SOURCE: Rural/Metro Corporation

Rural/Metro Corporation

September 08, 2010 07:00 ET

Rural/Metro Reports Strong Fiscal 2010 Full-Year and Fourth-Quarter Results

SCOTTSDALE, AZ--(Marketwire - September 8, 2010) - Rural/Metro Corporation (NASDAQ: RURL)

Fiscal 2010 Highlights:

-- 7.9% growth in net revenue when compared to fiscal 2009

-- 17.9% growth in operating income when compared to fiscal 2009

-- $3.5 million net income attributable to Rural/Metro, or diluted
   earnings per share (EPS) of $0.14, including a $14.2 million pre-tax
   loss on debt extinguishment and a $1.2 million pre-tax goodwill
   impairment related to a legacy acquisition

-- $69.1 million in adjusted EBITDA from continuing operations

Rural/Metro Corporation (NASDAQ: RURL), a leading national provider of ambulance and private fire protection services, announced strong results for its fiscal 2010 full year and fourth quarter ended June 30, 2010.

Michael P. DiMino, President and Chief Executive Officer, said, "Our results clearly demonstrate the strength of our business strategies as we successfully achieve organic and strategic growth opportunities, leverage our operational and technological expertise to gain margin expansion and generate strong and sustainable cash flow."

Results of Operations for the Fiscal Year Ended June 30, 2010

For the fiscal year ended June 30, 2010, the Company generated net revenue of $530.8 million, an increase of 7.9% or $39.0 million, compared to $491.8 million for the same prior-year period. Ambulance services revenue was $457.8 million, an increase of 9.6% or $40.0 million, compared to $417.8 million for the same prior-year period. The increase was primarily attributable to $37.4 million in same-service-area revenue growth, which was driven by reductions in uncompensated care, rate increases and a 4.1% increase in ambulance transport volume, as well as $2.6 million from new contract growth. Other services revenue was $72.9 million, a decrease of 1.4% or $1.0 million, compared to $73.9 million for the same prior-year period.

Payroll and employee benefits expense for fiscal 2010 was $324.7 million, or 61.2% of net revenue, compared to $305.3 million, or 62.1% of net revenue for fiscal 2009. The year-over-year decrease as a percentage of net revenue was primarily attributable to improved labor management and higher transport volumes offset slightly by increases in employee health insurance and workers compensation insurance expenses.

Other operating expenses for fiscal 2010 totaled $121.9 million, or 23.0% of net revenue, compared to $115.6 million, or 23.5% of net revenue in fiscal 2009. The year-over-year decrease as a percentage of net revenue was related to higher revenue offset by an increase in professional fees.

General and auto liability insurance expense for fiscal 2010 was $13.9 million, or an increase of $2.3 million, compared with $11.6 million in fiscal 2009. The year-over-year increase was driven primarily by an increase in current-year claims estimates.

Fiscal 2010 net income attributable to Rural/Metro was $3.5 million, or diluted EPS of $0.14, which included a $14.2 million loss on debt extinguishment related to the Company's December 2009 debt refinancing and a $1.2 million goodwill impairment charge related to a legacy acquisition. Excluding the loss on debt extinguishment, fiscal 2010 net income attributable to Rural/Metro would have been $12.4 million, or diluted EPS of $0.49.

Fiscal 2010 adjusted EBITDA from continuing operations increased 18.3% to $69.1 million compared to $58.4 million in fiscal 2009. Adjusted EBITDA from continuing operations excludes the effect of the $14.2 million loss on debt extinguishment, the $1.2 million goodwill impairment, and $0.5 million in share-based compensation expense.

Results of Operations for the Fourth Quarter Ended June 30, 2010

For the quarter ended June 30, 2010, the Company generated net revenue of $133.8 million, an increase of 5.4%, or $6.9 million, compared to net revenue of $126.9 million for the same period last year. Ambulance services revenue was $116.1 million, an increase of 7.4% or $8.0 million, compared to $108.1 million for the same prior-year period. The increase was primarily attributable to $7.1 million in same-service-area revenue growth, which included reductions in uncompensated care, rate increases and a 5.3% increase in transport volume, as well as $0.9 million in new contract growth. Other services revenue was $17.7 million, a decrease of 5.7% or $1.1 million, compared to $18.8 million for the same prior-year period.

Payroll and employee benefits expense for the fourth fiscal quarter was $82.9 million, or 62.0% of net revenue, compared to $80.2 million, or 63.2% 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 improved labor management, higher transport volumes and lower employee bonus expense, offset slightly by an increase in employee health insurance expenses.

Other operating expenses for the fourth fiscal quarter totaled $31.8 million, or 23.8% of net revenue, compared to $31.0 million, or 24.4% of net revenue for the same prior-year period. The year-over-year decrease as a percentage of net revenue was related to higher revenue, offset in part by higher fuel expense related to increased prices.

