8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 7, 2005

RURAL/METRO CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	0-22056	86-0746929
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

9221 East Via De Ventura

Scottsdale, Arizona

85258

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (480) 606-3886

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On February 7, 2005, Rural/Metro Corporation (the “Company”) issued a press release announcing its preliminary unaudited financial results for the quarter ended December 31, 2004. The full text of the Company’s press release is attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits.

Exhibit No.	Description
99.1	Press release, dated February 7, 2005

The information in this Form 8-K, including the exhibits, shall not be deemed to be “filed” for purposes of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities thereof, nor shall it be deemed to be incorporated by reference in any filing under the Exchange Act or under the Securities Act of 1933, as amended, except to the extent specifically provided in any such filing.

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 hereunto duly authorized.

	RURAL/METRO CORPORATION
Date: February 7, 2005	By:	/s/ Michael S. Zarriello
		Michael S. Zarriello Senior Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

CONTACT:	Liz Merritt, Rural/Metro Corporation
	(480) 606-3337
	Financial Dynamics, Investor Relations
	Jim Byers (Investors)
	(415) 439-4504

For immediate release

RURAL/METRO EARNS $0.13 PER SHARE IN 2005 SECOND QUARTER

• Net revenue up 4.8% to $137.2 million

• Net income up 41% to $3.1 million

• EBITDA 10.8% to $13.6 million

SCOTTSDALE, Ariz. (Feb. 7, 2005) – Rural/Metro Corporation (Nasdaq/SC: RURL), a leading provider of medical transportation and fire protection services, today reported net income of $3.1 million or $0.13 cents per diluted share, representing a 41% increase from net income of $2.2 million or a loss of $0.01 cent per diluted share, in the second quarter of the prior fiscal year.

The loss per share for the second quarter of 2004 included the impact of allocating net income to the company’s former Series B and Series C preferred stock as well as a related accretion charge.

For the six months ended December 31, 2004, the company reported net income of $7.5 million or $0.32 cents per diluted share, compared with net income of $2.8 million or a loss of $0.01 cent per diluted share for the same period of the prior year.

The loss per share for the 2004 period included the impact of allocating net income to the company’s former Series B and Series C preferred stock as well as a related accretion charge.

Jack Brucker, President and Chief Executive Officer, said, “Our second-quarter results reflect continued progress with ongoing efforts to leverage our core business strengths and expand regional markets while further enhancing our operational performance. We remain focused on generating long-term sustainable growth and further establishing Rural/Metro as a quality leader in our industry.”

The company reported fiscal 2005 second-quarter net revenue of $137.2 million, an increase of 4.8% over net revenue of $130.9 million for the prior year’s second quarter. Second-quarter net revenue growth reflects a combination of increased medical transports and rates in both the company’s medical transportation and subscription fire businesses. For the six months ended December 31, 2004, the company generated net revenue of $273.7 million, compared to $259.6 million for the six months ended December 31, 2003.

Medical transportation and related services net revenue increased $4.8 million, or 4.3%, from $112.6 million for the quarter ended December 31, 2003 to $117.4 million for the quarter ended December 31, 2004. The increase is primarily due to an increase in transports and rates, which includes ambulance rate adjustments that took effect July 1, 2004 under the Medicare Modernization Act. For the six months ended December 31, 2004, medical transportation and related services net revenue was $233.4 million, compared to $222.5 million for the six months ended December 31, 2003.

“Regional fee increases provided under the Medicare Modernization Act were implemented on July 1, 2004, as were 1% urban and 2% rural rate increases on ambulance transports,” Mr. Brucker explained. “While the Medicare reimbursement environment is always subject to legislative change, we believe the Medicare Ambulance Fee Schedule, including recent modifications, will have a beneficial impact on our Medicare revenue at incremental and full phase-in, primarily due to the geographic diversity of our operations.”

Same-service-area medical transportation revenue increased 3.8% for the three months ended December 31, 2004 compared to the prior year’s second quarter. For the six months ended December 31, 2004, same-service-area revenue increased 4.6% compared to the same period of the prior year.

Fire protection and other services revenue increased $1.5 million, or 8.2%, from $18.3 million for the quarter ended December 31, 2003 to $19.8 million for the quarter ended December 31, 2004. The increase is primarily due to an increase in fire subscription revenue of $0.9 million, or 10.5%, as a result of increases in rates and subscribers . For the six months ended December 31, 2004, fire protection and other revenue was $40.3 million, compared to $37.1 million for the same period of the prior year. The increase is primarily due to an increase in fire subscription revenue of $1.9 million, or 11.1%, as a result of increases in rates and subscribers.

