EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

 

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

RURAL/METRO ANNOUNCES STRONG SECOND-QUARTER RESULTS;

RAISES 2010 ADJUSTED EBITDA GUIDANCE TO $63.0-$65.0 MILLION

Highlights:

 

   

Company completed $220.0 million debt refinancing to improve overall capital structure; second-quarter results include $13.8 million pre-tax loss on debt extinguishment.

 

   

Quarterly net revenue increased 12.0% over the prior year to $133.5 million; year-to-date net revenue increased 9.4% over the prior year to $264.3 million.

 

   

Quarterly net loss attributable to Rural/Metro, which included the loss on debt extinguishment, was $4.8 million.

 

   

Quarterly Adjusted EBITDA from continuing operations increased 10.8% over the prior-year period to $16.5 million; year-to-date Adjusted EBITDA from continuing operations increased 17.3% from the first two quarters of fiscal 2009 to $34.3 million.

SCOTTSDALE, Ariz. (Feb. 9, 2010) – Rural/Metro Corporation (NASDAQ: RURL), a leading provider of ambulance and private fire protection services, today announced strong financial results for its fiscal 2010 second quarter ended December 31, 2009.

“The continued success of our business results from the strength of our business model, which drives our ability to generate solid revenue growth, improve operating margins and maintain positive momentum in key operating metrics,” said Conrad A. Conrad, interim President and Chief Executive Officer. “We believe we can continue to leverage our operating strengths in the future, and, therefore, are raising our guidance for Adjusted EBITDA from continuing operations.”

Guidance Revised Upward

The Company raised guidance for the fiscal year ending June 30, 2010 to reflect the continued strength of operational and financial performance reflected in second fiscal quarter results. The Company revised Adjusted EBITDA from continuing operations to a range of $63.0 million to $65.0 million. Adjusted EBITDA from continuing operations excludes the effect of the loss on extinguishment of debt and share-based compensation expense. Capital expenditure guidance remained unchanged in the range of $16.0 million to $19.0 million.

Results of Operations for the Fiscal 2010 Second Quarter Ended December 31, 2009

For the quarter ended December 31, 2009, Rural/Metro generated net revenue of $133.5 million, an increase of 12.0%, or $14.3 million, compared to $119.2 million for the same period last year. The growth was primarily attributable to same-service area revenue growth and new contract revenue.

 

1


Payroll and employee benefits for the second fiscal quarter were $81.1 million, or 60.7% of net revenue, compared to $74.4 million, or 62.4% of net revenue, in the same period of the prior year. The year-over-year increase in actual payroll dollars was driven primarily by additional labor hours deployed in response to a 5.2% increase in ambulance transport volume, higher expenses related to employee health and workers’ compensation insurance programs and annual merit raises.

Other operating expenses for the second fiscal quarter were $30.9 million, or 23.1% of net revenue, compared to $27.5 million, or 23.0% of net revenue for the same period of the prior year. The year-over-year increase is attributable primarily to increases in vehicle and equipment expense, as well as other station expenses.

General and auto liability insurance expense for the second fiscal quarter was $5.2 million, compared to $2.4 million for the same period of the prior year. The year-over-year variance in this expense was driven primarily by $1.5 million in current-year increased claims costs and a $1.3 million net increase in actuarial adjustments during the quarter.

During the second quarter, the Company successfully concluded a $220.0 million debt refinancing transaction and achieved its goals to simplify the capital structure, gain flexibility to pre-pay debt and reduce the overall cost of capital. The current debt structure includes a $180.0 million term loan due 2014 and a $40.0 million revolving credit line. In connection with the refinancing, the Company recorded a loss on extinguishment of debt of $13.8 million.

Including the loss on extinguishment of debt, the second-quarter net loss attributable to Rural/Metro was $4.8 million, or a loss per share of $0.19, compared to net income of $1.1 million and earnings per share (EPS) of $0.04 for the second quarter of the prior year. Excluding the loss on debt extinguishment, net income attributable to Rural/Metro would have been $3.2 million, or diluted EPS of $0.13.

