SOURCE: Rural/Metro Corporation

Rural/Metro Corporation

February 09, 2010 07:00 ET

Rural/Metro Announces Strong Second-Quarter Results; Raises 2010 Adjusted EBITDA Guidance to $63.0-$65.0 Million

SCOTTSDALE, AZ--(Marketwire - February 9, 2010) - Rural/Metro Corporation (NASDAQ: RURL)

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.

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.

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.

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.
--  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.

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.

                          RURAL/METRO CORPORATION
                        CONSOLIDATED BALANCE SHEETS
                                (unaudited)
                    (in thousands, except share data)



                                                December 31,    June 30,
                                                    2009          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     Six Months Ended
                                    December 31,          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     Six Months Ended
                                    December 31,          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          Six Months
                                 Ended December 31,    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
   attrubutable to Rural/Metro  $  15,922  $  14,545  $  33,938  $  28,395
                                =========  =========  =========  =========

(RURL/F)

Contact Information

  • CONTACT:
    Liz Merritt
    Rural/Metro Corporation
    (480) 606-3337

    Sharrifah Al-Salem, FD
    (415) 293-4414