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Rural/Metro Announces Results for Fiscal 2008 First Quarter; Fiscal 2007 Fourth Quarter and Full Year
Date:11/14/2007

Highlights from Fiscal 2008 First Quarter Ended September 30, 2007

- 4.5% net revenue growth

- $348 Average Patient Charge (APC)

- 64 Days' Sales Outstanding (DSO)

- 15.0% uncompensated care as a percent of gross revenue

- EBITDA from continuing operations $12.6 million

- Company provides fiscal 2008 guidance

SCOTTSDALE, Ariz., Nov. 14 /PRNewswire-FirstCall/ -- Rural/Metro Corporation (Nasdaq: RURL), a leading provider of ambulance and private fire protection services, announced today results for its fiscal 2008 first quarter, which ended September 30, 2007. The quarter reflected continued growth in net revenue, a reduction in uncompensated care and significant growth in cash collections per transport.

The company also reported results for its fiscal 2007 fourth quarter and year ended June 30, 2007, following a delay related to the restatement of certain historical financial results and financial data. The Company will file today with the U.S. Securities and Exchange Commission its amended quarterly reports on Form 10-Q/A for the quarters ended September 30, 2006, December 31, 2006, and March 31, 2007, as well as its annual report on Form 10-K for the fiscal year ended June 30, 2007. These reports will include restated consolidated financial information for the quarterly and interim periods ended September 30, 2005 and 2006, December 31, 2005 and 2006 and March 31 2006 and 2007, and the fiscal year ended June 30, 2005 and 2006. The Company also will file today its quarterly report on Form 10-Q for the first quarter ended September 30, 2007.

Jack Brucker, President and Chief Executirepayment of debt, insurance coverage and claim reserves, capital needs, operating results and compliance with debt facilities. In addition, the Company may face risks and uncertainties related to the effectiveness of its initiatives to reduce uncompensated care, and its ability to collect its accounts receivable and other factors that are listed in its periodic reports filed under the Securities Exchange Act. In addition, the Company may face risks and uncertainties related to its recent restatement including, (1) the failure to timely file its restated financial statements as a result of its ability to complete its 2007 audit, the restatements, or its review of the SEC reports to be filed; (2) the effects of any potential SEC or NASDAQ inquiry with respect to the potential adjustments or the Company's accounting practices; (3) should NASDAQ seek to delist the Company's common stock following an untimely SEC filing, the possibility that the NASDAQ Listing Qualifications Panel may not grant the Company's request for an extension to regain compliance with NASDAQ listing qualifications or the Company's failure to regain compliance within any extension period, in which case the Company's common stock would be delisted from the Nasdaq Stock Market; (4) the effects of any required restatement adjustments to previously issued financial statements and possible material weaknesses in internal control over financial reporting; and (5) the additional risks and uncertainties and important factors detailed from time to time in the Company's press releases and in its periodic filings under the Securities Exchange Act of 1934. 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 express 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)

CONTACT: Liz Merritt, Rural/Metro Corporation (investors)

(480) 606-3337

Jeff Stanlis, Hayden Communications (media)

(602) 476-1821

RURAL/METRO CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited)

September 30, June 30,

2007 2007

ASSETS

Current assets:

Cash and cash equivalents $4,009 $6,181

Short-term investments 2,500 -

Accounts receivable, net 82,734 78,313

Inventories 8,845 8,782

Deferred income taxes 15,696 15,836

Prepaid expenses and other 17,814 18,273

Total current assets 131,598 127,385

Property and equipment, net 44,743 45,521

Goodwill 37,700 37,700

Deferred income taxes 59,746 67,309

Insurance deposits 2,353 1,868

Other assets 16,907 19,547

Total assets $293,047 $299,330

LIABILITIES, MINORITY INTEREST AND

STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable $16,271 $15,271

Accrued liabilities 60,926 53,358

Deferred revenue 25,056 24,959

Current portion of long-term debt 42 41

Total current liabilities 102,295 93,629

Long-term debt, net of current portion 277,151 280,081

Other long-term liabilities 24,256 24,065

Total liabilities 403,702 397,775

Minority interest 2,309 2,104

Stockholders' equity (deficit):

Common stock, $0.01 par value, 40,000,000

shares authorized, 24,737,726 shares issued

and outstanding at September 30, 2007 and

June 30, 2007 247 247

Additional paid-in capital 154,777 154,777

Treasury stock, 96,246 shares at

September 30, 2007 and June 30, 2007 (1,239) (1,239)