Adjusted EBITDA from continuing operations for the second quarter increased 10.8%, or $1.6 million, to $16.5 million compared to $14.9 million for the same period in fiscal 2009.

Results of Operations for the Six Months Ended December 31, 2009

For the six months ended December 31, 2009, Rural/Metro generated net revenue of $264.3 million, an increase of 9.4% compared to $241.7 million for the same period last year. The increase was primarily attributable to same-service-area revenue growth and new contract revenue.

Payroll and employee benefits for the six-month period were $162.4 million, or 61.4% of net revenue, compared to $149.5 million, or 61.9% of net revenue for the same period of the prior year. The year-over-year increase in actual payroll dollars was driven primarily by additional labor hours driven by a 3.2% increase in ambulance transport volume when compared to the prior year, higher expenses related to employee health insurance and workers’ compensation insurance programs and annual merit raises.

 

2


Other operating expenses for the six-month period were $58.8 million, or 22.2% of net revenue, compared to $56.8 million, or 23.5% of net revenue for the same period of the prior year. The year-over-year difference is attributable primarily to increases in vehicle and equipment expense, as well as other station expenses, offset by lower fuel costs.

General and auto liability insurance expense for the first six months of fiscal 2010 was $8.6 million, compared to $5.8 million for the same period of the prior year. The year-over-year variance in this expense was driven primarily by $1.5 million in current-year increased claims costs and a $1.3 million net increase in actuarial adjustments during the quarter.

Including the loss on debt extinguishment, net loss attributable to Rural/Metro was $1.9 million, or a loss per share of $0.07 during the first six months of fiscal 2010, compared to net income of $1.8 million and diluted EPS of $0.07 during the first six months of fiscal 2009. Excluding the loss on debt extinguishment, net income attributable to Rural/Metro for the fiscal 2010 six-month period would have been $6.1 million, or diluted EPS of $0.24.

Adjusted EBITDA from continuing operations for the six months ended December 31, 2009 increased 17.3%, or $5.1 million, to $34.3 million compared to $29.2 million for the same period in fiscal 2009.

Adjusted EBITDA from continuing operations and net income and diluted EPS attributable to Rural/Metro excluding the loss on debt extinguishment are key indicators management uses to evaluate operating performance. While Adjusted EBITDA from continuing operations and net income and diluted EPS attributable to Rural/Metro excluding the loss on debt extinguishment are 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 these measures are useful to investors in assessing its 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 Adjusted EBITDA to income/(loss) from continuing operations and discontinued operations for the three and six months ended December 31, 2009 and 2008, as well as a reconciliation of net income and diluted EPS attributable to Rural/Metro excluding the loss on debt extinguishment to net loss attributable to Rural/Metro and diluted earnings per share for the three and six months ended December 31, 2009 and 2008, are included with this press release and the related current report on Form 8-K.

Second-Quarter Operating Statistics

The following table provides results for medical transports, Average Patient Charge (APC), and Days Sales Outstanding (DSO) during each of the five most recent quarters:

 

   

The quarterly increase in transport volume when compared to the same prior-year period was driven equally by growth in emergency and non-emergency transports.

 

3


   

APC improvement of $33 per transport when compared to the same fiscal 2009 quarter was primarily due to further reductions in uncompensated care and secondarily to rate increases. Uncompensated care as a percentage of gross revenue decreased further to 13.4%, compared to 13.8% for the same period of the prior year. APC represents average cash collected per ambulance transport during the period.

 

   

DSO improved by 11 days when compared to the same prior-year period and 3 days when compared to the first quarter of fiscal 2010. This improvement was related primarily to the Company’s ongoing national implementation of the electronic patient care records system and related billing and collections effectiveness.

