES 2,552 2,267 --------- --------- Total liabilities 151,940 110,148 --------- --------- STOCKHOLDERS' EQUITY Common stock 120 113 Additional paid-in capital 100,517 92,359 Retained earnings 42,956 30,181 Deferred compensation (947) (1,448) Treasury stock (1,239) (1,239) --------- --------- Total stockholders' equity 141,407 119,966 --------- --------- $ 293,347 $ 230,114 ========= =========
The accompanying notes are an integral part of these consolidated balance sheets. -3- 4 RURAL/METRO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended March 31, Nine Months Ended March 31, ---------------------------- --------------------------- 1997 1996 1997 1996 ------- ------- -------- -------- REVENUE Ambulance services $69,161 $51,789 $190,654 $143,246 Fire protection services 10,551 9,813 31,205 28,503 Other 5,209 3,382 14,586 9,837 ------- ------- -------- -------- Total revenue 84,921 64,984 236,445 181,586 ------- ------- -------- -------- OPERATING EXPENSES Payroll and employee benefits 44,706 34,596 127,207 98,198 Provision for doubtful accounts 11,878 8,138 32,037 22,445 Depreciation 2,995 2,571 8,646 7,063 Amortization of intangibles 1,149 888 3,349 2,574 Other operating expenses 14,693 12,016 41,640 34,378 ------- ------- -------- -------- Total expenses 75,421 58,209 212,879 164,658 ------- ------- -------- -------- OPERATING INCOME 9,500 6,775 23,566 16,928 INTEREST EXPENSE, net 1,576 1,706 3,658 4,136 ------- ------- -------- -------- INCOME BEFORE INCOME TAXES 7,924 5,069 19,908 12,792 PROVISION FOR INCOME TAXES 3,249 2,080 8,163 5,305 ------- ------- -------- -------- NET INCOME $ 4,675 $ 2,989 $ 11,745 $ 7,487 ======= ======= ======== ======== EARNINGS PER COMMON STOCK AND COMMON STOCK EQUIVALENT $ 0.38 $ 0.31 $ 0.97 $ 0.79 ======= ======= ======== ======== WEIGHTED AVERAGE NUMBER OF COMMON STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING 12,369 9,735 12,154 9,522
The accompanying notes are an integral part of these consolidated financial statements. -4- 5 RURAL/METRO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) (IN THOUSANDS)
Nine Months Ended March 31, 1997 1996 -------- -------- CASH FLOW FROM OPERATING ACTIVITIES Net income $ 11,745 $ 7,487 Adjustments to reconcile net income to cash used in operations -- Depreciation and amortization 11,995 9,637 Amortization of deferred compensation 502 459 Amortization of gain on sale of real estate (78) (78) Provision for doubtful accounts 32,037 22,445 Change in assets and liabilities, net of effect of businesses acquired -- Increase in accounts receivable (56,523) (40,368) Increase in inventories (1,328) (279) Increase in prepaid expenses and other (1,036) (1,673) Decrease in accounts payable (479) (2,865) Increase (decrease) in accrued liabilities and other (4,785) 307 Increase in non-refundable subscription income 373 362 Increase in deferred income taxes 195 1,837 -------- -------- Net cash used in operating activities (7,382) (2,729) -------- -------- CASH FLOW FROM FINANCING ACTIVITIES Borrowings on revolving credit facilities, net 45,200 40,600 Repayment of debt and capital lease obligations (17,221) (17,474) Borrowings of debt -- 2,016 Issuance of common stock 8,076 2,070 -------- -------- Net cash provided by financing activities 36,055 27,212 -------- -------- CASH FLOW FROM INVESTING ACTIVITIES Cash paid for businesses acquired (12,616) (8,887) Capital expenditures (14,049) (13,806) Increase in other assets (2,666) (122) -------- -------- Net cash used in investing activities (29,331) (22,815) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (658) 1,668 CASH AND CASH EQUIVALENTS, Beginning of period 1,388 900 -------- -------- CASH AND CASH EQUIVALENTS, End of period $ 730 $ 2,568 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. -5- 6 RURAL/METRO CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 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. (1) INTERIM RESULTS In the opinion of management, the consolidated financial statements for the three month and nine month periods ended March 31, 1997 and 1996 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 and nine month periods ended March 31, 1997 and 1996 are not necessarily indicative of the results of operations for a full fiscal year. (2) ACQUISITIONS During the nine months ended March 31, 1997 the Company purchased the stock of an ambulance service provider operating in Kentucky and the assets of ambulance service providers operating in Indiana, Ohio, Kentucky, South Carolina and Georgia. The acquisitions were accounted for as purchases in accordance with Accounting Principles Board Opinion No. (APB) 16 and, accordingly, the purchased assets and assumed liabilities were recorded at their estimated fair values at each respective acquisition date. The aggregate purchase price consisted of the following:
(in thousands) Cash $12,616 Notes payable to sellers 3,067 Assumption of liabilities 11,367 ------- $27,050 =======