Accumulated other comprehensive income 294 294

Accumulated deficit (267,043) (254,628)

Total stockholders' equity (deficit) (112,964) (100,549)

Total liabilities, minority interest and

stockholders' equity (deficit) $293,047 $299,330

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

Three Months Ended September 30,

2007 2006

Net revenue $119,491 $114,293

Operating expenses:

Payroll and employee benefits 75,234 71,433

Depreciation and amortization 3,121 2,904

Other operating expenses 27,319 23,692

Auto/general liability insurance expense 3,837 4,012

Loss (gain) on sale of assets 3 (3)

Total operating expenses 109,514 102,038

Operating income 9,977 12,255

Interest expense (7,750) (7,785)

Interest income 142 120

Income from continuing operations before

income taxes and minority interest 2,369 4,590

Income tax provision (1,196) (2,215)

Minority interest (505) (773)

Income from continuing operations 668 1,602

Income (loss) from discontinued operations,

net of income taxes (257) 85

Net income $411 $1,687

Income (loss) per share:

Basic -

Income from continuing operations $0.03 $0.07

Income (loss) from discontinued operations (0.01) 0.00

Net income $0.02 $0.07

Diluted -

Income from continuing operations $0.03 $0.07

Income (loss) from discontinued operations (0.01) 0.00

Net income $0.02 $0.07

Average number of common shares outstanding

- Basic 24,738 24,510

Average number of common shares outstanding

- Diluted 24,988 24,920

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Three Months Ended September 30,

2007 2006

Cash flows from operating activities:

Net income $411 $1,687

Adjustments to reconcile net income

to net cash provided by operating

activities -

Depreciation and amortization 3,140 3,000

Accretion of 12.75% Senior Discount

Notes 2,080 1,838

Deferred income taxes 566 1,851

Amortization of deferred financing costs 541 418

Loss (gain) on sale of property and

equipment 14 (3)

Earnings of minority shareholder 505 773

Stock based compensation benefit - (7)

Change in assets and liabilities -

Accounts receivable (4,421) (3,295)

Inventories (63) (430)

Prepaid expenses and other 459 (3,233)

Insurance deposits (485) 578

Other assets 2,045 959

Accounts payable 988 (2,062)

Accrued liabilities 1,879 3,197

Deferred revenue 97 924

Other liabilities 191 (453)

Net cash provided by operating activities 7,947 5,742

Cash flows from investing activities:

Sales of short-term investments 2,500 8,701

Purchases of short-term investments (5,000) (5,000)

Capital expenditures (2,313) (5,340)

Proceeds from the sale of property and

equipment 3 5

Net cash used in investing activities (4,810) (1,634)

Cash flows from financing activities:

Repayment of debt (5,009) (3)

Distributions to minority shareholders (300) -

Issuance of common stock - 74

Tax benefit from the exercise of stock

options - 134

Net cash (used in) / provided by financing

activities (5,309) 205

Increase (decrease) in cash and cash

equivalents (2,172) 4,313

Cash and cash equivalents, beginning

of period 6,181 3,041

Cash and cash equivalents, end of period $4,009 $7,354

Supplemental disclosure of non-cash

operating activities:

Decrease in retained earnings, deferred

income taxes and increase in accrued

liabilities upon adoption of FIN 48 $12,826 $-

Supplemental disclosure of non-cash

investing activities:

Property and equipment funded by

liabilities $12 $294

RURAL/METRO CORPORATION

RECONCILIATION OF EBITDA TO CASH FLOWS

PROVIDED BY OPERATING ACTIVITIES

(unaudited)

(in thousands)

Three Months Ended

September 30,

2007 2006

Income from continuing operations $668 $1,602

Add back:

Depreciation and amortization 3,121 2,904

Interest expense on borrowings 5,129 5,529

Amortization of deferred financing costs 541 418

Accretion of 12.75% Senior Discount Notes 2,080 1,838

Interest income (142) (120)

Income tax provision 1,196 2,215

EBITDA from continuing operations $12,593 $14,386

EBITDA from discontinued operations (458) 233

Total EBITDA $12,135 $14,619

The items listed below have not been included

as adjustments in the above calculation of

EBITDA:

Stock based compensation benefit - (7)

