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 REPORTS SOLID REVENUE AND PROFIT GROWTH

IN FISCAL 2011 FIRST QUARTER AND ANNOUNCES CHANGES TO REFINANCING PLAN

First-Quarter Highlights

 

   

7.4% growth in net revenue when compared to fiscal 2010 first quarter.

 

   

8.3% growth in ambulance transport volume.

 

   

$5.4 million in net income attributable to Rural/Metro, or diluted earnings per share (EPS) of $0.21.

 

   

$21.1 million, or 18.5% growth, in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations, representing an adjusted EBITDA margin of 15.1%.

 

   

Key operating metrics—Average Patient Charge (APC), Days Sales Outstanding (DSO) and ambulance transports—all show strong improvement compared to the same prior-year period.

SCOTTSDALE, Ariz. (Nov. 8, 2010)—Rural/Metro Corporation (NASDAQ: RURL), a leading provider of ambulance and private fire protection services, announced strong results today for its fiscal 2011 first quarter, reporting solid growth in net revenue, EBITDA, net income and diluted earnings per share.

Michael P. DiMino, President and Chief Executive Officer, said, “Our first quarter was outstanding, with growth driven by strong transport volume, new contracts and continued operating efficiencies. These results are indicative of the success we have had in executing on our growth initiatives. Additionally, we have continued to demonstrate superior revenue cycle management, effectively leverage operating efficiencies and deliver the highest quality services to our patients and customers.”

Mr. DiMino continued, “We will build on these results throughout fiscal 2011, as we execute on our strategic vision and remain focused on superior patient care, customer service, technology and infrastructure. We believe these initiatives and our actions to reduce debt leverage and increase EBITDA will continue to drive long-term value for our shareholders.”

Results of Operations for the Fiscal 2011 First Quarter Ended September 30, 2010

For the quarter ended September 30, 2010, the Company generated net revenue of $140.1 million, an increase of 7.4% or $9.6 million, compared to net revenue of $130.5 million for the same period last year. Ambulance services revenue was $122.5 million, an increase of 9.5% or $10.6 million, compared to $111.9 million for the same prior-year period. The increase was primarily attributable to increases of $7.2 million in same-service-area revenue and $3.4 million in new contract revenue. Same-service-area revenue growth included reductions in uncompensated care, increases in rates and 4.3% growth in transport volume. Overall transport volume grew 8.3% in the first quarter.


 

Fire and other services revenue was $17.7 million, a decrease of 4.8% or $0.9 million, compared to $18.6 million for the same prior-year period. The difference was due primarily to a reduction in fire subscription service revenue.

Payroll and employee benefits expense for the first fiscal quarter was $84.8 million, or 60.5% of net revenue, compared to $81.1 million, or 62.1% of net revenue, in the same period of the prior year. The year-over-year decrease as a percentage of net revenue was primarily attributable to an increase in payroll expenses related to higher transport volume, offset by decreases in employee health and workers’ compensation insurance expenses.

Other operating expenses for the first fiscal quarter totaled $30.0 million, or 21.4% of net revenue, compared to $27.8 million, or 21.3% of net revenue for the same prior-year period. The slight year-over-year increase as a percentage of net revenue was related to increased transports, unit hours and fuel prices.

First-quarter net income attributable to Rural/Metro was $5.4 million, or diluted EPS of $0.21, compared to net income of $2.9 million and diluted EPS of $0.12 for the first quarter of the prior year.

Net cash provided by operating activities remained strong in the first quarter at $15.2 million. Capital expenditures for the quarter were $2.7 million.

Adjusted EBITDA from continuing operations for the first quarter increased 18.5% to $21.1 million and an adjusted EBITDA margin of 15.1%, compared to $17.8 million and a 13.6% margin for the same period in fiscal 2010.

Adjusted EBITDA from continuing operations and net income and diluted EPS attributable to Rural/Metro are key indicators management uses to evaluate operating performance. While adjusted 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 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 from continuing operations and discontinued operations for the three months ended September 30, 2010 and 2009 is, included with this press release and the related current report on Form 8-K.