“During the quarter, we announced several new service agreements, including significant contract renewals with North and South Fulton County in metro-Atlanta for an estimated $14.7 million in combined net revenue per year, and with the City of San Diego for an estimated $44 million in net revenue per year. In addition, we were awarded a new contract to begin providing emergency and non-emergency medical transportation services in the City of Salem, Oregon, which we estimate will generate approximately $5 million in net revenue annually. These agreements reflect our strategy to expand our reach in existing markets while selectively targeting new markets with favorable demographic and population trends that represent significant potential for future growth,” Mr. Brucker concluded.

2

For the quarter ended December 31, 2004, Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) was $13.6 million, representing an increase of 10.8% over EBITDA of $12.3 million for the same period of the prior year. For the six months ended December 31, 2004, EBITDA was $28.6 million, representing an increase of 17.3% over EBITDA of $24.4 million for the same period of the prior year.

The company regards EBITDA, which is widely used by analysts, investors, creditors, and other interested parties, as relevant and useful information. The company provides this information to permit a more comprehensive analysis of its ability to meet future debt service, capital expenditures, and working capital requirements. Additionally, the company’s management uses this information to evaluate the performance of its operating units. EBITDA is not intended to represent cash provided by operating activities as defined by generally accepted accounting principles, and it should not be considered as an indicator of operating performance or an alternative to cash provided by operating activities as a measure of liquidity. The company has provided a reconciliation of EBITDA to cash used in operating activities in a table that accompanies this press release.

Following is a summary of certain of the company’s key operating statistics. Medical transports and Net/Net Average Patient Charge statistics have been adjusted to eliminate discontinued operations:

	Q2’04 (12/31/03)		Q3’04 (3/31/04)		Q4’04 (6/30/04)		Q1’05 (9/30/04)		Q2’05 (12/31/04)
Medical Transports (1)		262,586		266,064		259,953		265,045		264,724
Net/Net Average Patient Charge (2)	$	308	$	312	$	312	$	317	$	324
Average DSO (QTD) (3)		45		45		45		45		45

(1) Medical transports from continuing operations are defined as actual emergency and non-emergency patient transports, excluding those under fixed-fee arrangements.

(2) Net/Net Average Patient Charge is defined as gross medical transport revenue minus provisions for Medicare, Medicaid and other third-party payers and doubtful accounts divided by emergency and non-emergency transports from continuing operations. For purposes of this calculation, revenue and transports related to capitated contracts are excluded.

(3) Average quarterly DSO is defined as average accounts receivable divided by consolidated net revenue per day, as calculated on a quarter-to-date basis.

3

Key operating statistics trended favorably for the quarter ended December 31, 2004 as follows:

• Net/Net Average Patient Charge (APC) increased to $324, from $308 for the same period of the prior year. The increase in net/net APC is primarily a result of rate escalators and other negotiated rate increases, the discontinuation of lower rate contracts and an increase in overall operating efficiencies associated with improvements to the company’s billing and collections procedures.

• The company considers APC to be an approximation of cash collected per transport. Daily cash deposits for the three months ended December 31, 2004 averaged $1.9 million, compared to $1.8 million for the same period of the prior year.

• While consolidated revenue increased by $6.3 million in the second quarter, quarter-to-date days’ sales outstanding (DSO) remained consistent at an average of 45 days.

Rural/Metro Corporation provides emergency and non-emergency medical transportation, fire protection, and other safety services in 23 states and approximately 400 communities throughout the United States. For more information, visit the company’s web site at www.ruralmetro.com.

The company will discuss these results in a conference call Monday, February 7, 2005, beginning at 8 a.m. Pacific/9 a.m. Mountain/11 a.m. Eastern. The call will be broadcast live on the company’s web site at www.ruralmetro.com. A replay will be available from 2 p.m. Eastern on February 7, 2005 through midnight February 14, 2005. The replay can be accessed by dialing 888-203-1112 (domestic) or 719-457-0820 (international). Please use the confirmation code 874-1437 when accessing the replay. An archived webcast also will be available at www.ruralmetro.com.

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 company’s ability to collect its accounts receivable; competitors’ actions; litigation and regulatory matters; and the company’s ability to sustain operating cash flow, secure new contracts, retain existing contracts, improve earnings and operating margin. Additional factors that could affect the company are described in its Form 10-K for the year ended June 30, 2004 under the caption “Risk Factors” in the Management’s Discussion and Analysis section, and other factors as described from time to time in the company’s SEC filings. The company disclaims any obligation to update its forward-looking statements.