(Gain) loss on sale of property and equipment 14 (3)

Executive severance - 1,133

Adjusted EBITDA from all operations $12,149 $15,742

Increase (decrease):

Items added back to arrive at EBITDA from

continuing operations (11,925) (12,784)

Items added back to arrive at EBITDA from

discontinued operations:

Income tax benefit (provision) on

discontinued operations 220 (52)

Depreciation and amortization on

discontinued operations (19) (96)

Items added back to arrive at Adjusted EBITDA (14) (1,123)

Depreciation and amortization 3,140 3,000

Accretion of 12.75% Senior Discount Notes 2,080 1,838

Deferred income taxes 566 1,851

Amortization of deferred financing costs 541 418

Earnings of minority shareholder 505 773

(Gain) loss on sale of property and equipment 14 (3)

Stock based compensation benefit - (7)

Changes in operating assets and liabilities 690 (3,815)

Net cash provided by operating activities $7,947 $5,742

RURAL/METRO CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

As of June 30,

2006

2007 (As restated)

ASSETS

Current assets:

Cash and cash equivalents $6,181 $3,041

Short-term investments - 6,201

Accounts receivable, net 78,313 83,367

Inventories 8,782 8,828

Deferred income taxes 15,836 13,610

Prepaid expenses and other 18,273 3,191

Total current assets 127,385 118,238

Property and equipment, net 45,521 45,303

Goodwill 37,700 38,362

Deferred income taxes 67,309 70,374

Insurance deposits 1,868 2,842

Other assets 19,547 23,749

Total assets $299,330 $298,868

LIABILITIES, MINORITY INTEREST AND

STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable $15,271 $14,229

Accrued liabilities 53,358 41,279

Deferred revenue 24,959 24,444

Current portion of long-term debt 41 37

Total current liabilities 93,629 79,989

Long-term debt, net of current portion 280,081 291,337

Other long-term liabilities 24,065 26,135

Total liabilities 397,775 397,461

Minority interest 2,104 2,065

Stockholders' equity (deficit):

Common stock, $0.01 par value, 40,000,000

shares authorized, 24,737,726 and

24,495,518 shares issued and outstanding

at June 30, 2007 and 2006, respectively 247 245

Additional paid-in capital 154,777 153,955

Treasury stock, 96,246 shares at June 30,

2007 and 2006 (1,239) (1,239)

Accumulated other comprehensive income 294 -

Accumulated deficit (254,628) (253,619)

Total stockholders' equity (deficit) (100,549) (100,658)

Total liabilities, minority interest

and stockholders' equity (deficit) $299,330 $298,868

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended Fiscal Year Ended

June 30, June 30,

2006 2006

2007 (As restated) 2007 (As restated)

Net revenue $118,115 $113,748 $467,611 $450,527

Operating expenses:

Payroll and employee benefits 72,501 67,295 291,311 268,850

Depreciation and amortization 3,013 2,896 12,132 11,118

Other operating expenses 30,545 28,442 112,628 107,915

Auto/general liability insurance

expense 6,192 923 18,094 13,143

Loss on goodwill impairment 662 - 662 -

Loss (gain) on sale of assets 61 (9) 61 (1,311)

Total operating expenses 112,974 99,547 434,888 399,715

Operating income 5,141 14,201 32,723 50,812

Interest expense (7,788) (7,875) (31,518) (31,025)

Interest income 104 123 517 548

Income (loss) from continuing

operations before income taxes

and minority interest (2,543) 6,449 1,722 20,335

Income tax benefit (provision) 1,555 (4,047) (1,609) (10,749)

Minority interest ve Officer, said, "During the fourth quarter of fiscal 2007 and the first quarter of fiscal 2008, we continued to produce steady year-over-year growth in net revenue through new contract wins, renewals, and same-market expansion efforts; to execute on key strategies to minimize exposure to uncompensated care; and to generate predictable cash flows, as the initiatives we are implementing to improve ambulance collections continue to gain momentum.

"We continued to trend positively with respect to our ongoing efforts to improve collections and made significant strides in the key operating metrics we use to measure uncompensated care," Mr. Brucker said. "During the first quarter, we were also successful in increasing ambulance subsidies by $0.9 million over the prior year to help offset uncompensated care related to uninsured patients."

