<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
March 26, 1998 June 5, 1998
(Date of earliest event reported)
RURAL/METRO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-22056 86-0746929
(Commission File Number) (IRS Employer Identification Number)
8401 EAST INDIAN SCHOOL ROAD
SCOTTSDALE, ARIZONA
85251
(Address of principal executive offices)
(Zip Code)
(602) 994-3886
(Registrant's telephone number, including area code)
<PAGE> 2
RURAL/METRO CORPORATION
FORM 8-K/A
CURRENT REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to a Purchase Agreement dated January 16, 1998 and a Complementary
Agreement dated March 26, 1998 between Registrant as buyer and Messrs. Horacio
Artagaveytia, Jose Mateo Campomar, Alberto Fluerquin, Carlos Mezzera, Renato
Ribeiro, Gervasio Reyes and Carlos Arturo Delmiro Marfetan, the Registrant
acquired all of the issued and outstanding stock of Peimu S.A.,
Energencios Recor S.A., Marlon S.A. and Semercor S.A. ("the Companies"). The
Companies provide emergency transport and urgent home medical care in
Argentina. The Registrant intends to continue the operations of the Companies.
The purchase price consisted of cash of $25.0 million and 293,148 shares of the
Registrant's common stock and liabilities assumed of approximately $14.1
million. The acquisition will be accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16.
The Registrant financed the cash portion of the purchase price for the
acquisition described above from its revolving credit facility.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Combined financial statements of Peimu S.A., Semercor S.A., Marlon
S.A. and Emergencias Recor S.A.
- Auditor's Report
- Combined Companies
- Combined Balance Sheet as of September 30, 1997
- Combined Statement of Income for the Twelve-Month Period
Ended September 30, 1997
- Notes to the Combined Financial Statements as of
September 30, 1997
- Combined Property and Equipment as of September 30, 1997
- Combined Reserves and Accruals as of September 30, 1997
- Combined Information Required Under Art. 64, Paragraph
I, Clause b) of Law No 19,550 for the Twelve-Month
Period Ended September 30, 1997
- Combined Foreign Currency Assets and Liabilities as of
September 30, 1997
- Interim Financial Statements dated as of March 25, 1998
(b) Pro Forma Financial Statements
- Introduction
- Pro Forma Combined Statement of Income for the year
ended June 30, 1997
- Pro Forma Combined Statement of Income for the nine
months ended March 31, 1998
- Notes to Pro Forma Consolidated Financial Data
(c) Exhibits
23. Consent of Independent Public Accountants
<PAGE> 3
COMBINED FINANCIAL STATEMENTS OF
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
AS OF SEPTEMBER 30, 1997
<PAGE> 4
[PISTRELLI, DIAZ y ASOCIADOS ARTHUR ANDERSEN LOGO]
AUDITOR'S REPORT Pistrelli, Diaz y Asociados
Miembro de Arthur Andersen
To the Directors of 25 de Mayo 487
RURAL METRO CORPORATION 1002 - Buenos Aires
Tel. 54 (1) 311-6644/6667 / 318-1600
Fax: 54 (1) 312-8647 / 318-1777
1. We have audited the combined balance sheet of PEIMU S.A., SEMERCOR
S.A., MARLON S.A. and EMERGENCIAS RECOR S.A. as of September 30, 1997 and the
related combined statement of income for the twelve-month period then ended.
These combined financial statements are the responsibility of the
Companies' Management. Our responsibility is to express an opinion on these
financial statements based on our audits.
2. We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that the auditor plan and perform the audit
to obtain the reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis of
our opinion.
3. In our opinion, the accompanying combined financial statements present
fairly, in all material respects, the combined financial position of PEIMU S.A.,
SEMERCOR S.A., MARLON S.A. and EMERGENCIAS RECOR S.A. as of September 30, 1997
and the combined results of their operations for the twelve-month period then
ended in conformity with generally accepted accounting principles in Argentina.