(Tables to Follow)

4

RURAL/METRO CORPORATION

CONSOLIDATED BALANCE SHEET

(unaudited)

(in thousands)

	December 31, 2004			June 30, 2004
ASSETS
Current assets:
Cash	$	10,109		$	16,372
Accounts receivable, net of allowance for doubtful accounts of $65,142 and $59,430 at December 31, 2004 and June 30, 2004 respectively		67,421 12,017			65,348 11,738
Prepaid expenses and other assets		8,353			8,512
Total current assets		97,900			101,970
Property and equipment, net		41,904			40,283
Goodwill		40,850			41,100
Insurance deposits		6,453			9,244
Other assets		11,889			12,644
	$	198,996		$	205,241
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	9,520		$	13,833
Accrued liabilities		46,837			57,273
Deferred revenue		19,008			18,650
Current portion of long-term debt		1,515			1,495
Total current liabilities		76,880			91,251
Long-term debt, net of current portion		303,440			304,057
Deferred income taxes		650			650
Total liabilities		380,970			395,958
Minority interest		1,481			1,509
Stockholders’ equity (deficit):
Common stock, $.01 par value 40,000,000 shares authorized, 22,835,290 and 21,890,816 shares issued and outstanding at December 31, 2004 and June 30, 2004, respectively		228			219
Additional paid-in capital		148,363			147,075
Accumulated deficit		(330,807	)		(338,281	)
Treasury stock		(1,239	)		(1,239	)
Total stockholders’ equity (deficit)		(183,455	)		(192,226	)
	$	198,996		$	205,241

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENT OF INCOME

For The Three Months Ended December 31, 2004 and 2003

(unaudited)

(in thousands, except per share amounts)

	2004			% of Net revenue		2003			% of Net revenue
Net revenue	$	137,217		100.0	%	$	130,903		100.0	%
Operating expenses
Payroll and employee benefits		73,661		53.7	%		68,333		52.2	%
Provision for doubtful accounts		20,492		14.9	%		21,213		16.2	%
Depreciation and amortization		2,689		2.0	%		2,763		2.1	%
Other operating expenses		29,746		21.7	%		29,062		22.2	%
Total operating expenses		126,588		92.3	%		121,371		92.7	%
Operating income		10,629		7.7	%		9,532		7.3	%
Interest expense		(7,514	)	-5.5	%		(7,194	)	-5.5	%
Interest income		49		0.0	%		22		0.0	%
Income from continuing operations before income taxes and minority interest		3,164		2.3	%		2,360		1.8	%
Income tax provision		(428	)	-0.3	%		(103	)	-0.1	%
Minority interest		337		0.2	%		(189	)	-0.1	%
Income from continuing operations		3,073		2.2	%		2,068		1.6	%
Income (loss) from discontinued operations		(16	)	0.0	%		107		0.1	%
Net income	$	3,057		2.2	%	$	2,175		1.7	%
Less: Net income allocated to redeemable nonconvertible participating preferred stock under the two-class method		—					(502	)
Less: Accretion of redeemable nonconvertible participating preferred stock		—					(1,706	)
Net income (loss) applicable to common stock	$	3,057				$	(33	)
Income (loss) per share
Basic -
Income (loss) from continuing operations applicable to common stock	$	0.14				$	(0.01	)
Income (loss) from discontinued operations applicable to common stock		—					—
Net income (loss)	$	0.14				$	(0.01	)
Diluted -
Income (loss) from continuing operations applicable to common stock	$	0.13				$	(0.01	)
Income (loss) from discontinued operations applicable to common stock		—					—
Net income (loss)	$	0.13				$	(0.01	)
Average number of common shares outstanding - Basic		22,241					16,521
Average number of common shares outstanding - Diluted		24,022					16,521

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENT OF INCOME

For The Six Months Ended December 31, 2004 and 2003

(unaudited)

(in thousands, except per share amounts)