 

     Q2 ‘09    Q3 ‘09    Q4 ‘09    Q1 ‘10    Q2 ‘10
     (12/31/08)    (3/31/09)    (6/30/09)    (9/30/09)    (12/31/09)

Medical Transports (1)

     258,344      265,969      266,952      269,317      271,856

Average Patient Charge (APC) (2)

   $ 364    $ 374    $ 378    $ 389    $ 397

Days Sales Outstanding (DSO) (3)

     57      55      52      49      46

 

(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.

Conference Call to Discuss Results

The Company will discuss results in a conference call today beginning at 8 a.m. Pacific/11 a.m. Eastern. To access the conference call, dial 888-525-6276 (domestic) or 719-325-2115 (international). The call also will be broadcast and archived on the Company’s web site at www.ruralmetro.com. A telephone replay will be available from approximately 2 p.m. Eastern today through 11:59 p.m. Eastern Feb. 12, 2010. To access the replay, dial 888-203-1112. From international locations, dial 719-457-0820. The required pass code is 8428507.

About Rural/Metro

Rural/Metro Corporation provides emergency and non-emergency ambulance services and private fire protection services in 20 states and approximately 400 communities throughout the United States. For more information, visit the Company’s web site at www.ruralmetro.com.

 

4


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 “believe”, “anticipate”, “expect”, “plan”, “intend”, “may”, “should”, “will likely result”, “continue”, “estimate”, “project”, “goals”, 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, adjusted EBITDA, capital expenditures, insurance coverage and claim reserves, capital needs, key operating metrics, future growth plans, 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)

 

5


RURAL/METRO CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share data)

 

     December 31,
2009
    June 30,
2009
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 15,136      $ 37,108   

Restricted cash

     4,560        —     

Accounts receivable, net

     59,869        64,355   

Inventories

     8,137        8,535   

Deferred income taxes

     24,851        25,032   

Prepaid expenses and other

     6,897        19,895   
                

Total current assets

     119,450        154,925   

Property and equipment, net

     47,040        49,096   

Goodwill

     37,700        37,700   

Restricted cash

     17,842        —     

Deferred income taxes

     42,754        41,678   

Other assets

     10,627        11,556   
                

Total assets

   $ 275,413      $ 294,955   
                

LIABILITIES AND STOCKHOLDERS’ DEFICIT

    

Current liabilities:

    

Accounts payable

   $ 15,187      $ 14,883   

Accrued liabilities

     43,348        57,588   

Deferred revenue

     20,899        21,585   

Current portion of long-term debt

     4,859        199   
                

Total current liabilities

     84,293        94,255   

Long-term debt, net of current portion

     266,037        277,110   

Other long-term liabilities

     30,374        28,497   
                

Total liabilities

     380,704        399,862   
                

Rural/Metro Stockholders’ deficit:

    

Common stock, $0.01 par value, 40,000,000 shares authorized, 25,244,914 and 24,852,726 shares issued and outstanding at December 31, 2009 and June 30, 2009, respectively

     252        248   

Additional paid-in capital

     156,417        155,187   

Treasury stock, 96,246 shares at both December 31, 2009 and June 30, 2009

     (1,239     (1,239

Accumulated other comprehensive loss

     (2,499     (2,597

Accumulated deficit

     (260,182     (258,331
                

Total Rural/Metro stockholders’ deficit

     (107,251     (106,732

Noncontrolling interest

     1,960        1,825   
                

Total stockholders’ deficit

     (105,291     (104,907
                

Total liabilities and stockholders’ deficit

   $ 275,413      $ 294,955   
                


RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2009     2008     2009     2008  

Net revenue

   $ 133,513      $ 119,204      $ 264,335      $ 241,677   
                                

Operating expenses:

        

