EX-99.1 2 dex991.htm PRESS RELEASE, DATED FEBRUARY 9, 2009 Press release, dated February 9, 2009

Exhibit 99.1

LOGO

 

CONTACT:    Liz Merritt, Rural/Metro Corporation
   (480) 606-3337
   Sharrifah Al-Salem, FD
   (415) 293-4414

RURAL/METRO REPORTS STRONG FISCAL 2009 SECOND-QUARTER RESULTS

Highlights:

 

   

Quarterly net revenue increased 3.1% over the prior year to $121.0 million; year-to-date net revenue increased 4.6% over the prior year to $245.4 million

 

   

Quarterly net income increased 42.0% to $1.1 million, or $0.04 diluted earnings per share (EPS), over prior year; year-to-date net income increased 58.2% to $1.8 million, or $0.07 diluted EPS

 

   

Quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations increased 11.2% over the prior year to $14.7 million; year-to-date EBITDA from continuing operations increased 15.4% over the prior year to $29.1 million

 

   

Days Sales Outstanding (DSO) improved seven days to 57 days from 64 days in prior year

 

   

Average Patient Charge (APC) increased $11 per transport to $363 from $352 in prior year

SCOTTSDALE, Ariz. (Feb. 9, 2009) – Rural/Metro Corporation (NASDAQ: RURL), a leading provider of ambulance and private fire protection services, announced results today for its fiscal 2009 second quarter ended December 31, 2008, highlighting continued growth in revenue and EBITDA, as well as further improvements in key operating metrics.

“We reduced uncompensated care and increased ambulance service collections in the second quarter, resulting in improvement in several key areas, including APC and DSO,” said Jack Brucker, President and Chief Executive Officer. “Further, against the backdrop of a challenging economy, we grew revenue and generated strong cash flows, with $19.3 million in net cash from operating activities for the first two fiscal quarters.

“We are very pleased by this progress and believe it reflects our commitment to growing the business while maintaining our focus on service quality, operational efficiencies, and billing and collections excellence,” Mr. Brucker added.

Results of Operations for the Second Fiscal Quarter Ended December 31, 2008

Consolidated net revenue for the second quarter ended December 31, 2008 increased 3.1 percent, or $3.7 million, to $121.0 million from $117.3 million for the same period in fiscal 2008. Net ambulance revenue increased 3.8 percent, or $3.7 million, to $102.3 million from $98.6 million for the same prior-year period. Other services revenue, which includes fire protection services, was $18.6 million compared to $18.7 million for the same prior-year period. Consolidated quarterly net revenue growth was driven by an increase in same-service-area ambulance revenue


related to improvements in net APC, revenue derived from new emergency and non-emergency ambulance contracts, and a Tennessee Medicare claims reserve adjustment recorded in the prior year.

Payroll and employee benefits expense for the second quarter was $75.7 million, or 62.6 percent of net revenue, compared to $73.7 million, or 62.9 percent of net revenue, in the same prior-year period. The dollar increase was driven in part by increases in employee health insurance expenses and year-over-year net changes in workers compensation claims actuarial adjustments. These increases were partly offset by decreases in ambulance unit hours and current-year workers’ compensation claims estimates.

Other operating expenses for the second quarter decreased to $27.9 million, or 23.1 percent of net revenue, from $29.2 million, or 24.9 percent of net revenue, in the second quarter of fiscal 2008. The decrease was primarily related to year-over-year reductions in fuel expenses, vehicle maintenance and professional fees.

General and auto liability expense for the second fiscal quarter was $2.4 million compared to $2.1 million for the same prior-year period. The difference was related to net changes in actuarial adjustments from year to year, offset by decreases in current-year claims estimates.

Net income for the second quarter was $1.1 million, or diluted EPS of $0.04, compared to net income of $0.8 million, or diluted EPS of $0.03, for the same prior-year period.

EBITDA from continuing operations for the second quarter increased 11.2 percent to $14.7 million from $13.2 million in the same prior-year period.

