Guest guest Posted May 14, 2001 Report Share Posted May 14, 2001 CNNfn IndustryWatch - Article Aerospace/Defense Auto Aviation Banking Business and Finance - Bankruptcy - Dividends/Earnings - Executives - Intellect. Prop. - Investments - Investors - IPO's - Joint Ventures - Labor - Mergers & Acq. - Mortgages/Loans - Products - Reg. and Taxes - Venture Capital Chemicals Computers Economy/Markets Energy Entertainment Environment Food Government Healthcare Insurance Internet Metals & Minerals Real Estate Retail Small Business Telecommunications Transportation Travel Utilities Search Industry News: Enter Keywords Rural/Metro Corporation Announces Third Quarter Results; Cash Flow Improvements Continue; Collections Efforts Progressing Source: Business Wire Publication date: 2001-05-14 SCOTTSDALE, Ariz.--(BUSINESS WIRE)--May 14, 2001--Rural/Metro Corporation (Nasdaq:RURL) today announced results of its third quarter ended March 31, 2001, reporting continued improvements in cash flow performance. For the third fiscal quarter ended March 31, 2001, the company reported revenue of $126.7 million. EBITDA, prior to one-time charges, was $11.1 million for the quarter, resulting in a margin of 8.8%. During the quarter, the company recognized one-time, pre-tax charges of $5 million to increase its reserve for workers' compensation claims and $15 million to increase its reserve for general liability claims. Additions to the company's insurance reserves reflect the escalating costs related to current and future claims, despite fewer actual claims being filed. On a fully consolidated basis including the charges, net loss after taxes was $23.6 million or a loss of $1.60 per diluted share. This compares to a net loss of $16.6 million, or a loss of $1.14 per diluted share, for the same quarter of the prior year. Jack Brucker, president and chief executive officer, said, " We continue to make progress on our cash flow performance, strengthen our core business, and target profitable new contracts in select service areas. We are pleased by the results so far and are encouraged by the progress we are seeing on the collections front. " The company reported improvement in its average days sales outstanding (DSO) over the prior two quarters, with the DSO decreasing to 97 days from 99 days in the prior quarter. Brucker continued, " We believe the steps we have taken to strengthen our ambulance documentation and pre-billing systems prior to transport -- combined with efficient and timely billing and collection procedures post-transport -- are the catalysts behind this positive development. " The company also reported continuing performance on its revolving credit facility and senior notes. During the quarter, the company paid $3.3 million in regularly scheduled interest on the revolving credit facility and $5.9 million interest on its bonds. Additionally, the company has paid $3.9 million in principal on its revolving credit facility in the past year, with the most recent payment on April 23, 2001 in the amount of $1.25 million. In conjunction with Rural/Metro's ongoing initiatives to improve operations and renegotiate non-emergency ambulance contracts, the company announced that it has signed a new three-year contract with Baptist Memorial Healthcare Corporation in Memphis, Tenn. The contract is valued at approximately $1.3 million annually and provides direct payment from the hospital for its patients' ambulance needs. " This is the second contract with a large hospital provider in recent weeks in which payment originates directly from the health system, which further enhances our cash flow performance. " The company reported slight progress in the third quarter from its Latin American operations, with an EBIDTA contribution of $379,000, as compared to break-even performance in the first two fiscal quarters. Brucker explained, " While the regional economy remains sluggish, and no break in Argentina's three-year-old recession is in sight, we have made important changes to improve performance. While our work is far from complete, we believe our Latin American operations -- for the moment -- are somewhat stabilized. " The company took one-time, pre tax charges in the third quarter of $15 million to increase its reserves for general liability claims, and $5 million to increase its reserves for workers' compensation claims. The company is experiencing an escalation in these costs that has prompted the company to revise its estimates based on the changing environment. The company believes the change in its estimates for reserves for open legal claims will more closely approximate the outcome of such claims and the associated legal costs. " Our analysis shows our cost of workers' compensation and general liability claims increasing approximately 15 percent annually, as