The Company's results reflected significant progress in key operating metrics related to uncompensated care. Since the three months ended March 31, 2007, when the Company began implementation of seven new initiatives designed to minimize exposure to uncompensated care, it has achieved the following:

* APC increased by $22 per transport to $348 in the first quarter of

fiscal 2008 from $326 in the fiscal 2007 third quarter ended March 31,

2007.

* DSO, a measurement of the average time it takes to collect per

transport, improved by three days, to 64 days in the first quarter of

fiscal 2008 from 67 days in the fiscal 2007 third quarter.

* Uncompensated care as a percentage of gross revenue improved to 15.0

percent in the first quarter from 15.2 percent in the third quarter

ended March 31, 2007.

Mr. Brucker continued, "These initiatives have driven reductions in contractual allowances and decreases in write-offs for uncompensated care, resulting in a 2.1 percent increase in overall ambulance collection rates. We view this as a significant improvement in unco (131) (108) (1,389) (759)

Income (loss) from continuing

operations (1,119) 2,294 (1,276) 8,827

Income (loss) from discontinued

operations, net of income taxes (57) (1,241) 267 (5,947)

Net income (loss) $(1,176) $1,053 $(1,009) $2,880

Income (loss) per share:

Basic -

Income (loss) from continuing

operations $(0.05) $0.09 $(0.05) $0.36

Income (loss) from

discontinued operations (0.00) (0.05) 0.01 (0.24)

Net income (loss) $(0.05) $0.04 $(0.04) $0.12

Diluted -

Income (loss) from continuing

operations $(0.05) $0.09 $(0.05) $0.36

Income (loss) from

discontinued operations (0.00) (0.05) 0.01 (0.24)

Net income (loss) $(0.05) $0.04 $(0.04) $0.12

Average number of common shares

outstanding - Basic 24,695 24,468 24,604 24,359

Average number of common shares

outstanding - Diluted 24,695 24,910 24,604 24,842

RURAL/METRO CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Fiscal Year Ended June 30,

2006

2007 (As restated)

Cash flows from operating activities:

Net income (loss) $(1,009) $2,880

Adjustments to reconcile net income to

net cash provided by operating

activities -

Depreciation and amortization 12,132 11,351

Accretion of 12.75% Senior Discount Notes 7,784 6,895

Deferred income taxes 656 5,299

Non-cash adjustments to insurance claims

reserves (4,674) (8,440)

Amortization of deferred financing costs 2,191 2,367

Gain on sale of property and equipment (614) (1,412)

Goodwill impairment in continuing operations 662 -

Goodwill impairment in discontinued

operations - 982

Earnings of minority shareholder 1,389 759

Stock based compensation (benefit) expense (7) 28

Change in assets and liabilities -

Accounts receivable 5,054 (11,381)

Inventories 46 (350)

Prepaid expenses and other (3,249) 4,175

Insurance deposits 974 3,744

Other assets 2,197 1,396

Accounts payable 1,728 (1,354)

Accrued liabilities 2,171 1,671

Deferred revenue 515 2,286

Other liabilities 1,696 5,200

Net cash provided by operating activities 29,642 26,096

Cash flows from investing activities:

Sales of short-term investments 21,751 56,150

Purchases of short-term investments (15,550) (62,351)

Capital expenditures (13,249) (15,173)

Proceeds from the sale of property and

equipment 777 1,806

Net cash used in investing activities (6,271) (19,568)

Cash flows from financing activities:

Repayment of debt (19,036) (22,496)

Distributions to minority shareholders (1,350) (305)

Issuance of common stock 504 731

Cash paid for debt issuance costs (676) -

Tax benefit from the exercise of stock

options 327 895

Net cash used in financing activities (20,231) (21,175)

Increase (decrease) in cash and cash

equivalents 3,140 (14,647)

Cash and cash equivalents, beginning of

period 3,041 17,688

Cash and cash equivalents, end of period $6,181 $3,041

Supplemental disclosure of non-cash operating

activities:

Increase in other current assets and

accrued liabilities for general liability

insurance claim $11,565 $-

Supplemental disclosure of non-cash

investing activities:

Property and equipment funded by

liabilities $47 $1,000

Supplemental cash flow information:

Cash paid for interest $22,567 $21,359

Cash paid for income taxes, net 499 607

RURAL/METRO CORPORATION

RECONCILIATION OF EBITDA TO CASH FLOWS

PROVIDED BY OPERATING ACTIVITIES

(unaudited)