During the nine months ended March 31, 1997, subsidiaries of the Company merged with and into an ambulance service provider operating in Pennsylvania and an ambulance service provider operating in Arkansas. The Company issued an aggregate of 361,970 shares of its common stock in exchange for all of the issued and outstanding stock of the acquired companies. The transactions were accounted for as poolings-of-interest in accordance with APB 16. The unaudited pro forma combined condensed statements of income for the fiscal year ended June 30, 1996 and the nine months ended March 31, 1997 give effect to the acquisitions as if each had been consummated as of the beginning of each respective period. The pro forma combined condensed financial statements do not purport to represent what the Company's actual results of operations or financial position would have been had such transactions in fact occurred on such dates. The pro forma combined condensed statements of income also do not purport to project the results of operations of the Company for the current year or for any future period. -6- 7 RURAL/METRO CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME FOR THE YEAR ENDED JUNE 30, 1996 AND FOR THE NINE MONTHS ENDED MARCH 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED NINE MONTHS ENDED JUNE 30, 1996 MARCH 31, 1997 ------------- -------------- PROFORMA PROFORMA HISTORICAL COMBINED HISTORICAL COMBINED ---------- -------- ---------- -------- Revenue $250,263 $310,499 $236,445 $254,111 Net income $ 11,512 $ 14,910 $ 11,745 $ 12,695 Earnings per share $ 1.14 $ 1.37 $ 0.97 $ 1.03
Pro forma adjustments include adjustments to: (i) reflect amortization of the cost in excess of the fair value of net assets acquired; (ii) adjust payroll and related expenses for the effect of certain former owners of the acquired businesses not being employed by the Company and to reflect the difference between the actual compensation paid to officers of the businesses acquired and the lower level of aggregate compensation such individuals would have received under the terms of employment agreements executed between the Company and such individuals; (iii) adjust other operating expenses to reflect the reduction of expenses related to certain real estate and buildings not acquired and sellers' costs incurred in connection with the sale of their respective businesses; (iv) adjust interest expense to reflect interest expense related to debt issued in connection with the acquisitions; and, (v) adjust income taxes to reflect the tax effect of the adjustments and the tax effect of treating all of the acquisitions as if they had C corporation status. (3) RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share" which supersedes APB 15, the existing authoritative guidance. SFAS No. 128 is effective for financial statements for both interim and annual periods ending after December 15, 1997 and requires restatement of all prior period earnings per share (EPS) data presented. The new statement modifies the calculation of primary and fully diluted EPS and replaces them with basic and diluted EPS. Pro forma EPS assuming implementation of SFAS No. 128 at the beginning of the period for the three and nine month periods ending March 31, 1997 and 1996 is as follows:
THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31, ---------------------------- --------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Basic $0.40 $0.32 $1.03 $0.83 Diluted $0.38 $0.31 $0.97 $0.79
-7- 8 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 charged 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 generally is 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. THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 REVENUE Total revenue increased $19.9 million, or 30.6%, from $65.0 million for the three months ended March 31, 1996 to $84.9 million for the three months ended March 31, 1997. Approximately $12.8 million of this increase resulted from the acquisition of ambulance service providers during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997. Ambulance service revenue in markets served by the Company in both of the three month periods ended March 31, 1996 and 1997 increased by 8.9%. Fire protection services revenue increased $0.8 million, or 8.2%, from $9.8 million for the three months ended March 31, 1996 to -8- 9 $10.6 million for the three months ended March 31, 1997. Other revenue increased by $1.8 million, or 52.9%, in the three months ended March 31, 1997. Total ambulance transports increased by 61,000, or 33.3%, from 183,000 for the three months ended March 31, 1996 to 244,000 transports for the three months ended March 31, 1997. The acquisition of fifteen ambulance service companies during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997 accounted for 46,000 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 benefits increased $10.1 million, or 29.2%, from $34.6 million for the three months ended March 31, 1996 to $44.7 million for the three months ended March 31, 1997. This increase was primarily due to the acquisition of fifteen ambulance service providers during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997. Provision for doubtful accounts increased $3.8 million, or 46.9%, from $8.1 million for the three months ended March 31, 1996 to $11.9 million for the three months ended March 31, 1997. Provision for doubtful accounts increased from 12.5% of total revenue for the three months ended March 31, 1996 to 14.0% of total revenue for the three months ended March 31, 1997, reflecting the effect of