<PAGE> 5
[PISTRELLI, DIAZ y ASOCIADOS ARTHUR ANDERSEN LOGO]
4. Further, in our opinion, the reconciliation of the combined
shareholders' equity and net income for the twelve-month period ended September
30, 1997, presented in note 7 to the accompanying combined financial statements,
presents fairly in all material respects, the reconciliation of combined
shareholders' equity and net income, as shown in the combined financial
statements with generally accepted accounting principles in Argentina, to
combined shareholders' equity and net income as determined in accordance with
accounting principles generally accepted in the United States of America.
Buenos Aires, PISTRELLI, DIAZ Y ASOCIADOS
April 30, 1998 C.P.C.E.C.F. Vol. No. 1 - Fol. No. 8
HUGO R. PENTENERO
Partner
Certified Public Accountant U.B.A.
C.P.C.E.C.F. Vol. No. 59 - Fol. No. 78
<PAGE> 6
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED COMPANIES
PEIMU S.A.:
Legal domicile: Rioja 1474 - Rosario - Province of Santa Fe
Principal business: Medical emergency services
Capital structure: - Shares: 3,000 common shares, face value
$100, five votes per share
- Subscribed and paid in: $300,000
SEMERCOR S.A.:
Legal domicile: Crisol 31 - Cordoba - Province of Cordoba
Principal business: Medical emergency services
Capital structure: - Shares: 192,490 common shares, face value
$1.00, one vote per share
- Subscribed and paid in: $192,490
MARLON S.A.:
Legal domicile: Sarmiento 27 - San Miguel de Tucuman - Province of
Tucuman
Principal business: Medical emergency services
Capital structure: - Shares: 3,000 common shares, face value
$0.01, one vote per share
- Subscribed and paid in: $30.
EMERGENCIAS RECOR S.A.:
Legal domicile: Buenos Aires 1431 - Rosario - Province of Santa Fe
Principal business: Medical emergency services.
Capital structure: - Shares: 5,000 common shares, face value
$ 1.00, one vote per share
- Subscribed and paid in: $5,000.
JUAN JOSE FEDRIGOTTI
Chairperson
<PAGE> 7
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(stated in pesos)
<TABLE>
<CAPTION>
CURRENT ASSETS
<S> <C>
Cash and banks (Note 3.1) 1,121,353
Trade receivables (Note 3.2) 1,018,817
Other receivables (Note 3.3.a) 5,043,550
Inventories 69,092
----------
Total current assets 7,252,812
----------
NONCURRENT ASSETS
Other receivables (Note 3.3.b) 68,443
Investments (Note 3.4) --
Property and equipment (Exhibit I) 1,831,838
----------
Total noncurrent assets 1,900,281
----------
9,153,093
==========
CURRENT LIABILITIES
Accounts payable (Note 3.5) 1,240,801
Loans (Note 3.6.a) 235,957
Payroll and social security charges (Note 3.7.a) 2,432,097
Taxes payable (Note 3.8.a) 1,432,072
Other liabilities (Note 3.9) 412,856
----------
Total current liabilities 5,753,783
----------
NONCURRENT LIABILITIES
Loans (Note 3.6.b) 4,167
Payroll and social security charges (Note 3.7.b) 269,440
Taxes payable (Note 3.8.b) 41,566
Accruals (Exhibit II) 1,415,592
----------
Total noncurrent liabilities 1,730,765
----------
Total liabilities 7,484,548
----------
SHAREHOLDERS' EQUITY
Capital stock - Face value 497,520
Capital stock - Adjustment to capital 1,581,909
Irrevocable contributions 842,325
Legal reserve 470,489
Retained earnings (5,023,969)
Net income for the period 3,300,271
----------
Total shareholders' equity 1,668,545
----------
9,153,093
==========
</TABLE>
The accompanying notes 1 through 7 and the supplementary statements
(Exhibits I through IV) are an integral part of this statement.
