EX-99.1 2 dex991.htm PRESS RELEASE, DATED FEBRUARY 7, 2005 Press Release, dated February 7, 2005

Exhibit 99.1

 

LOGO

 

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