the acquisition of ambulance service providers during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997 operating in markets with a greater mix of "911" emergency activity. Depreciation increased $0.4 million, or 15.4%, from $2.6 million for the three months ended March 31, 1996 to $3.0 million for the three months ended March 31, 1997, primarily as a result of depreciation expense on property and equipment obtained through recent ambulance service acquisitions. Depreciation decreased from 4.0% of total revenue for the three months ended March 31, 1996 to 3.5% of total revenue for the three months ended March 31, 1997. Amortization of intangibles increased by $0.2 million, or 22.2%, from $0.9 million for the three months ended March 31, 1996 to $1.1 million for the three months ended March 31, 1997. This increase is primarily a result of intangible assets recorded in recent acquisitions. Amortization of intangibles was 1.4% of total revenue for the three month periods ended March 31, 1996 and 1997. Other operating expenses increased approximately $2.7 million, or 22.5%, from $12.0 million for the three months ended March 31, 1996 to $14.7 million for the three months ended March 31, 1997 primarily due to increased expenses associated with the operation of the fifteen ambulance service providers acquired during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997. Other operating expenses decreased from 18.5% of total revenue for the three months ended March 31, 1996 to 17.3% of total revenue for the three months ended March 31, 1997 as a result of operational efficiencies realized through the integration of these acquired companies. Interest expense decreased $0.1 million from $1.7 million for the three months ended March 31, 1996 to $1.6 million for the three months ended March 31, 1997. This decrease was attributable to lower interest rates on the Company's $125 million revolving credit facility. The Company's effective tax rate was 41.0% for the three month periods ended March 31, 1996 and 1997. -9- 10 NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996 REVENUE Total revenue increased $54.8 million, or 30.2%, from $181.6 million for the nine months ended March 31, 1996 to $236.4 million for the nine months ended March 31, 1997. Approximately $34.3 million of this increase resulted from the acquisition of ambulance service providers during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997. Ambulance service revenue in markets served by the Company in both of the nine month periods ended March 31, 1996 and 1997 increased by 9.2%. Fire protection services revenue increased by $2.7 million, or 9.5%, from $28.5 million for the nine months ended March 31, 1996 to $31.2 million for the nine months ended March 31, 1997. Other revenue increased by $4.8 million, or 49.0%, in the nine months ended March 31, 1997. Total ambulance transports increased by 148,000, or 28.5%, from 520,000 for the nine months ended March 31, 1996 to 668,000 for the nine months ended March 31, 1997. The acquisition of fifteen ambulance service companies during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997 accounted for 115,000 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 benefits increased $29.0 million, or 29.5%, from $98.2 million for the nine months ended March 31, 1996 to $127.2 million for the nine months ended March 31, 1997. This increase was primarily due to the acquisition of fifteen ambulance service providers during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997. Provision for doubtful accounts increased $9.6 million, or 42.9%, from $22.4 million for the nine months ended March 31, 1996 to $32.0 million for the nine months ended March 31, 1997. Provision for doubtful accounts increased from 12.3% of total revenue for the nine months ended March 31, 1996 to 13.5% of total revenue for the nine months ended March 31, 1997, reflecting the effect of the acquisition of ambulance service providers during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997 operating in markets with a greater mix of "911" emergency activity. Depreciation increased $1.5 million, or 21.1%, from $7.1 million for the nine months ended March 31, 1996 to $8.6 million for the nine months ended March 31, 1997, primarily as a result of depreciation expense on equipment obtained through recent ambulance service acquisitions. Depreciation decreased from 3.9% of total revenue for the nine months ended March 31, 1996 to 3.7% of total revenue for the nine months ended March 31, 1997. Amortization of intangibles increased by $0.7 million, or 26.9%, from $2.6 million for the nine months ended March 31, 1996 to $3.3 million for the nine months ended March 31, 1997. This increase is primarily a result of intangible assets recorded in recent acquisitions. Amortization of intangibles was 1.4% of total revenue for the nine months ended March 31, 1996 and 1997. Other operating expenses increased $7.2 million, or 20.9%, from $34.4 million for the nine months ended March 31, 1996 to $41.6 million for the nine months ended March 31, 1997, primarily due to increased expenses associated with the operation of the fifteen ambulance service providers acquired during the last quarter of fiscal 1996 and the first