EBITDA from continuing operations is a key indicator used by management to evaluate operating performance. While EBITDA from continuing operations is not intended to replace presentations included in the Company’s consolidated financial statements under generally accepted accounting principles (GAAP) and should not be considered an alternative to operating performance or an alternative to cash flow as a measure of liquidity, the Company believes this measure is useful to investors in assessing the ability to meet future debt service, capital expenditure and working capital requirements. This calculation may differ in the method of calculation from similarly titled measures used by other companies. A reconciliation of EBITDA to income/(loss) from continuing operations and discontinued operations for the three months ended December 31, 2008 and 2007 is included with this press release and the related current report on Form 8-K.

Results of Operations for the Six Months Ended December 31, 2008

Consolidated net revenue for the six months ended December 31, 2008 increased 4.6 percent, or $10.8 million, to $245.4 million from $234.6 million for the same period in fiscal 2008. Net ambulance revenue increased 4.8 percent, or $9.6 million, to $207.7 million from $198.1 million for the same prior-year period. Other services revenue, which includes fire protection services, increased 3.2 percent, or $1.1 million, to $37.7 million from $36.6 million for the same prior-year period. Consolidated year-to-date net revenue growth was driven primarily by an increase in same-service-area ambulance revenue related to improvements in net APC, as well as revenue derived from new emergency and non-emergency ambulance contracts.

Payroll and employee benefits expense for the six-month period ended December 31, 2008 was $152.2 million, or 62.0 percent of net revenue, compared to $147.9 million, or 63.0 percent of net revenue, in the same prior-year period. The dollar increase was driven in part by cost-of-living

 

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wage adjustments and year-over-year net changes in workers compensation actuarial adjustments. These expenses were offset in part by decreases in current-year workers’ compensation claims estimates and pension plan expenses.

Other operating expenses for the first six months of fiscal 2009 were $57.7 million, or 23.5 percent of net revenue, compared to $56.1 million, or 23.9 percent of net revenue, in the same period of fiscal 2008. The difference included year-over-year increases in fuel expense, an increase to the Ohio Medicare reserve contingency, and higher property rental expense. These expenses were partly offset by reductions in professional fees and vehicle maintenance costs.

General and auto liability expense of $5.9 million for the first six months of fiscal 2009 was not significantly different from such expense for the first six months of fiscal 2008.

Net income for the six-month period ended December 31, 2008 was $1.8 million, or diluted EPS of $0.07, compared to net income of $1.2 million, or diluted EPS of $0.05 for the same prior-year period.

EBITDA from continuing operations for the six-month period increased 15.4 percent to $29.1 million from $25.3 million for the same prior-year period.

Electronic Patient Care Record (ePCR) System Update

During the second quarter, ePCR system implementation continued in key 911 markets, including Orlando, Florida, and Rochester, New York. These locations are expected to be fully integrated by the close of the fiscal third quarter on March 31, 2009, with four additional markets scheduled for completion in fiscal 2009.

The Company’s largest ePCR implementation to date was completed in Buffalo, New York, in July 2008. With just six months of data, the Buffalo market has improved days to bill (measured from date of service to date of invoice) by approximately 50 percent, as electronic reporting replaces paper and contributes to overall billing efficiencies.

Additionally, service level mix shifted by 5 percent to a higher number of Advanced Life Support transports as a percentage of total transports billed. Ambulance rates vary by patient condition and level of care required during transport, ranging from Basic Life Support to higher rate Advanced Life Support services. ePCR technology prompts medical personnel for applicable services performed, medications administered and supplies rendered based on regulated pre-hospital medical protocols, which assists in creating improved documentation records amid the urgency of on-scene patient care activities.

“We monitor nearly a dozen measures of system efficiencies, documentation quality, collection outcomes and hardware durability and are optimistic about the positive impact we have experienced in the Buffalo market,” Mr. Brucker said. “We are encouraged by these early indicators and the significant opportunities and efficiencies we anticipate the system will bring to our operations.”