(in thousands)

Three Months Ended Fiscal Year Ended

June 30, June 30,

2006 2006

2007 (As restated) 2007 (As restated)

Income (loss) from continuing

operations $(1,119) $2,294 $(1,276) $8,827

Add back:

Depreciation and amortization 3,013 2,896 12,132 11,118

Goodwill impairment 662 - 662 -

Interest expense on borrowings 5,166 5,482 21,543 21,763

Amortization of deferred

financing costs 566 575 2,191 2,367

Accretion of 12.75% Senior

Discount Notes 2,056 1,818 7,784 6,895

Interest income (104) (123) (517) (548)

Income tax (benefit) provision (1,555) 4,047 1,609 10,749

EBITDA from continuing

operations $8,685 $16,989 $44,128 $61,171

EBITDA from discontinued

operations (58) (1,740) 411 (7,872)

Total EBITDA $8,627 $15,249 $44,539 $53,299

The items listed below have

not been included as

adjustments in the above

calculation of EBITDA:

Stock based compensation (benefit)

expense - 5 (7) 28

(Gain) loss on sale of property

and equipment 61 (110) (614) (1,412)

Debt amendment fees - 218 214 718

Executive severance 473 - 1,606 -

Adjusted EBITDA from all

operations $9,161 $15,362 $45,738 $52,633

Increase (decrease):

Items added back to arrive at

EBITDA from continuing

operations (9,804) (14,695) (45,404) (52,344)

Items added back to arrive at

EBITDA from discontinued

operations:

Income tax benefit (provision)

on discontinued operations 1 506 (144) 3,140

Depreciation and amortization

on discontinued operations - (7) - (233)

Goodwill impairment in

discontinued operations - - - (982)

Items added back to arrive at

Adjusted EBITDA (534) (113) (1,199) 666

Depreciation and amortization 3,013 2,903 12,132 11,351

Accretion of 12.75% Senior

Discount Notes 2,056 1,818 7,784 6,895

Deferred income taxes (1,843) 2,837 656 5,299

Non-cash adjustments to

insurance claims reserves (1,474) (6,053) (4,674) (8,440)

Amortization of deferred

financing costs 566 575 2,191 2,367

Goodwill impairment 662 - 662 982

Earnings of minority shareholder 131 108 1,389 759

(Gain) loss on sale of property

and equipment 61 (110) (614) (1,412)

Stock based compensation (benefit)

expense - 5 (7) 28

Changes in operating assets and

liabilities 5,251 7,563 11,132 5,387

Net cash provided by

operating activities $7,247 $10,699 $29,642 $26,096

mpensated care.

"It is also important to note that we expect to derive ongoing benefits from the billing and case management initiatives and expect to mark further improvement in these metrics upon implementation of future technology enhancements, including the rollout of our electronic patient care reporting (ePCR) system to the majority of our operations within the next 18 to 24 months."

Results of Operations for the Quarter Ended September 30, 2007

Consolidated net revenue for the first quarter ended September 30, 2007 increased 4.5 percent, or $5.2 million, to $119.5 million, compared to $114.3 million for the prior year. Ambulance services revenue for the quarter increased 4.3 percent, or $4.1 million, to $100.8 million, compared to $96.7 million for the same period of the prior year. Other services revenue, which includes fire services revenue, increased 6.1 percent, or $1.1 million, to $18.7 million, compared to $17.6 million for the same period of the prior year. On a consolidated basis, period-over-period net revenue growth was driven primarily by same-service area market expansion; new contracts for emergency and non-emergency ambulance services, as well as one new contract for airport fire protection services; higher subsidies negotiated under 911-emergency contracts; and rate increases on master and subscription fire contracts.

Payroll and employee benefits for the quarter increased $3.8 million, or 5.3 percent, to $75.2 million, compared to $71.4 million for the same period of the prior year. The increase was primarily a result of increased wages due to higher transport volumes and new contract start-ups, as well as an increase related to the fiscal 2008 management incentive plan accrual.

Other operating expenses for the first quarter increased $3.6 million, or 15.2 percent, to $27.3 million, compared to $23.7 million for the same period of the prior year. The increase included $0.8 million in professional fees related to the adoption of FIN 48 for tax purposes and $0.7 million in legal, audit and Sarbanes-Oxley fees as a result of the financial restatement. In addition, the Company experienced a $0.8 million increase in vehicle maintenance, a $0.5 million increase in property lease expense and an increase in operating supplies and fuel expense as a result of higher transport volume and new contract start-ups.