three quarters of fiscal 1997. Other operating expenses decreased from 18.9% of total revenue for the nine months ended March 31, 1996 to 17.6% of total revenue for the nine months ended March 31, 1997, as a result of operational efficiencies realized through the integration of these acquired companies. -10- 11 Interest expense decreased by $0.4 million from $4.1 million for the nine months ended March 31, 1996 to $3.7 million for the nine months ended March 31, 1997. This decrease was attributable to lower rates on the Company's $125 million revolving credit facility and lower balances outstanding during the quarter as a result of the Company's April 1996 stock offering. The Company's effective tax rate decreased from 41.5% for the nine months ended March 31, 1996 to 41.0% for the nine months ended March 31, 1997, 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 and subsequent public stock offerings in May 1994 and April 1996, and the on-going exercise of stock options. During the nine months ended March 31, 1997, the Company used cash flow from operations of $7.4 million. This compares to cash flow used in operations of $2.7 million for the nine months ended March 31, 1996. This change resulted primarily from increases in accounts receivable, inventories and prepaid expenses, and a decrease in accrued liabilities. Approximately $94.0 million was outstanding on the Company's revolving credit facility at March 31, 1997. Availability on the facility was $28.0 million at March 31, 1997. During the nine months ended March 31, 1997, the Company purchased the stock of an ambulance service provider operating in Kentucky and the assets of ambulance service providers operating in Indiana, Ohio, Kentucky, South Carolina and Georgia. The acquisitions were accounted for as purchases in accordance with Accounting Principles Board Opinion No. 16 (APB 16). The aggregate purchase price was $27.1 million, consisting of cash of $12.6 million, notes payable to sellers of $3.1 million and liabilities assumed of $11.4 million. The Company funded the cash portion of the acquisitions primarily from the Company's revolving credit facility. During the nine months ended March 31, 1997, subsidiaries of the Company merged with and into an ambulance service provider operating in Pennsylvania and an ambulance service provider operating in Arkansas. The Company issued an aggregate of 361,970 shares of its common stock in exchange for all of the issued and outstanding stock of the acquired companies. The transactions were accounted for as poolings-of-interest in accordance with APB 16. During the nine months ended March 31, 1997, the Company made an investment of $2.5 million in National Health Enhancement Systems (NHES), a provider of medical information, technology and software products to managed care providers. The Company purchased 370,370 shares of NHES common stock, representing approximately 7% of its aggregate outstanding common stock. The Company has registered 3.2 million shares of common stock for issuance in connection with acquisitions. At March 31, 1997, approximately 1.8 million of the shares have been issued. In February 1997, the Company signed definitive agreements to acquire four entities doing business as Southwest Ambulance, one of Arizona's largest private ambulance companies. Completion of the acquisition is subject to regulatory approval by the United States Federal Trade Commission (FTC) and the Arizona Department of Health Services (ADHS). In April 1997, the staff of the FTC requested the Company to provide additional information and documentary material relevant to the proposed acquisition. In addition, ADHS has scheduled a public hearing relevant to the acquisition. No assurance can be given that the Company will obtain the approvals required to complete the acquisition. -11- 12 In April 1997, the Company signed definitive agreements to acquire the stock of seven Ontario-based ambulance providers. Completion of these acquisitions is subject to regulatory approval by the Ontario Ministry of Health, and no assurance can be given that the Company will obtain the approvals required to complete any or all of these acquisitions. 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 March 31, 1997. 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. -12- 13 PART II - OTHER INFORMATION Item 2(c) Changes in Securities - Pursuant to a private placement under Section 4(2) of the Securities Act of 1933, on January 22, 1997, the Registrant issued 62,109 shares to David Lewis in connection with the merger of a subsidiary of the Registrant with and into Professional Medical Services, Inc. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits - none (b) Reports on Form 8-K - none -13- 14 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: May 13, 1997 By /s/ W. R. Crowell ----------------------------------- W. R. Crowell, Vice President and Principal Accounting Officer -14- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS YEAR JUN-30-1997 JUL-01-1996 MAR-31-1997 1 730 0 123,124 26,288 6,638 110,622 97,183 38,772 293,347 24,916 180,502 0 0 120 141,287 293,347 236,445 236,445 0 180,842 0 32,037 3,658 19,908 8,163 11,745 0 0 0 11,745 .97 .97
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