JUAN JOSE FEDRIGOTTI
Chairperson
<PAGE> 8
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED STATEMENT OF INCOME
FOR THE TWELVE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
(stated in pesos)
<TABLE>
<S> <C>
Revenues 46,611,690
Less: Deductions and direct taxes (3,166,712)
-----------
Net revenues 43,444,978
Cost of services (Exhibit III) (25,193,595)
-----------
Gross margin 18,251,383
Selling expenses (Exhibit III) (9,815,853)
Administrative expenses (Exhibit III) (3,266,287)
Other income (Note 3.10) 243,891
Financial and holding results (200,863)
-----------
Income before income tax 5,212,271
Income tax (1,912,000)
-----------
Net income for the period 3,300,271
===========
</TABLE>
The accompanying
notes 1 through 7 and the
supplementary statements (Exhibits I through IV)
are an integral part of this statement.
JUAN JOSE FEDRIGOTTI
Chairperson
<PAGE> 9
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
(Figures stated in pesos)
1. BASIS FOR THE COMBINATION
The combined balance sheet of Peimu S.A., Semercor S.A., Marlon S.A. and
Emergencias Recor S.A. (Companies) as of September 30, 1997 and the
related combined statement of income for the twelve-month period then
ended were prepared on the basis of accumulation of balances of similar
items and the ensuing elimination of outstanding balances and results
among the companies.
Similar financial criteria concerning valuation and presentation have been
applied in the preparation of the combined financial statements of the
group of companies.
The amounts shown in these combined financial statements are in accordance
with the Companies' accounting records except for those belonging to
Marlon S.A. and Emergencias Recor S.A. that, due to their statutory cut
off dates which are different from September 30, 1997, have been adjusted
to reflect a cut-off as of that date.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements of this group of companies have been prepared in
accordance with Technical Resolution No 10 and presented by applying the
provisions of Technical Resolutions No 8, 9 and 12, issued by the
Argentine Federation of Professional Councils in Economic Sciences
(FACPCE).
<PAGE> 10
2.1. RESTATEMENT IN CONSTANT PESOS
The financial statements have been restated to fully reflect the effect of
changes in the purchasing power of currency until August 31, 1995 by the
method for restatement to constant pesos set forth in Technical Resolution
No. 6 of the FACPCE. In compliance with professional regulations,
effective September 1, 1995, the Companies discontinued their application
of the restatement method, while retaining all restatements recorded until
that date.
This method is accepted by generally accepted accounting principles to the
extent that the price index required to be used for restatement purposes
does not experience an annual variation exceeding 8%. The variation
recorded in this index in the years ended on or after September 1, 1995
was below that maximum limit.
2.2. VALUATION METHODS
a) Cash, receivables and payables:
- In local currency: at nominal value.
- In foreign currency: as of September 30, 1997 at nominal value
translated at the exchange rate in effect as of September 30,
1997 for the settlement of these transactions. The related
detail is disclosed in Exhibit IV.
b) Investments:
Securities - Celulosa Puerto Piray S.A.: they have been valued at
their inflation restated cost as of August 31, 1995. As of September
30, 1997 they are completely reserved
c) Property and equipment:
They are valued at their acquisition cost, restated as described in
Note 2.1., less related accumulated depreciation, calculated on a
straight-line basis and applying sufficient annual rates to fully
depreciate the original values by the end of their respective
estimated useful lives.
The net residual value thus determined does not exceed, considered
as a whole, its economic recoverable value.
d) Income tax:
The Companies determine the accounting charge for income tax by
applying the tax rate in effect as of September 30, 1997 of 33%, on
the twelve-month period estimated taxable income, without
considering the effect of temporary differences between book and
taxable income.
<PAGE> 11
e) Shareholders' equity accounts:
They have been restated as described in Note 2.1., except for the
"Capital stock - Face value" account, which has been maintained at
its original amount. The adjustment derived from their restatement
as indicated in Note 2.1. is disclosed under the caption "Capital
stock Adjustment to Capital".
f) Statement of income accounts:
- Accounts accumulating monetary transactions made in the
twelve-month period ended September 30, 1997 were valued at
the original amount of each item.