Auto and general liability expense for the fiscal 2008 first quarter decreased $0.2 million, or 4.4 percent, to $3.8 million from $4.0 million in the first quarter of fiscal 2007. The decrease was primarily due to lower claims reserve accruals under the Company's auto liability program.

Net income for the first quarter was $0.4 million, or earnings of $0.02 per diluted share, compared to net income of $1.7 million, or earnings of $0.07 per diluted share, for the same prior-year period.

First-quarter EBITDA from continuing operations was $12.6 million compared to $14.4 million for the same prior-year period.

Earnings Before Interest, Taxes, Depreciation and Amortization including goodwill impairment (EBITDA) from continuing operations is a key indicator used by management to evaluate operating performance. While EBITDA from continuing operations is not intended to replace any presentation 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 method of calculation from similarly titled measures used by other companies. A reconciliation of EBITDA to GAAP financial measures for the three months ended September 30, 2007, and the three and 12 months ended June 30, 2007 is included with this press release and with the Company's related Form 8-K.

Results of Operations for the Quarter Ended June 30, 2007

Consolidated net revenue for the fourth quarter of fiscal 2007 ended June 30, 2007 increased 3.9 percent, or $4.4 million, to $118.1 million, compared to $113.7 million for the same period of the prior year. Ambulance services revenue increased 3.3 percent, or $3.2 million, to $99.2 million, compared to $96.0 million for the prior year. Other services revenue, which includes fire services, increased 6.9 percent, or $1.2 million, to $18.9 million, compared to $17.7 million for the same prior-year period. On a consolidated basis, period-over-period net revenue growth was driven primarily by same-service area market expansion, new contracts for emergency and non-emergency ambulance services, higher subsidies negotiated under 911-emergency contracts, and rate increases on master and subscription fire contracts.

Payroll and employee benefits for the fourth quarter increased $5.2 million, or 7.7 percent, to $72.5 million, compared to $67.3 million for the same prior-year period. The increase was attributable to a $1.5 million increase in workers' compensation insurance expenses related to lower non-cash actuarial reserve adjustments compared to the prior year, and a $1.0 million increase in employee health insurance expense due to increased utilization and rising healthcare costs, with the balance primarily due to increased wages from higher transport volume and competitive wage pricing, These expenses were partly offset by a $2.2 million reduction in the Company's management incentive plan accrual for fiscal 2007.

Other operating expenses for the fourth quarter increased $2.1 million, or 7.4 percent, to $30.5 million, compared to $28.4 million for the same prior-year period. The increase was primarily attributable to a $0.8 million increase in operating supplies, vehicle maintenance and fuel expenses due to added transport volume, and a $0.5 million increase in property lease expenses.

Auto and general liability expense for the fourth quarter was $6.2 million, up from $0.9 million for the fourth quarter of fiscal 2006. The increase was primarily due to a $1.5 million negative actuarial claims adjustment recognized in 2007 compared to a $3.0 million positive actuarial claims adjustment in 2006. In addition, the Company expensed a $0.9 million settlement related to third-party claims administrator fees.

Net loss for the fourth quarter was $1.2 million, or a loss of $0.05 per diluted share, compared to net income of $1.1 million, or earnings of $0.04 per diluted share for the same prior-year period.

Fourth-quarter EBITDA from continuing operations was $8.7 million compared to $17.0 million for the same prior-year period.

Results of Operations for the Fiscal Year Ended June 30, 2007

Consolidated net revenue for fiscal 2007 increased 3.8 percent, or $17.1 million, to $467.6 million, compared to $450.5 million for fiscal 2006. Ambulance and related services revenue increased 2.7 percent, or $10.3 million, to $394.1 million, compared to $383.8 million for the prior year. Other services revenue, including fire protection services, increased 10.2 percent, or $6.8 million, to $73.5 million, compared to $66.7 million for the prior year. On a consolidated basis, period-over-period net revenue growth was driven primarily by same-service area market expansion, new contracts for emergency and non-emergency ambulance services as well as master fire services, higher subsidies negotiated under 911-emergency contracts, and rate increases on master and subscription fire contracts.