medical treatment, legal fees and related expenses continue to grow, " Brucker said. " Key to this issue is the fact that claims take an average of six years to settle, from the time an initial claim is filed until settlement is ultimately reached. " The company also announced it intends to close or downsize nine or fewer under performing service areas and will take associated restructuring charges in the fourth fiscal quarter ending June 30, 2001. That amount, which will consist of primarily non-cash charges, has not yet been determined. The company will provide complete details in its fiscal fourth-quarter report. Brucker explained, " Levels of uncompensated care are growing rapidly due to economic pressures in some areas, while others are saturated with multiple providers competing for a smaller base of business. It is always difficult to close service areas, and we will not name these operations at this time out of respect for employees who may be affected. " FISCAL 2001 Q1 (9/30/00) Q2 (12/31/00) Q3 (3/31/01) Revenue $128.2 million $125.2 million $126.7 million EBITDA (excluding special $10.8 million $ 8.7 million $ 11.1 million charges) Average Patient Charge (net/net) $ 245 $ 236 $ 271 Domestic Transports 277,057 278,157 278,012 DSO 101 99 97 Operating Cash Flow Per Share ($ 0.19) $ 0.01 $ 0.19 Rural/Metro Corporation provides mobile health services, including 911 and non-emergency ambulance transportation, fire protection and other safety-related services to municipal, residential, commercial and industrial customers in more than 400 communities in the United States and Latin America. Except for the historical information herein, this press release contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include the ability to secure new contracts, retain existing contracts, successfully negotiate a long-term solution for the Company's revolving credit facility, improve operating margins by restructuring service areas and effectively managing labor costs, and increase the efficiency of its collections process. RURAL/METRO CORPORATION CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2001 AND JUNE 30, 2000 (In Thousands) March 31, June 30, 2001 2000 (Unaudited) ASSETS CURRENT ASSETS Cash $ 6,255 $ 10,287 Accounts receivable, net 124,131 143,905 Inventories 21,592 19,070 Prepaid expenses and other 5,690 6,552 -------- -------- Total current assets 157,668 179,814 -------- -------- PROPERTY AND EQUIPMENT, net 72,529 85,919 INTANGIBLE ASSETS, net 197,449 207,200 OTHER ASSETS 15,773 18,284 -------- -------- Total assets $443,419 $491,217 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 17,029 $ 16,135 Accrued liabilities 62,406 57,087 Current portion of long-term debt 296,028 299,104 --------- --------- Total current liabilities 375,463 372,326 --------- --------- LONG-TERM DEBT, net of current portion 1,456 2,850 NON-REFUNDABLE SUBSCRIPTION INCOME 15,516 14,989 DEFERRED INCOME TAXES -- -- OTHER LIABILITIES 23 101 --------- --------- Total liabilities 392,458 390,266 --------- --------- MINORITY INTEREST 4,063 5,360 --------- --------- STOCKHOLDERS' EQUITY Common stock 152 149 Additional paid-in capital 137,948 137,603 Accumulated deficit (89,975) (40,670) Deferred compensation -- -- Cumulative translation adjustment 12 (252) Treasury stock (1,239) (1,239) --------- --------- Total stockholders' equity 46,898 95,591 --------- --------- $ 443,419 $ 491,217 ========= ========= RURAL/METRO CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2001 AND 2000 (Unaudited) (In thousands, except per share amounts) Three months ended March 31 2001 2000 REVENUE Ambulance services $ 101,923 $ 119,902 Fire protection services 15,364 14,981 Other 9,435 11,515 Total revenue 126,722 146,398 OPERATING EXPENSES Payroll and employee benefits 76,080 79,078 Provision for doubtful accounts 19,089 25,266 Provision for doubtful accounts -- change in accounting estimate -- -- Depreciation 5,336 6,140 Amortization of intangibles 1,815 2,263 Other operating expenses 40,436 26,555 Restructuring charge and other -- 25,098 Contract termination costs and related asset impairment -- -- Total expenses 142,756 164,400 OPERATING LOSS (16,034) (18,002) Interest expense, net 7,592 6,401 Other (474) (21) LOSS BEFORE INCOME TAXES, EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (23,152) (24,382) Provision for (benefit from) income taxes 494 (7,767) LOSS BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (23,646) (16,615) EXTRAORDINARY LOSS ON EXPROPRIATION OF CANADIAN AMBULANCE SERVICE LICENSES (NET OF $0 OF INCOME TAXES) -- -- CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (NET OF AN INCOME TAX BENEFIT OF $392) -- -- NET LOSS $ (23,646) $ (16,615) LOSS PER SHARE: Basic -- Loss before extraordinary loss and cumulative effect of a change in