Additionally, the Company has included a reconciliation of previously reported segment results for the three months ended September 30, 2010 and 2009 to represent the effect on results of the first-quarter realignment of its operating zones and the reclassification of discontinued operations on results.

Refinancing Terms Revised

The Company also announced that it has revised the manner in which it intends to refinance its outstanding indebtedness. The Company intends to negotiate a secured credit facility to replace its existing secured revolving credit, term loan and letter of credit facilities, and to finance the redemption of the Company’s outstanding 12¾% Senior Discount Notes due 2016 (the “Outstanding Notes”). Proceeds from the new credit facility, which is expected to include a term loan for $270 million and a revolving credit facility of at least $75 million, will also be used to pay fees and expenses relating to the proposed refinancing. Under the proposed new credit facility, the Company will not be required to cash collateralize any portion of its letter of credit facility. No assurance can be given that the Company’s planned refinancing will be consummated.

The previously announced offer of $200 million principal amount of Senior Notes due 2018 will not be pursued, and the Company has notified the holders which have tendered the Outstanding Notes in connection with the Company’s tender offer and consent solicitation that they are permitted to withdraw such tender and consent during a period commencing today and ending at 5:00 pm New York City time on November 11, 2010. In addition, the Company announced that it will waive the minimum consents condition in connection with the tender offer and consent solicitation.

Mr. DiMino noted, “The Company’s discussions with potential senior lenders have resulted in strong interest in the Company’s proposed new credit facility at attractive pricing and under other favorable terms. We expect the refinancing to create substantial savings in interest expense for the Company, and the shift away from financing the Company’s long-term debt from notes to an increased amount of debt under the Company’s senior credit facility will permit the Company to have the flexibility to carry out its business objectives, including to support organic growth and pursue potential acquisitions, while securing a lower interest rate.”


 

Fiscal 2011 Guidance Re-Affirmed

The Company re-affirmed financial guidance for the fiscal year ending June 30, 2011, with adjusted EBITDA from continuing operations expected to be in the range of $74.0 million to $76.0 million and capital expenditures expected to be in the range of $18.0 million to $20.0 million.

Quarterly Operating Statistics

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

 

     Q1 '10      Q2 '10      Q3 '10      Q4 '10      Q1 '11  
     (9/30/09)      (12/31/09)      (3/31/10)      (6/30/10)      9/30/10  

Medical Transports (1)

     268,755         271,396         277,276         280,574         291,152   

Average Patient Charge (APC) (2)

   $ 389       $ 397       $ 394       $ 391       $ 397   

Days Sales Outstanding (DSO) (3)

     49         46         44         43         42   

 

(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 11 a.m. Eastern. To join the Company’s conference call, dial 877-383-7417 (domestic) or 678-894-3972 (international). A taped replay will be available approximately two hours following the completion of the call through 11:59 p.m. Eastern on November 11, 2010. To access the replay, dial 800-642-1687 (domestic) or 706-645-9291 (international). The required pass code to access the replay is 17067574. An audio webcast also will be available at www.ruralmetro.com the day of the call and will remain on the Company’s website for 90 days thereafter.

About Rural/Metro

Rural/Metro Corporation provides emergency and non-emergency ambulance services and private fire protection services in 20 states and approximately 440 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 “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 financial reports filed with the Securities and Exchange Commission (SEC), investor 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)


 

RURAL/METRO CORPORATION

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share data)

 

     September  30,
2010
    June  30,
2010
 
    

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 29,901      $ 20,228   

Accounts receivable, net

     67,276        63,581   

Inventories

     7,423        8,001   

Deferred income taxes

     25,618        23,737   

Prepaid expenses and other

     6,583        7,907   
                

Total current assets

     136,801        123,454   

Property and equipment, net

     48,155        50,670   

Goodwill

     36,516        36,516   

Restricted cash

     20,376        20,376   

Deferred income taxes

     36,691        41,538   

Other assets

     15,136        15,908   
                

Total assets

   $ 293,675      $ 288,462   
                

LIABILITIES AND DEFICIT

    