- Depreciation and amortization of nonmonetary assets was
computed based on such assets' adjusted amounts as indicated
in Note 2.1.
2.3. COMBINATION PROCEDURES:
The combined financial statements have been prepared on the basis of the
financial statements of PEIMU S.A. and SEMERCOR S.A. as of September 30,
1997, for the year then ended which have been audited for local purposes
by Deloitte & Touche, and from the balance sheet and information prepared
by the companies of MARLON S.A. and EMERGENCIAS RECOR S.A. as of September
30, 1997, and for the twelve-month period then ended.
<TABLE>
<S> <C>
AGGREGATE COMBINED COMPANIES' SHAREHOLDERS' EQUITY 7,615,877
ADJUSTMENTS:
Increase in the allowance for uncollectible trade receivables (95,174)
Decrease in the goodwill arising from the purchase of SEMERCOR S.A
shares by PEIMU S.A. net of accumulated amortization (3,243,978)
Decrease in the net book value of the deferred charges recorded (991,752)
Increase in Social Security payables (81,357)
Subtraction of the investment of PEIMU S.A. in SEMERCOR S.A (736,592)
Increase in lawsuit accrual (773,957)
Other adjustments (24,522)
----------
COMBINED SHAREHOLDERS' EQUITY 1,668,545
==========
</TABLE>
<PAGE> 12
3. DETAIL OF THE MAIN ACCOUNTS
<TABLE>
<S> <C>
3.1. CASH AND BANKS
Cash - local currency 140,512
Cash - foreign currency (Exhibit IV) 9,990
Banks - local currency 969,501
Banks - foreign currency (Exhibit IV) 1,350
----------
Total 1,121,353
==========
3.2 TRADE RECEIVABLES
Common accounts receivable 1,272,519
In legal process 202,248
----------
Sub-total 1,474,767
Allowance for doubtful accounts (Exhibit II) (455,950)
----------
Total 1,018,817
==========
3.3 OTHER RECEIVABLES
a) CURRENT
Related company GEA S.A 510,451
Shareholders' Private accounts 3,060,346
Prepaid expenses 100,668
Advances to employees 71,562
Values to deposit and note receivables 967,520
Positive tax balance 68,218
Advances to suppliers 44,144
Compulsory saving 14,307
Others 288,900
----------
Sub-total 5,126,116
Allowance for other doubtful accounts (Exhibit II) (82,566)
----------
Total 5,043,550
==========
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
b) NONCURRENT
Guaranteed deposits 70,472
Judicial deposits 26,589
Compulsory saving 7,777
Tax contribution 2,872
Temporary joint venture 2,352
---------
Sub-total 110,062
Allowance for other doubtful accounts (Exhibit II) (41,619)
----------
Total 68,443
==========
3.4 INVESTMENTS
SECURITIES:
Celulosa Puerto Piray S.A 22,627
Allowance for other doubtful accounts (Exhibit II) (22,627)
----------
Total --
==========
3.5 ACCOUNTS PAYABLE
Suppliers 1,240,801
==========
3.6 LOANS
a) CURRENT
Bank loans (Exhibit IV) 131,290
Bank check accounts - Credit balances 104,667
----------
Total 235,957
==========
b) NONCURRENT
Bank loans (Exhibit IV) 4,167
==========
</TABLE>
<PAGE> 14
<TABLE>
<S> <C>
3.7. PAYROLL AND SOCIAL SECURITY CHARGES
a) CURRENT
Salaries payable 993,922
Reserve for vacations and corresponding social charges 855,860
Social security charges 582,315
----------
Total 2,432,097
==========
b) NONCURRENT
Social security charges 269,440
==========
3.8 TAXES PAYABLE
a) CURRENT
Income tax 1,912,000
Advanced taxes (744,840)
Provincial taxes (Gross income tax) 227,499
Withholding tax (67,195)
Local duties 65,306
Withholding to deposit 9,752
Reserve for interests 14,683
Others 14,867
----------
Total 1,432,072
==========
b) NONCURRENT
Provincial taxes (Gross income tax) 41,566
==========
3.9 OTHER LIABILITIES
Dividends payable 142,829
Colegio de Medicos (Medical Professional Association) 77,475
Various creditors 48,754
Miscellaneous 143,798
----------
Total 412,856
==========
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
3.10. OTHER INCOME
Increase of allowance for legal actions (Exhibit II) (317,330)
Recovery of allowance for legal actions (Exhibit II) 230,410
Recovery of subscription fees 183,709
Recovery of expenses 118,744
Recovery of allowance for doubtful accounts (Exhibit II) 17,998
Result for property and equipment sales 7,370
Other 2,990
---------
Total 243,891
=========
</TABLE>
4. LEVIED ASSETS AND GUARANTEES GRANTED
a) Semercor S.A. has guaranteed bank loans for GEA S.A. for a total
amount of 1,900,000 that will finish their amortization on April 12,
2000.