accounting principle $ (1.60) $ (1.14) Extraordinary loss on expropriation of Canadian ambulance service licenses -- -- Cumulative effect of change in a accounting principle -- -- Net loss per share $ (1.60) $ (1.14) Diluted -- Loss before extraordinary loss and cumulative effect of a change in accounting principle $ (1.60) $ (1.14) Extraordinary loss on expropriation of Canadian ambulance service licenses -- -- Cumulative effect of change in a accounting principle -- -- Net loss per share $ (1.60) $ (1.14) AVERAGE NUMBER OF SHARES OUTSTANDING -- BASIC 14,805 14,626 AVERAGE NUMBER OF SHARES OUTSTANDING -- DILUTED 14,805 14,626 Nine months ended March 31, 2001 2000 REVENUE Ambulance services $ 303,867 $ 357,908 Fire protection services 46,228 42,595 Other 30,074 34,202 Total revenue 380,169 434,705 OPERATING EXPENSES Payroll and employee benefits 220,056 235,331 Provision for doubtful accounts 67,526 66,923 Provision for doubtful accounts -- change in accounting estimate -- 65,000 Depreciation 16,463 18,542 Amortization of intangibles 5,553 6,725 Other operating expenses 91,972 83,485 Restructuring charge and other -- 25,098 Contract termination costs and related asset impairment 5,190 -- Total expenses 406,760 501,104 OPERATING LOSS (26,591) (66,399) Interest expense, net 23,295 17,649 Other (1,297) (95) LOSS BEFORE INCOME TAXES, EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (48,589) (83,953) Provision for (benefit from) income taxes 716 (28,577) LOSS BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (49,305) (55,376) EXTRAORDINARY LOSS ON EXPROPRIATION OF CANADIAN AMBULANCE SERVICE LICENSES (NET OF $0 OF INCOME TAXES) -- (1,200) CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (NET OF AN INCOME TAX BENEFIT OF $392) -- (541) NET LOSS $ (49,305) $ (57,117) LOSS PER SHARE: Basic -- Loss before extraordinary loss and cumulative effect of a change in accounting principle $ (3.36) $ (3.80) Extraordinary loss on expropriation of Canadian ambulance service licenses -- (0.08) Cumulative effect of change in a accounting principle -- (0.04) Net loss per share $ (3.36) $ (3.92) Diluted -- Loss before extraordinary loss and cumulative effect of a change in accounting principle $ (3.36) $ (3.80) Extraordinary loss on expropriation of Canadian ambulance service licenses -- (0.08) Cumulative effect of change in a accounting principle (0.04) Net loss per share $ (3.36) $ (3.92) AVERAGE NUMBER OF SHARES OUTSTANDING -- BASIC 14,692 14,581 AVERAGE NUMBER OF SHARES OUTSTANDING -- DILUTED 14,692 14,581 RURAL/METRO CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 2001 AND 2000 (Unaudited) (In thousands) 2001 2000 CASH FLOW FROM OPERATING ACTIVITIES Net loss $ (49,305) $ (57,117) Adjustments to reconcile net loss to cash used in operations-- Write-off of goodwill impaired with termination of contract 4,287 -- Write-off of assets included in restructuring charge -- 19,503 Extraordinary loss -- 1,200 Cumulative effect of a change in accounting principle -- 541 Depreciation and amortization 22,016 25,267 Amortization of gain on sale of real estate (78) (78) Gain on sale of property and equipment (387) (94) Provision for doubtful accounts 67,526 131,923 Undistributed loss of minority shareholder (1,297) (95) Amortization of discount on Senior Notes 19 19 Change in assets and liabilities --- Increase in accounts receivable (47,752) (101,172) Increase in inventories (2,522) (2,060) Decrease in prepaid expenses and other 773 2,615 Increase (decrease) in accounts payable 894 (3,098) Increase (decrease) in accrued liabilities and other liabilities 5,319 (33,126) Increase (decrease) in nonrefundable subscription income 527 (16) Decrease in deferred income taxes -- (2,877) --------- --------- Net cash provided by (used in) operating activities 20 (18,665) --------- --------- CASH FLOW FROM FINANCING ACTIVITIES Borrowings (repayments) on revolving credit facility, net (2,471) 33,500 Repayment of debt and capital lease obligations (2,018) (4,851) Issuance of common stock 348 655 --------- --------- Net cash provided by (used in) financing activities (4,141) 29,304 --------- --------- CASH FLOW FROM INVESTING ACTIVITIES Proceeds from the expropriation of Canadian ambulance service licenses -- 2,191 Capital expenditures (4,551) (16,820) Proceeds from the sale of property and equipment 1,865 1,019 (Increase) decrease in other assets 2,511 (973) --------- --------- Net cash used in investing activities (175) (14,583) --------- --------- EFFECT OF CURRENCY EXCHANGE RATE CHANGE 264 37 --------- --------- DECREASE IN CASH (4,032) (3,907) CASH, beginning of period 10,287 7,180 --------- --------- CASH, end of period $ 6,255 $ 3,273 ========= ========= Publication date: 2001-05-14 © 2001, YellowBrix, Inc. 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