Current liabilities:

    

Accounts payable

   $ 10,726      $ 12,914   

Accrued liabilities

     51,741        48,290   

Deferred revenue

     21,526        21,244   

Current portion of long-term debt

     6,393        6,436   
                

Total current liabilities

     90,386        88,884   

Long-term debt, net of current portion

     260,598        262,606   

Other long-term liabilities

     37,757        38,130   
                

Total liabilities

     388,741        389,620   
                

Rural/Metro Stockholders’ deficit:

    

Common stock, $0.01 par value, 40,000,000 shares authorized, 25,319,403 and 25,254,713 shares issued and outstanding at September 30, 2010 and June 30, 2010, respectively

     253        252   

Additional paid-in capital

     156,968        156,748   

Treasury stock, 96,246 shares at both September 30, 2010 and June 30, 2010

     (1,239     (1,239

Accumulated other comprehensive loss

     (3,824     (3,782

Accumulated deficit

     (249,396     (254,823
                

Total Rural/Metro stockholders’ deficit

     (97,238     (102,844

Noncontrolling interest

     2,172        1,686   
                

Total deficit

     (95,066     (101,158
                

Total liabilities and deficit

   $ 293,675      $ 288,462   
                


 

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

 

     Three Months Ended September 30,  
     2010     2009  

Net revenue

   $ 140,131      $ 130,494   
                

Operating expenses:

    

Payroll and employee benefits

     84,811        81,050   

Depreciation and amortization

     4,289        3,809   

Other operating expenses

     30,044        27,826   

General/auto liability insurance expense

     3,650        3,411   

Gain on sale/disposal of assets

     (253     (162
                

Total operating expenses

     122,541        115,934   
                

Operating income

     17,590        14,560   

Interest expense

     (7,330     (7,470

Interest income

     74        82   
                

Income from continuing operations before income taxes

     10,334        7,172   

Income tax provision

     (3,946     (3,630

Income from continuing operations

     6,388        3,542   

Income from discontinued operations, net of income taxes

     25        82   
                

Net income

   $ 6,413      $ 3,624   
                

Net income attributable to noncontrolling interest

     (986     (705
                

Net income attributable to Rural/Metro

   $ 5,427      $ 2,919   
                

Income per share:

    

Basic—

    

Income from continuing operations attributable to Rural/Metro

   $ 0.21      $ 0.12   

Income from discontinued operations attributable to Rural/Metro

   $ —          —     
                

Net income attributable to Rural/Metro

   $ 0.21      $ 0.12   
                

Diluted—

    

Income from continuing operations attributable to Rural/Metro

   $ 0.21      $ 0.12   

Income from discontinued operations attributable to Rural/Metro

   $ —        $ —     
                

Net income attributable to Rural/Metro

   $ 0.21      $ 0.12   
                

Average number of common shares outstanding—Basic

     25,280        24,858   
                

Average number of common shares outstanding—Diluted

     25,560        25,204   
                


 

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

     Three Months Ended September 30,  
     2010     2009  

Cash flows from operating activities:

    

Net income

   $ 6,413      $ 3,624   

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

    

Depreciation and amortization

     4,289        3,879   

Non-cash adjustments to insurance claims reserves

     —          798   

Accretion of debt

     304        2,664   

Deferred income taxes

     3,172        2,425   

Share-based compensation expense

     229        136   

Excess tax benefits from share-based compensation

     (181     (36

Amortization of debt issuance costs

     322        570   

Loss on sale/disposal of property and equipment

     38        7   

Change in assets and liabilities—

    

Accounts receivable

     (3,695     935   

Inventories

     578        316   

Prepaid expenses and other

     1,322        (799

Other assets

     169        135   

Accounts payable

     (1,205     (3,104

Accrued liabilities

     3,451        6,465   

Deferred revenue

     282        124   

Other liabilities

     (271     (578
                

Net cash provided by operating activities

     15,217        17,561   
                

Cash flows from investing activities:

    