Payroll and employee benefits

     81,096        74,419        162,387        149,537   

Depreciation and amortization

     3,827        3,613        7,637        6,925   

Other operating expenses

     30,862        27,463        58,753        56,772   

General/auto liability insurance expense

     5,182        2,373        8,599        5,771   

Gain on sale of assets

     (240     (47     (403     (240
                                

Total operating expenses

     120,727        107,821        236,973        218,765   
                                

Operating income

     12,786        11,383        27,362        22,912   

Interest expense

     (7,175     (7,763     (14,645     (15,576

Interest income

     49        33        131        148   

Loss on debt extinguishment

     (13,842     —          (13,842     —     
                                

Income (loss) from continuing operations before income taxes

     (8,182     3,653        (994     7,484   

Income tax benefit (provision)

     4,035        (2,077     398        (4,302

Income (loss) from continuing operations

     (4,147     1,576        (596     3,182   

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

     (293     (290     (220     (597
                                

Net income (loss)

   $ (4,440   $ 1,286      $ (816   $ 2,585   
                                

Net income attributable to noncontrolling interest

     (330     (215     (1,035     (742
                                

Net income (loss) attributable to Rural/Metro

   $ (4,770   $ 1,071      $ (1,851   $ 1,843   
                                

Income (loss) per share:

        

Basic -

        

Income (loss) from continuing operations attributable to Rural/Metro

   $ (0.18   $ 0.05      $ (0.06   $ 0.10   

Loss from discontinued operations attributable to Rural/Metro

   $ (0.01     (0.01   $ (0.01     (0.03
                                

Net income (loss) attributable to Rural/Metro

   $ (0.19   $ 0.04      $ (0.07   $ 0.07   
                                

Diluted -

        

Income (loss) from continuing operations attributable to Rural/Metro

   $ (0.18   $ 0.05      $ (0.06   $ 0.10   

Loss from discontinued operations attributable to Rural/Metro

   $ (0.01     (0.01   $ (0.01     (0.03
                                

Net income (loss) attributable to Rural/Metro

   $ (0.19   $ 0.04      $ (0.07   $ 0.07   
                                

Average number of common shares outstanding - Basic

     25,069        24,826        24,964        24,824   
                                

Average number of common shares outstanding - Diluted

     25,069        24,910        24,964        24,913   
                                


RURAL/METRO CORPORATION

RECONCILIATION OF NET LOSS EXCLUDING LOSS ON DEBT EXTINGUISHMENT

(unaudited)

(in thousands, except per share amounts)

 

     Three Months Ended
December 31,
   Six Months Ended
December 31,
     2009     2008    2009     2008

Net income (loss) attributable to Rural/Metro

   $ (4,770   $ 1,071    $ (1,851   $ 1,843
                             

Loss on debt extinguishment

     13,842        —        13,842        —  

Tax effect of loss on debt extinguishment

     (5,865     —        (5,865     —  

Adjusted net income attributable to Rural Metro

     3,207        1,071      6,126        1,843
                             

Income per share:

         

Basic -

         

Net income attributable to Rural/Metro

   $ 0.13      $ 0.04    $ 0.25      $ 0.07
                             

Diluted -

         

Net income attributable to Rural/Metro

   $ 0.13      $ 0.04    $ 0.24      $ 0.07
                             

Average number of common shares outstanding - Basic

     25,069        24,826      24,964        24,824
                             

Average number of common shares outstanding - Diluted

     25,324        24,910      25,264        24,913
                             


RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended December 31, 2009 and 2008

(unaudited)

(in thousands)

 

     2009     2008  

Cash flows from operating activities:

    

Net income (loss)

   $ (816   $ 2,585   

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

    

Depreciation and amortization

     7,752        7,181   

Non-cash adjustments to insurance claims reserves

     2,149        (1,453

Accretion of 12.75% Senior Discount Notes

     5,465        4,830   

Accretion of Term Loan Due 2014

     66        —     

Deferred income taxes

     (463     2,128   

Excess tax benefits from share-based compensation

     (491     —     

Amortization of deferred financing costs

     980        1,089   

Non-cash loss on debt extinguishment

     2,261        —     

Loss on disposal of property and equipment

     38        52   

Gain on property insurance settlement

     (119     —     

Share-based compensation expense

     304        117   

Change in assets and liabilities -

    