b) Emergencias Recor S.A., has guaranteed bank loans as of September
30, 1997 for a balance of 126,290 by means of a lien on eight
vehicles whose residual value at the end of the period added up to
119,935. Besides, a vehicle without residual value has been affected
to the settlement of a labor trial.
c) Peimu S.A. has levied vehicles whose residual value as of September
30, 1997 added up to 7,623 and were affected to the settlement of
three labor trials.
5. PURCHASE AGREEMENT INVOLVING STOCK OF THE COMPANIES
A share purchase agreement was executed on January 16, 1998, with an
amendment thereto executed on March 26, 1998, between the shareholders of
PEIMU S.A., SEMERCOR S.A., MARLON S.A. and EMERGENCIAS RECOR S.A. (the
Companies) and Rural/Metro Corporation whereby the former sold the
Companies' shares of stock to Rural/Metro of Argentina S.A.
Such agreement provided a sale price of US$35 million which was comprised
of US$25 million in cash and US$10 million in shares of common stock of
Rural/Metro Corporation. US$5 million of the stock is restricted from
resale until March 26, 1999.
<PAGE> 16
The restricted amount will be kept to compensate any lawsuits, claims, or
procedures made or filed by third parties against the Companies prior to
closing date or after such closing date but due to events, acts or
omissions made or occurred before closing date, Rural/Metro of Argentina
S.A. will deduct any such indemnifications from the balance of the
purchase price.
6. SUBSEQUENT EVENTS
PEIMU S.A. Shareholders' Meeting held on February 9, 1998 approved the
distribution of cash dividends for 3,011,200. SEMERCOR S.A. Shareholders'
Meeting held on February 10, 1998 approved the distribution of cash
dividends for 1,755,000.
The Companies' receivables from their shareholders were settled by
offsetting them against the dividends.
7. SUMMARY OF THE MOST SIGNIFICANT DIFFERENCES BETWEEN THE GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES APPLIED BY THE COMPANY AND US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The accompanying combined financial statements have been prepared in
accordance with generally accepted accounting principles in Argentina
("Argentine GAAP") which differs in certain respects from those applicable
in the United States of America ("US GAAP") or in other countries.
Accordingly, these combined financial statements are intended to only
present combined financial position and combined results of operations in
accordance with Argentine GAAP.
A description of the significant differences and the adjustments required
to conform the combined financial statements to accounting principles
generally accepted in the United States of America is as follows. This
note does not include certain additional disclosures required by US
generally accepted accounting principles.
(a) Main differences arise from the following accounts:
- Restatement of financial statements for general price-level
changes: The Argentine GAAP combined financial statements of
the Companies were restated through August 31, 1995 and
updated through August 31, 1995 price-levels to reflect the
effects of inflation in accordance with specified rules.
<PAGE> 17
In most circumstances, US GAAP does not allow for the
restatement of financial statements. Under US GAAP, account
balances and transactions are generally stated in the units of
currency of the year when the transactions originated. This
accounting model is commonly known as the historical cost
basis of accounting.