Payroll and employee benefits for fiscal 2007 increased $22.4 million, or 8.3 percent, to $291.3 million, compared to $268.9 million for fiscal 2006. The year-over-year increase included a $3.7 million increase in employee health insurance expense due to higher claims paid under the company's self-insured program, a $2.2 million increase related to the transition of certain San Diego paramedics from independent contractors to Company employees, a $1.6 million increase in executive severance expense, a $1.6 million increase in workers compensation expense, and the balance due to increased wages from higher transport volume and competitive wage pricing. These increases were partly offset by a $4.3 million decrease in the management incentive plan accrual.

Other operating expenses for fiscal 2007 increased $4.7 million, or 4.4 percent, to $112.6 million, compared to $107.9 million for the same prior-year period. The year-over-year increase included a $1.5 million increase in medical supplies related to higher transport volume, a $0.8 million increase in fuel costs, a $1.4 million increase in leased property expense, and a $1.3 million reserve related to negotiations surrounding alleged billing inaccuracies in Ohio from 1997 through 2001. These increases were offset by the reduction in independent contractors expense related to the transition of San Diego paramedics discussed above.

Auto and general liability expense for fiscal 2007 was $18.1 million, up from $13.1 million in fiscal 2006. The increase was primarily due to a $1.1 million negative actuarial claims adjustment recognized in 2007 compared to a $2.8 million positive actuarial claims adjustment in 2006. Additionally, the Company expensed a $0.9 million settlement in fiscal 2007 related to third-party administrator fees.

Net loss for the 12-month period was $1.0 million, or a loss of $0.04 per diluted share, compared to net income of $2.9 million, or earnings of $0.12 per diluted share, for the 12 months ended June 30, 2006.

EBITDA from continuing operations for the 12 months ended June 30, 2007 was $44.1 million, compared to $61.2 million in EBITDA from continuing operations for the same prior-year period.

Fiscal 2008 Financial Guidance

The Company announced financial guidance for the fiscal year ending June 30, 2008. The Company expects EBITDA from continuing operations to be in the range of $50.0 million to $55.0 million, and capital expenditures to be in the range of $13.0 million to $15.0 million.

Key Operating Statistics

Following is a presentation of certain of the Company's key operating statistics:

Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08

(6/30/06) (9/30/06) (12/31/06) (3/31/07) (6/30/07) (9/30/07)

(4) (4) (4) (4)

Medical

Transports (1) 262,580 261,347 269,939 278,494 275,652 267,915

Average Patient

Charge (APC)

(2) (4) $340 $343 $341 $326 $333 $348

Days Sales

Outstanding

(DSO) (3) 64 66 68 67 65 64

(1) Medical transports from continuing operations are defined as actual

emergency and non-emergency patient transports.

(2) APC is defined as gross medical transport revenue less provisions for

discounts applicable to Medicare, Medicaid and other third-party

payers and uncompensated care divided by emergency and non-emergency

transports from continuing operations.

(3) DSO is calculated using the average accounts receivable balance on a

rolling 13-month average and net revenue on a rolling 12-month basis

and has not been adjusted to eliminate discontinued operations.

(4) The amounts in these columns were calculated including those

operations that were discontinued during the quarter ended

September 30, 2007.

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) 819-8015 (domestic) or (913) 981-5519 (international). The call will be broadcast live on the Company's web site at http://www.ruralmetro.com. A telephone replay will be available from approximately 2 p.m. (Eastern) today through midnight (Eastern) November 15, 2007. To access the replay, dial 888-203-1112. From international locations, dial (719) 457-0820. The required pass code is 3642507. An archived webcast will be available for 90 days following the call at http://www.ruralmetro.com.

About Rural/Metro

Rural/Metro Corporation provides emergency and non-emergency ambulance services and private fire protection services in 23 states and approximately 400 communities throughout the United States. For more information, visit the Company's web site at http://www.ruralmetro.com.

SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS

The foregoing reflects the Company's views about the accounting adjustments, its financial condition, performance and other matters that constitute "forward-looking" statements as such term is defined by the federal securities laws. You can find many of these statements by looking for words such as "may," "will," "expect," "anticipate," "believe," "estimate," "should," "continue," "predict," "preliminary" and similar words used herein. 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, working capital, accounts receivable collection, cash flow, EBITDA, capital expenditures, expected trends in uncompensated care, payroll expense,
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SOURCE Rural/Metro Corporation
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