 

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Second-Quarter Operating Statistics

Second-quarter operating statistics trended as follows when compared to the same prior-year period:

 

   

Medical transports decreased by 2,149 transports, or 0.8 percent, with the variance due primarily to the discontinuation of two emergency ambulance contracts in Orange County, Florida, and Tempe, Arizona, as well as a non-emergency contract in Ohio. New contract transports increased by 2,940 related to contracts in the Tennessee, Washington and Colorado markets.

 

   

Average patient charge (APC) increased to $363 per transport from $352 per transport for the same period of the prior year. Of the $11 increase, more than 60 percent was due to continuing improvement in collections, with the balance attributable to rate increases.

 

   

Days sales outstanding (DSO) improved by seven days, a factor of continued billing and collections efficiencies and reductions in uncompensated care as a percentage of gross revenue.

The following table provides results for medical transports, APC, and DSO during each of the five most recent quarters:

 

     Q2 ‘08
(12/31/07)
   Q3 ‘08
(3/31/08)
   Q4 ‘08
(6/30/08)
   Q1 ‘09
(9/30/08)
   Q2 ‘09
(12/31/08)

Medical Transports (1)

     265,369      282,737      269,899      271,407      263,220

Average Patient Charge (APC) (2)

   $ 352    $ 350    $ 368    $ 361    $ 363

Days Sales Outstanding (DSO) (3)

     64      62      60      59      57

 

(1) Defined as emergency and non-emergency medical patient transports from continuing operations.

 

(2) Net medical transport APC is defined as gross ambulance transport revenue less provisions for contractual allowances applicable to Medicare, Medicaid and other third-party payers and uncompensated care divided by medical transports from continuing operations.

 

(3) DSO is calculated using the average accounts receivable balance on a rolling 13-month basis and net revenue on a rolling 12-month basis and has not been adjusted to eliminate discontinued operations.

 

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Fiscal 2009 Financial Guidance Confirmed

The Company confirmed its guidance for the fiscal year ending June 30, 2009, expecting EBITDA from continuing operations to be in the range of $54.0 million to $58.0 million and capital expenditures to be in the range of $15.0 million to $18.0 million.

Conference Call to Discuss Results

The Company will discuss results in a conference call today beginning at 8 a.m. Pacific/9 a.m. Mountain/11 a.m. Eastern. To access the conference call, dial 877-857-6150 (domestic) or 719-325-4843 (international). The call will be broadcast live on the Company’s web site at www.ruralmetro.com. A telephone replay will be available from approximately 2 p.m. (Eastern) today through midnight (Eastern) February 11, 2009. To access the replay, dial 888-203-1112. From international locations, dial 719-457-0820. The required pass code is 1472715. An archived webcast will be available following the call at www.ruralmetro.com.

About Rural/Metro

Rural/Metro Corporation provides emergency and non-emergency ambulance services and private fire protection services in 22 states and approximately 400 communities throughout the United States. For more information, visit the Company’s web site at www.ruralmetro.com.

SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS

The foregoing reflects the Company's views about its future financial condition, performance and other matters that constitute "forward-looking" statements as such term is defined by the federal securities laws. Many of these statements can be found by looking for words such as "anticipate," “expect”, “plan”, “intend”, may”, "should”, “will likely result” "continue", “estimate”, “project”, or similar words used herein in connection with any discussions of future operating or financial performance or business prospects. We may also make forward-looking statements in our earnings reports filed with the Securities and Exchange Commission (SEC), earnings calls and other investor communications. These forward-looking statements are subject to the safe harbor protection provided by federal securities laws. These forward-looking statements are subject to numerous risks, uncertainties and assumptions, including those relating to the Company’s future business prospects, uncompensated care, working capital, accounts receivable collection, liquidity, cash flow, EBITDA, capital expenditures, insurance coverage and claim reserves, capital needs, future operating results and future compliance with covenants in our debt facilities or instruments. In addition, the Company may face risks and uncertainties related to other factors that are listed in its periodic reports filed under the Securities Exchange Act. Although the Company believes the expectations reflected in its forward-looking statements are based upon reasonable assumptions, because the statements are subject to risks and uncertainties, the Company can give no assurance that its expectations will be attained or that actual developments and results will not materially differ from those expressed or implied by the forward-looking statements. Readers are cautioned not to place undue reliance on the statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law.