- Income tax: Argentine GAAP does not state the method to be
used for calculating income tax although they allow the
deferred tax method. However, the usual practice in Argentina
to account for income tax is based on the amount owed to the
Revenue Collection Authority. When the recognition of income
and expenses in the financial statements does not occur in the
same year as the recognition of income and expenses for income
tax, temporary differences are not considered in the
calculation of the year's income tax.
Under US GAAP, deferred tax is recorded by the liability
method. Under such method, deferred tax is recorded to reflect
the temporary differences between the tax bases used for book
and for tax assets and liabilities in each year, and for tax
adjustments.
(b) Reconciliation of the combined shareholders' equity as of September
30, 1997 and the combined net income for the twelve-month period
then ended from Argentine GAAP to US GAAP.
The following summary indicates the most significant adjustments to
the combined shareholders' equity as of September 30, 1997 and the
combined net income for the twelve-month period then ended would
have been required should US GAAP been applied instead of Argentine
GAAP.
RECONCILIATION OF THE COMBINED SHAREHOLDERS' EQUITY AS OF SEPTEMBER
30, 1997
<TABLE>
<S> <C>
Combined Shareholders' equity in accordance with Argentine GAAP 1,668,545
US GAAP adjustments - profit (loss):
- Restatement of property and equipment (68,396)
- Deferred income tax asset 498,762
---------
Combined Shareholders' equity in accordance with US GAAP 2,098,911
=========
</TABLE>
<PAGE> 18
RECONCILIATION OF THE COMBINED NET INCOME FOR THE TWELVE-MONTH
PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<S> <C>
Combined net income in accordance with Argentine GAAP 3,300,271
US GAAP adjustments - profit (loss):
- Depreciation of property and equipment 33,390
- Deferred income tax benefit 89,429
---------
Combined net income in accordance with US GAAP 3,423,090
=========
</TABLE>
Assets and liabilities as of September 30, 1997 were translated into
US dollars by using the exchange rate at the combined balance sheet
date ($1 = US$1), except Property and Equipment that were
remeasured using historical rates. Revenues, expenses, gains and
losses were translated into US dollars by using the exchange rate
$1 = US$1, given that it has been the exchange rate at the dates on
which those transactions were recognized (the rate $1 = US$1 has
not varied since April 1991). The depreciation of Property and
Equipment was recalculated on the remeasured value of fixed assets.
JUAN JOSE FEDRIGOTTI
Chairperson
<PAGE> 19
EXHIBIT I
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED PROPERTY AND EQUIPMENT
AS OF SEPTEMBER 30, 1997
(stated in pesos)
<TABLE>
<CAPTION>
ORIGINAL VALUES
-------------------------------------------------------
AT THE RETIREMENTS AT THE
BEGINNING ADDITIONS FOR DURING THE END
MAIN ACCOUNT OF PERIOD THE PERIOD PERIOD OF PERIOD
- ----------------------------- ------------ -------------- -------------- -----------
<S> <C> <C> <C> <C>
Vehicles 2,671,631 75,282 (70,805) 2,676,108
Vehicles equipment 293,579 10,889 -- 304,468
Office furniture 617,374 98,679 -- 716,053
Medical equipment 1,130,620 92,924 (960) 1,222,584
Radios equipment 179,650 31,206 -- 210,856
Office equipment 586,152 50,863 -- 637,015
Telemetry Equipment 33,353 -- -- 33,353
Building improvements 312,725 -- -- 312,725
Installations 299,788 54,715 -- 354,503
Advances to suppliers 2,000 -- -- 2,000
--------- --------- --------- ---------
Total 6,126,872 414,558 (71,765) 6,469,665
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION
--------------------------------------------------------------------