Capital expenditures

     (2,676     (2,180

Proceeds from the sale/disposal of property and equipment

     7        4   
                

Net cash used in investing activities

     (2,669     (2,176
                

Cash flows from financing activities:

    

Payments on debt

     (2,367     (10,117

Excess tax benefits from share-based compensation

     181        36   

Net (payments for) proceeds from issuance of common stock under share-based compensation plans

     (189     1   

Distributions to noncontrolling interest

     (500     (400
                

Net cash used in financing activities

     (2,875     (10,480
                

Increase in cash and cash equivalents

     9,673        4,905   

Cash and cash equivalents, beginning of year

     20,228        37,108   
                

Cash and cash equivalents, end of year

   $ 29,901      $ 42,013   
                

Supplemental disclosure of non-cash operating activities:

    

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

   $ —        $ 174   

Supplemental disclosure of non-cash investing and financing activities:

    

Property and equipment funded by liabilities

   $ 332      $ 473   

Supplemental cash flow information:

    

Cash paid for interest

   $ 9,674      $ 7,242   

Cash paid for income taxes, net

   $ 239      $ 311   


 

RURAL/METRO CORPORATION

RECONCILIATION OF INCOME FROM CONTINUING AND DISCONTINUED OPERATIONS TO EBITDA

(unaudited)

(in thousands)

 

     Three Months Ended
September 30,
 
     2010     2009  

Income from continuing operations

   $ 6,388      $ 3,542   

Add (deduct):

    

Depreciation and amortization

     4,289        3,809   

Interest expense

     7,330        7,470   

Interest income

     (74     (82

Income tax provision

     3,946        3,630   

Income attributable to noncontrolling interest

     (986     (705
                

EBITDA from continuing operations attributable to Rural/Metro

     20,893        17,664   
                

Add (deduct):

    

Share-based compensation expense

     229        136   
                

Adjusted EBITDA from continuing operations attributable to Rural/Metro

     21,122        17,800   
                

Income from discontinued operations

     25        82   

Add (deduct):

    

Depreciation and amortization

     —          70   

Income tax provision

     16        64   
                

EBITDA from discontinued operations attributable to Rural/Metro

     41        216   
                

Total adjusted EBITDA attributable to Rural/Metro

   $ 21,163      $ 18,016   
                


 

     Three Months  Ended
9/30/09

As Previously
Reported
     Adjustments
Related to
Reporting Segment
Realignment (1)
    Adjustments
Related to
Discontinued
Operations (2)
    Three Months  Ended
9/30/09

Revised
 

EAST ZONE

         

Net Revenue

   $ 23,911       $ 7,779      $ —        $ 31,690   

Segment Profit

   $ 6,506       $ 828      $ —        $ 7,334   

Medical Transports

     57,638         25,943        —          83,581   

SOUTH ZONE

         

Net Revenue

   $ 35,520       $ (4,442   $ (465   $ 30,613   

Segment Profit

   $ 3,543       $ (456   $ (32   $ 3,055   

Medical Transports

     84,892         (13,436     (562     70,894   

SOUTHWEST ZONE

         

Net Revenue

   $ 44,552       $ —        $ —        $ 44,552   

Segment Profit

   $ 5,698       $ —        $ —        $ 5,698   

Medical Transports

     58,341         —          —          58,341   

WEST ZONE

         

Net Revenue

   $ 27,998       $ (3,337   $ (1,022   $ 23,639   

Segment Profit

   $ 2,753       $ (372   $ (99   $ 2,282   

Medical Transports

     71,154         (12,507     (2,708     55,939   

CONSOLIDATED

         

Net Revenue

   $ 131,981       $ —        $ (1,487   $ 130,494   

Segment Profit

   $ 18,500       $ —        $ (131   $ 18,369   

Medical Transports

     272,025         —          (3,270     268,755   

 

(1)

   —Adjustments represent the effect of the realignment of our reporting segments on results for the quarter ended September 30, 2009 as previously reported on Form 10-Q for the quarter ended September 30, 2009.

(2)

   —Adjustments represent the effect of the reclassification of operations that were discontinued between October 1, 2009 and September 30, 2010.