Auto and general liability insurance expense for the fourth fiscal quarter was $1.9 million, or an increase of $0.9 million, when compared to $1.0 million for the same period of the prior year. The year-over-year increase was driven primarily by a higher positive adjustment in actuarial claims in the prior year when compared to the current year.

Fourth-quarter net income attributable to Rural/Metro was $1.6 million, or diluted EPS of $0.06, compared to net income of $2.2 million and diluted EPS of $0.09 for the fourth quarter of the prior year.

Adjusted EBITDA from continuing operations for the fourth quarter increased 15.4% to $16.8 million, compared to $14.6 million for the same period in fiscal 2009. Adjusted EBITDA from continuing operations for the three-month period excludes the effect of the $1.2 million goodwill impairment and $0.2 million in share-based compensation expense.

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 12 months ended June 30, 2010 and 2009, 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 12 months ended June 30, 2010 and 2009, are included with this press release and the related current report on Form 8-K.

Transaction Technology

The Company's focus on invoice transaction processing and related technology has resulted in consistent and measurable improvement in areas such as uncompensated care (UC) and days sales outstanding (DSO). Specifically, the national rollout of its electronic patient care reporting (ePCR) system that began in July 2008 has contributed to these improvements. The Company monitors an array of system performance measures, ranging from the impact to uncompensated care to the durability of the hardware installed in each ambulance. At the close of fiscal 2010, ePCR technology was being used in approximately 65% of the Company's ambulance transports.

"When Rural/Metro designed the electronic patient record system and began the deployment, we strongly believed that the accuracy and efficiency afforded by this technology would complement the enhancements made to our front-end billing and collections processes," Mr. DiMino said.

"In two years, we have achieved not only a solid $12.0 million return on our $8.0 million investment, but also have established our leadership position when it comes to billing and collecting for ambulance services," he continued. "The ePCR system has more than paid for itself through reductions in uncompensated care and reduced DSO. It is a key component of our success, and will continue to be a part of our strategy to improve invoice-to-cash outcomes in the future."

Fiscal 2011 Guidance

The Company announced 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:


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

Medical
 Transports (1)     266,357     268,755     271,396     277,276     280,574

Average Patient
 Charge (APC)
 (2)             $      378  $      389  $      397  $      394  $      391

Days Sales
 Outstanding
 (DSO) (3)               52          49          46          44          43

(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 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 September 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 91751906. 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 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 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)

                                                      June 30,   June 30,
                                                        2010       2009
                                                      ---------  ---------
ASSETS
Current assets:
  Cash and cash equivalents                           $  20,228  $  37,108
  Accounts receivable, net                               63,581     64,355
  Inventories                                             8,001      8,535
  Deferred income taxes                                  23,737     25,032
  Prepaid expenses and other                              7,907     19,895
                                                      ---------  ---------
    Total current assets                                123,454    154,925

  Property and equipment, net                            50,670     49,096
  Goodwill                                               36,516     37,700
  Restricted cash                                        20,376          -
  Deferred income taxes                                  41,538     41,678
  Other assets                                           15,908     11,556
                                                      ---------  ---------
    Total assets                                      $ 288,462  $ 294,955
                                                      =========  =========

LIABILITIES AND DEFICIT
Current liabilities:
  Accounts payable                                    $  12,914  $  14,883
  Accrued liabilities                                    48,290     57,588
  Deferred revenue                                       21,244     21,585
  Current portion of long-term debt                       6,436        199
                                                      ---------  ---------
    Total current liabilities                            88,884     94,255

  Long-term debt, net of current portion                262,606    277,110
  Other long-term liabilities                            38,130     28,497
                                                      ---------  ---------
    Total liabilities                                   389,620    399,862
                                                      ---------  ---------

Rural/Metro Stockholders' deficit:
  Common stock, $0.01 par value, 40,000,000 shares
   authorized, 25,254,713 and 24,852,726 shares
   issued and outstanding at June 30, 2010 and
   June 30, 2009, respectively                              252        248
  Additional paid-in capital                            156,748    155,187
  Treasury stock, 96,246 shares at both June 30, 2010
   and June 30, 2009                                     (1,239)    (1,239)
  Accumulated other comprehensive loss                   (3,782)    (2,597)
  Accumulated deficit                                  (254,823)  (258,331)
                                                      ---------  ---------
    Total Rural/Metro stockholders' deficit            (102,844)  (106,732)

  Noncontrolling interest                                 1,686      1,825
                                                      ---------  ---------
    Total deficit                                      (101,158)  (104,907)

                                                      ---------  ---------
      Total liabilities and deficit                   $ 288,462  $ 294,955
                                                      =========  =========



                          RURAL/METRO CORPORATION
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                (unaudited)
                 (in thousands, except per share amounts)