Accounts receivable

     4,486        5,801   

Inventories

     398        46   

Prepaid expenses and other

     (75     2,014   

Other assets

     (3,496     339   

Accounts payable

     184        (2,591

Accrued liabilities

     (1,628     (1,686

Deferred revenue

     (686     (441

Other liabilities

     262        (680
                

Net cash provided by operating activities

     16,571        19,331   
                

Cash flows from investing activities:

    

Capital expenditures

     (5,514     (8,191

Proceeds from property insurance settlement

     119        —     

Proceeds from the sale/disposal of property and equipment

     8        —     

Increase in restricted cash

     (22,402     —     
                

Net cash used in investing activities

     (27,789     (8,191
                

Cash flows from financing activities:

    

Payments on Term Loan B

     (66,000     (7,000

Payments on senior subordinated notes

     (121,000     —     

Payments on other debt and capital leases

     (147     (207

Borrowings under Term Loan Due 2014

     178,200        —     

Debt refinancing costs

     (1,837     —     

Excess tax benefits from share-based compensation

     491        —     

Net proceeds from issuance of common stock under share-based compensation plans

     439        2   

Distributions to noncontrolling interest

     (900     (250
                

Net cash used in financing activities

     (10,754     (7,455
                

Increase (decrease) in cash and cash equivalents

     (21,972     3,685   

Cash and cash equivalents, beginning of year

     37,108        15,907   
                

Cash and cash equivalents, end of year

   $ 15,136      $ 19,592   
                

Supplemental disclosure of non-cash operating activities:

    

Increase (decrease) in other current assets and accrued liabilities for general liability insurance claim

   $ (13,073   $ 1,160   

Supplemental disclosure of non-cash investing and financing activities:

    

Property and equipment funded by liabilities

   $ 620      $ 1,402   

Supplemental cash flow information:

    

Cash paid for interest

   $ 11,693      $ 9,656   

Cash paid for income taxes, net

   $ 1,279      $ 487   


RURAL/METRO CORPORATION

RECONCILIATION OF INCOME (LOSS) FROM CONTINUING AND DISCONTINUED OPERATIONS TO EBITDA

(unaudited)

(in thousands)

 

     Three Months Ended
December 31,
    Six Months Ended
December 31,
 
     2009     2008     2009     2008  

Income (loss) from continuing operations

   $ (4,147   $ 1,576      $ (596   $ 3,182   

Add (deduct):

        

Depreciation and amortization

     3,827        3,613        7,637        6,925   

Interest expense

     7,175        7,763        14,645        15,576   

Interest income

     (49     (33     (131     (148

Income tax provision (benefit)

     (4,035     2,077        (398     4,302   

Income attributable to noncontrolling interest

     (330     (215     (1,035     (742
                                

EBITDA from continuing operations attributable to Rural/Metro

     2,441        14,781        20,122        29,095   
                                

Add (deduct):

        

Share-based compensation expense

     168        72        304        117   

Loss on debt extinguishment

     13,842        —          13,842        —     
                                

Adjusted EBITDA from continuing operations attributable to Rural/Metro

     16,451        14,853        34,268        29,212   
                                

Income (loss) from discontinued operations

     (293     (290     (220     (597

Add (deduct):

        

Depreciation and amortization

     46        172        115        256   

Income tax provision (benefit)

     (282     (190     (225     (476
                                

EBITDA from discontinued operations attributable to Rural/Metro

     (529     (308     (330     (817
                                

Total adjusted EBITDA attributable to Rural/Metro

   $ 15,922      $ 14,545      $ 33,938      $ 28,395