(RURL/F)

###

 

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RURAL/METRO CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share data)

 

     December 31,
2008
    June 30,
2008
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 19,592     $ 15,907  

Accounts receivable, net

     70,330       76,131  

Inventories

     8,410       8,456  

Deferred income taxes

     25,832       22,263  

Prepaid expenses and other

     18,092       18,946  
                

Total current assets

     142,256       141,703  

Property and equipment, net

     48,513       46,938  

Goodwill

     37,700       37,700  

Deferred income taxes

     45,064       50,773  

Insurance deposits

     802       989  

Other assets

     14,772       16,108  
                

Total assets

   $ 289,107     $ 294,211  
                

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ DEFICIT

    

Current liabilities:

    

Accounts payable

   $ 13,600     $ 16,147  

Accrued liabilities

     54,255       55,139  

Deferred revenue

     21,460       21,901  

Current portion of long-term debt

     456       374  
                

Total current liabilities

     89,771       93,561  

Long-term debt, net of current portion

     277,024       279,017  

Other long-term liabilities

     27,742       29,536  
                

Total liabilities

     394,537       402,114  
                

Minority interest

     2,458       1,966  
                

Stockholders’ deficit:

    

Common stock, $0.01 par value, 40,000,000 shares authorized, 24,842,726 and

    

24,822,726 shares issued and outstanding at December 31, 2008 and June 30, 2008, respectively

     248       248  

Additional paid-in capital

     155,037       154,918  

Treasury stock, 96,246 shares at both December 31, 2008 and June 30, 2008

     (1,239 )     (1,239 )

Accumulated other comprehensive loss

     (420 )     (439 )

Accumulated deficit

     (261,514 )     (263,357 )
                

Total stockholders’ deficit

     (107,888 )     (109,869 )
                

Total liabilities, minority interest and stockholders’ deficit

   $ 289,107     $ 294,211  
                


RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

 

     Three Months Ended December 31,     Six Months Ended December 31,  
     2008     2007     2008     2007  

Net revenue

   $ 120,970     $ 117,286     $ 245,396     $ 234,637  
                                

Operating expenses:

        

Payroll and employee benefits

     75,723       73,736       152,156       147,864  

Depreciation and amortization

     3,787       3,131       7,181       6,182  

Other operating expenses

     27,949       29,231       57,713       56,121  

General/auto liability insurance expense

     2,413       2,120       5,883       5,920  

Loss on sale of assets

     (50 )     (1,299 )     (246 )     (1,296 )
                                

Total operating expenses

     109,822       106,919       222,687       214,791  
                                

Operating income

     11,148       10,367       22,709       19,846  

Interest expense

     (7,763 )     (8,010 )     (15,576 )     (15,760 )

Interest income

     33       92       148       234  
                                

Income from continuing operations before income taxes and minority interest

     3,418       2,449       7,281       4,320  

Income tax provision

     (1,965 )     (1,443 )     (4,204 )     (2,409 )

Minority interest

     (215 )     (259 )     (742 )     (764 )
                                

Income from continuing operations

     1,238       747       2,335       1,147  

Income (loss) from discontinued operations, net of income taxes

     (167 )     7       (492 )     18  
                                

Net income

   $ 1,071     $ 754     $ 1,843     $ 1,165  
                                

Income (loss) per share:

        

Basic -

        

Income from continuing operations

   $ 0.05     $ 0.03     $ 0.09     $ 0.05  

Income (loss) from discontinued operations

     (0.01 )     0.00       (0.02 )     0.00  
                                

Net income

   $ 0.04     $ 0.03     $ 0.07     $ 0.05  
                                

Diluted -

        

Income from continuing operations

   $ 0.05     $ 0.03     $ 0.09     $ 0.05  

Income (loss) from discontinued operations

     (0.01 )     0.00       (0.02 )     0.00  
                                

Net income

   $ 0.04     $ 0.03     $ 0.07     $ 0.05  
                                

Average number of common shares outstanding - Basic

     24,826       24,764       24,824       24,751  
                                

Average number of common shares outstanding - Diluted

     24,910       24,950       24,913       24,969  
                                


RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

     Six Months Ended December 31,  
     2008     2007  

Cash flows from operating activities:

    

Net income

   $ 1,843     $ 1,165  

Adjustments to reconcile net income to net cash provided by operating activities -

    

Depreciation and amortization

     7,181       6,343  

Non-cash adjustments to insurance claims reserves

     (1,453 )     (4,466 )

Accretion of 12.75% Senior Discount Notes

     4,830       4,268  

Deferred income taxes

     2,128       1,205  

Tax benefit from the exercise of stock options

     —         (75 )

Amortization of deferred financing costs

     1,089       1,021  

Loss on disposal of property and equipment

     52       286  

Earnings of minority shareholder

     742       764  

Stock based compensation expense

     117       —    

Change in assets and liabilities -

    

Accounts receivable

     5,801       (7,841 )

Inventories

     46       (145 )

Prepaid expenses and other

     2,014       2,015  

Insurance deposits

     187       (264 )

Other assets

     152       1,462  

Accounts payable

     (2,591 )     2,636  

Accrued liabilities

     (1,686 )     2,534  

Deferred revenue

     (441 )     (1,655 )

Other liabilities

     (680 )     563  
                

Net cash provided by operating activities

     19,331       9,816  
                

Cash flows from investing activities:

    

Purchases of short-term investments

     —         (5,000 )

Sales of short-term investments

     —         5,000  

Capital expenditures

     (8,191 )     (7,525 )

Proceeds from the sale of property and equipment

     —         5  
                

Net cash used in investing activities

     (8,191 )     (7,520 )
                

Cash flows from financing activities:

    

Repayment of debt

     (7,207 )     (6,319 )

Issuance of debt

     —         1,300  

Cash paid for debt issuance costs

     —         (850 )

Tax benefit from the exercise of stock options

     —         75  

Issuance of common stock

     2       58  

Distributions to minority shareholders

     (250 )     (500 )
                

Net cash used in financing activities

     (7,455 )     (6,236 )
                

Increase (decrease) in cash and cash equivalents

     3,685       (3,940 )

Cash and cash equivalents, beginning of period

     15,907       6,181  
                

Cash and cash equivalents, end of period

   $ 19,592     $ 2,241  
                

Supplemental disclosure of non-cash operating activities:

    

Increase in current assets and accrued liabilities for general liability insurance claim

   $ 1,160     $ —    
                

Increase in accumulated deficit, other liabilities and decrease in deferred taxes upon adoption of FIN 48

   $ —       $ 12,826  
                

Supplemental disclosure of non-cash investing and financing activities:

    

Property and equipment funded by liabilities

   $ 1,402     $ 55  
                

Note payable incurred for software licenses

   $ —       $ 354  
                

Debt issuance costs funded by liabilities

   $ —       $ 7  
                


RURAL/METRO CORPORATION

RECONCILIATION OF INCOME FROM CONTINUING AND DISCONTINUED OPERATIONS TO EBITDA

(unaudited)

(in thousands)

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2008     2007     2008     2007  

Income from continuing operations

   $ 1,238     $ 747     $ 2,335     $ 1,147  

Add (deduct)

        

Depreciation and amortization

     3,787       3,131       7,181       6,182  

Interest expense

     7,763       8,010       15,576       15,760  

Interest income

     (33 )     (92 )     (148 )     (234 )

Income tax provision

     1,965       1,443       4,204       2,409  
                                

EBITDA from continuing operations

     14,720       13,239       29,148       25,264  
                                

Income from discontinued operations

     (167 )     7       (492 )     18  

Add (deduct)

        

Depreciation and amortization

     (2 )     72       —         162  

Income tax provision

     (78 )     5       (379 )     14  
                                

EBITDA from discontinued operations

     (247 )     84       (871 )     194  
                                

Total EBITDA

   $ 14,473     $ 13,323     $ 28,277     $ 25,458