                                 Three Months Ended   Twelve Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Net revenue                     $ 133,845  $ 126,889  $ 530,754  $ 491,800
                                ---------  ---------  ---------  ---------
Operating expenses:
  Payroll and employee benefits    82,918     80,158    324,748    305,271
  Depreciation and amortization     4,537      3,744     15,982     14,258
  Other operating expenses         31,823     31,023    121,891    115,641
  General/auto liability
   insurance expense                1,921      1,031     13,902     11,649
  Goodwill impairment               1,184          -      1,184          -
  Gain on sale of assets and
   property insurance settlement     (108)      (132)      (623)      (536)
                                ---------  ---------  ---------  ---------
    Total operating expenses      122,275    115,824    477,084    446,283
                                ---------  ---------  ---------  ---------
Operating income                   11,570     11,065     53,670     45,517
  Interest expense                 (7,335)    (7,518)   (29,096)   (30,843)
  Interest income                      66         69        235        324
  Loss on debt extinguishment           -          -    (14,154)         -
                                ---------  ---------  ---------  ---------

Income from continuing
 operations before income taxes     4,301      3,616     10,655     14,998
Income tax provision               (2,080)    (1,048)    (4,395)    (7,433)

Income from continuing
 operations                         2,221      2,568      6,260      7,565
Loss from discontinued
 operations, net of income
 taxes                                 10        (82)      (491)      (930)
                                ---------  ---------  ---------  ---------
Net income                      $   2,231  $   2,486  $   5,769  $   6,635
                                =========  =========  =========  =========
Net income attributable to
 noncontrolling interest             (631)      (290)    (2,261)    (1,609)
                                ---------  ---------  ---------  ---------
Net income attributable to
 Rural/Metro                    $   1,600  $   2,196  $   3,508  $   5,026
                                =========  =========  =========  =========

Income (loss) per share:
  Basic -
    Income from continuing
     operations attributable
     to Rural/Metro             $    0.06  $    0.09  $    0.16  $    0.24
    Loss from discontinued
     operations attributable
     to Rural/Metro             $       -          -  $   (0.02)     (0.04)
                                ---------  ---------  ---------  ---------
      Net income attributable
       to Rural/Metro           $    0.06  $    0.09  $    0.14  $    0.20
                                =========  =========  =========  =========

  Diluted -
    Income from continuing
     operations attributable
     to Rural/Metro             $    0.06  $    0.09  $    0.16  $    0.24
    Loss from discontinued
     operations attributable
     to Rural/Metro             $       -  $       -  $   (0.02) $   (0.04)
                                ---------  ---------  ---------  ---------
      Net income attributable
       to Rural/Metro           $    0.06  $    0.09  $    0.14  $    0.20
                                =========  =========  =========  =========

 Average number of common
  shares outstanding - Basic       25,253     24,845     25,106     24,834
                                =========  =========  =========  =========
 Average number of common
  shares outstanding - Diluted     25,465     24,938     25,351     24,915
                                =========  =========  =========  =========



                          RURAL/METRO CORPORATION
    RECONCILIATION OF NET INCOME EXCLUDING LOSS ON DEBT EXTINGUISHMENT
                                (unaudited)
                 (in thousands, except per share amounts)



                                 Three Months Ended   Twelve Months Ended
                                      June 30,              June 30,
                                --------------------- --------------------
                                   2010       2009       2010       2009
                                ---------- ---------- ---------  ----------
Net income attributable to
 Rural/Metro                    $    1,600 $    2,196 $   3,508  $    5,026
                                ---------- ---------- ---------  ----------
Loss on debt extinguishment              -          -    14,154           -

Tax effect of loss on debt
 extinguishment                        192          -    (5,249)          -

Adjusted net income
 attributable to Rural Metro         1,792      2,196    12,413       5,026
                                ---------- ---------- ---------  ----------
Income per share:
  Basic -
    Net income attributable
     to Rural/Metro             $     0.07 $     0.09 $    0.49  $     0.20
                                ========== ========== =========  ==========

  Diluted -
    Net income attributable
     to Rural/Metro             $     0.07 $     0.09 $    0.49  $     0.20
                                ========== ========== =========  ==========

  Average number of common
   shares outstanding - Basic       25,253     24,845    25,106      24,834
                                ========== ========== =========  ==========
  Average number of common
   shares outstanding - Diluted     25,465     24,938    25,351      24,915
                                ========== ========== =========  ==========



                          RURAL/METRO CORPORATION
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
            For the twelve months ended June 30, 2010 and 2009
                                (unaudited)
                              (in thousands)