	2004			% of Net revenue		2003			% of Net revenue
Net revenue	$	273,680		100.0	%	$	259,559		100.0	%
Operating expenses
Payroll and employee benefits		146,149		53.4	%		137,731		53.1	%
Provision for doubtful accounts		42,054		15.4	%		41,450		16.0	%
Depreciation and amortization		5,677		2.1	%		5,603		2.2	%
Other operating expenses		57,083		20.9	%		56,238		21.7	%
Total operating expenses		250,963		91.7	%		241,022		92.9	%
Operating income		22,717		8.3	%		18,537		7.1	%
Interest expense		(14,834	)	-5.4	%		(15,208	)	-5.9	%
Interest income		179		0.1	%		51		0.0	%
Income from continuing operations before income taxes and minority interest		8,062		2.9	%		3,380		1.3	%
Income tax provision		(523	)	-0.2	%		(189	)	-0.1	%
Minority interest		28		0.0	%		(463	)	-0.2	%
Income from continuing operations		7,567		2.8	%		2,728		1.1	%
Income (loss) from discontinued operations		(93	)	0.0	%		53		0.0	%
Net income	$	7,474		2.7	%	$	2,781		1.1	%
Less: Net income allocated to redeemable nonconvertible participating preferred stock under the two-class method		—					—
Less: Accretion of redeemable nonconvertible participating preferred stock		—					(2,907	)
Net income (loss) applicable to common stock	$	7,474				$	(126	)
Income (loss) per share
Basic -
Income (loss) from continuing operations applicable to common stock	$	0.34				$	(0.01	)
Income (loss) from discontinued operations applicable to common stock		—					—
Net income (loss)	$	0.34				$	(0.01	)
Diluted -
Income (loss) from continuing operations applicable to common stock	$	0.32				$	(0.01	)
Income (loss) from discontinued operations applicable to common stock		—					—
Net income (loss)	$	0.32				$	(0.01	)
Average number of common shares outstanding - Basic		22,100					16,460
Average number of common shares outstanding - Diluted		23,351					16,460

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

For The Six Months Ended December 31, 2004 and 2003

(unaudited)

(in thousands)

	2004			2003
Cash flows from operating activities:
Net income	$	7,474		$	2,781
Adjustments to reconcile net income to cash provided by operating activities -
Depreciation and amortization		5,928			6,223
Loss on sale of property and equipment		77			10
Provision for doubtful accounts		42,079			44,556
Earnings (losses) of minority shareholder		(28	)		463
Amortization of deferred financing costs		1,339			1,414
Amortization of debt discount		13			13
Tax benefit related to the exercise of stock options		129			—
Change in assets and liabilities -
Increase in accounts receivable		(44,152	)		(51,643	)
Increase in inventories		(279	)		(494	)
Decrease in prepaid expenses and other assets		159			944
Decrease (increase) in insurance deposits		2,791			(558	)
(Increase) decrease in other assets		(973	)		724
Decrease in accounts payable		(4,313	)		(3,192	)
(Decrease) increase in accrued liabilities and other liabilities		(10,436	)		1,294
Increase in deferred revenue		358			595
Net cash provided by operating activities		166			3,130
Cash flows from investing activities:
Capital expenditures		(6,994	)		(3,410	)
Proceeds from the sale of property and equipment		7			81
Net cash used in investing activities		(6,987	)		(3,329	)
Cash flows from financing activities:
Repayments on credit facility		—			(1,000	)
Repayment of debt and capital lease obligations		(610	)		(547	)
Cash paid for debt modification costs		—			(515	)
Proceeds from the issuance of common stock		1,168			206
Net cash provided by (used in) financing activities		558			(1,856	)
Decrease in cash		(6,263	)		(2,055	)
Cash, beginning of period		16,372			12,561
Cash, end of period	$	10,109		$	10,506

RURAL/METRO CORPORATION

RECONCILIATION OF EBITDA TO CASH FLOW

PROVIDED BY (USED IN) OPERATING ACTIVITIES

(unaudited)

(in thousands)

	Three Months Ended December 31,						Six Months Ended December 31,
	2004			2003			2004			2003
Net income	$	3,057		$	2,175		$	7,474		$	2,781
Add back:
Depreciation and amortization		2,691			2,860			5,928			6,223
Interest expense		7,514			7,194			14,834			15,208
Interest income		(49	)		(22	)		(179	)		(51	)
Income tax provision		427			108			525			199
EBITDA		13,640			12,315			28,582			24,360
Increase (decrease):
Interest expense		(7,514	)		(7,194	)		(14,834	)		(15,208	)
Interest income		49			22			179			51
Income tax provision		(427	)		(108	)		(525	)		(199	)
Loss (gain) on sale of property and equipment		13			(12	)		77			10
Provision for doubtful accounts		20,491			22,704			42,079			44,556
Earnings (losses) of minority shareholder		(337	)		189			(28	)		463
Amortization of deferred financing costs		669			679			1,339			1,414
Amortization of debt discount		7			7			13			13
Tax benefit related to the exercise of stock options		129			—			129			—
Changes in operating assets and liabilities		(21,747	)		(20,018	)		(56,845	)		(52,330	)
Net cash provided by operating activities	$	4,973		$	8,584		$	166		$	3,130