                                                        2010       2009
                                                      ---------  ---------
Cash flows from operating activities:
  Net income                                          $   5,769  $   6,635
  Adjustments to reconcile net income to net cash
   provided by operating activities -
    Depreciation and amortization                        16,102     14,697
    Non-cash adjustments to insurance claims reserves     2,517         (4)
    Accretion of 12.75% Senior Discount Notes             7,769      9,968
    Accretion of Term Loan Due 2014                         586          -
    Deferred income taxes                                 2,647      7,622
    Excess tax benefits from share-based compensation      (583)        (9)
    Amortization of debt issuance costs                   1,577      2,089
    Non-cash loss on debt extinguishment                  2,345          -
    Loss on disposal of property and equipment and
     proceeds from property insurance settlement            (67)        76
    Goodwill impairment                                   1,184          -
    Share-based compensation expense                        545        241
    Items expensed related to acquisition                   186          -
  Change in assets and liabilities -
    Accounts receivable                                     774     11,776
    Inventories                                             552        (79)
    Prepaid expenses and other                           (1,081)       559
    Other assets                                         (2,283)       448
    Accounts payable                                     (2,772)      (872)
    Accrued liabilities                                   3,420        221
    Deferred revenue                                       (341)      (316)
    Other liabilities                                    (1,321)      (971)
                                                      ---------  ---------
  Net cash provided by operating activities              37,525     52,081
                                                      ---------  ---------
  Cash flows from investing activities:
    Capital expenditures                                (15,488)   (16,692)
    Cash paid for acquisition                            (1,400)         -
    Proceeds from the sale of property and equipment
     and property insurance settlement                      148         46
    Increase in restricted cash                         (20,376)         -
                                                      ---------  ---------
  Net cash used in investing activities                 (37,116)   (16,646)
                                                      ---------  ---------
  Cash flows from financing activities:
    Payments on debt                                   (192,272)   (12,512)
    Issuance of debt                                    178,200          -
    Debt issuance costs                                  (1,837)         -
    Excess tax benefits from share-based compensation       583          9
    Net proceeds from issuance of common stock under
     share-based compensation plans                         437         19
    Distributions of earnings to noncontrolling
     interest                                            (2,400)    (1,750)
                                                      ---------  ---------
  Net cash used in financing activities                 (17,289)   (14,234)
                                                      ---------  ---------
  (Decrease) increase in cash and cash equivalents      (16,880)    21,201
  Cash and cash equivalents, beginning of year           37,108     15,907
                                                      ---------  ---------
  Cash and cash equivalents, end of year              $  20,228  $  37,108
                                                      =========  =========

  Supplemental disclosure of non-cash operating
   activities:
    (Decrease) increase in other current assets and
     accrued liabilities for general liability
     insurance claim                                  $  (5,073) $   1,508

  Supplemental disclosure of non-cash investing and
   financing activities:
    Property and equipment funded by liabilities      $   1,750  $     962

  Supplemental cash flow information:
    Cash paid for interest                            $  17,944  $  19,360
    Cash paid for income taxes, net                   $   1,353  $   1,181



                          RURAL/METRO CORPORATION
  RECONCILIATION OF INCOME FROM CONTINUING AND DISCONTINUED OPERATIONS TO
                                  EBITDA
                                (unaudited)
                              (in thousands)


                                 Three Months Ended   Twelve Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------

Income from continuing
 operations                     $   2,221  $   2,568  $   6,260  $   7,565
Add (deduct):
 Depreciation and amortization      4,537      3,744     15,982     14,258
 Interest expense                   7,335      7,518     29,096     30,843
 Interest income                      (66)       (69)      (235)      (324)
 Income tax provision               2,080      1,048      4,395      7,433
 Income attributable to
  noncontrolling interest            (631)      (290)    (2,261)    (1,609)
                                ---------  ---------  ---------  ---------

 EBITDA from continuing
  operations attributable to
  Rural/Metro                      15,476     14,519     53,237     58,166
                                ---------  ---------  ---------  ---------

Add (deduct):
 Share-based compensation
  expense                             154         56        545        241
 Goodwill impairment                1,184          -      1,184          -
 Loss on debt extinguishment            -          -     14,154          -
                                ---------  ---------  ---------  ---------

 Adjusted EBITDA from
  continuing operations
  attributable to Rural/Metro      16,814     14,575     69,120     58,407
                                ---------  ---------  ---------  ---------

Loss from discontinued
 operations                            10        (82)      (491)      (930)
Add (deduct):
 Depreciation and amortization          -         81        121        439
 Income tax provision (benefit)        48        (26)      (292)      (550)
                                ---------  ---------  ---------  ---------

 EBITDA from discontinued
  operations attributable to
  Rural/Metro                          58        (27)      (662)    (1,041)
                                ---------  ---------  ---------  ---------

 Total adjusted EBITDA
  attributable to Rural/Metro   $  16,872  $  14,548  $  68,458  $  57,366
                                =========  =========  =========  =========

Contact Information

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