ACCUMULATED AT RETIREMENTS ACCUMULATED AT
THE BEGINNING DURING THE FOR THE THE END NET
MAIN ACCOUNT OF PERIOD PERIOD PERIOD OF PERIOD VALUE
- ----------------------------- ------------------ --------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Vehicles 1,938,874 (27,575) 246,050 2,157,349 518,759
Vehicles equipment 166,372 -- 19,633 186,005 118,463
Office furniture 350,279 -- 55,352 405,631 310,422
Medical equipment 839,999 (192) 108,248 948,055 274,529
Radios equipment 112,685 -- 21,298 133,983 76,873
Office equipment 371,016 -- 75,342 446,358 190,657
Telemetry Equipment 9,493 -- 3,335 12,828 20,525
Building improvements 156,794 -- 31,273 188,067 124,658
Installations 128,442 -- 31,109 159,551 194,952
Advances to suppliers -- -- -- -- 2,000
--------- --------- --------- --------- ---------
Total 4,073,954 (27,767) 591,640 4,637,827 1,831,838
========= ========= ========= ========= =========
</TABLE>
JUAN JOSE FEDRIGOTTI
Chairperson
<PAGE> 20
EXHIBIT II
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED RESERVES AND ACCRUALS
AS OF SEPTEMBER 30, 1997
(stated in pesos)
<TABLE>
<CAPTION>
AT BEGINNING OF AT END OF
ITEMS PERIOD INCREASES DECREASES PERIOD
- --------------------------------------------- --------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
DEDUCTED FROM ASSETS:
Applicable to doubtful receivables 232,610 267,615(1) (44,275)(2) 455,950
Applicable to other current doubtful
receivables 84,495 -- (1,929) 82,566
Applicable to other non-current
doubtful receivables 38,619 3,000(3) -- 41,619
Applicable to investments devaluation 22,627 -- -- 22,627
--------- --------- --------- ---------
Total 378,351 270,615 (46,204) 602,762
========= ========= ========= =========
INCLUDED IN LIABILITIES:
Applicable to lawsuits 1,390,824 317,330 (292,562)(4) 1,415,592
========= ========= ========= =========
</TABLE>
(1) Charged to results: Selling expenses (Exhibit III).
(2) Charged to results: Other income and expenses 17,998 (Note 3.10) and
used for its specific purpose 26,277.
(3) Charged to results: Selling expenses others (Exhibit III).
(4) Charged to results: Other income and expenses 230,410 (Note 3.10) and
used for its specific purpose 62,152.
JUAN JOSE FEDRIGOTTI
Chairperson
<PAGE> 21
EXHIBIT III
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED INFORMATION REQUIRED UNDER ART. 64, PARAGRAPH I, CLAUSE b)
OF LAW No 19,550 FOR THE TWELVE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
(stated in pesos)
<TABLE>
<CAPTION>
COST SELLING ADMINISTRATIVE
ITEMS TOTAL OF SERVICES EXPENSES EXPENSES
- ----------------------------------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Salaries 15,875,167 11,275,862 3,562,038 1,037,267
Social security charges 3,369,580 2,257,799 881,854 229,927
Fees and service payments 7,009,372 6,728,091 9,989 271,292
Advertising expenses 1,432,702 -- 1,432,702 --
Non-collectible receivables 1,089,790 -- 1,089,790 --
Taxes, services and contributions 1,254,179 471,836 108,742 673,601
Property and equipment depreciation 591,640 483,216 3,874 104,550
Fees 1,439,198 -- 1,370,322 68,876
Insurance 360,534 287,548 40,193 32,793
Leasing 62,360 55,732 -- 6,628
Medicine and medical supplies 557,620 556,839 781 --
Allowance for doubtful accounts 267,615 -- 267,615 --
Maintenance 631,146 564,623 23,897 42,626
Fuel oil 173,481 171,881 1,600 --
Others 4,161,351 2,340,168 1,022,456 798,727
---------- ---------- ---------- ----------
Total 38,275,735 25,193,595 9,815,853 3,266,287
========== ========== ========== ==========
</TABLE>
JUAN JOSE FEDRIGOTTI
Chairperson
<PAGE> 22
EXHIBIT IV
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED FOREIGN CURRENCY ASSETS AND LIABILITIES
AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ITEMS FOREIGN CURRENCY BOOK AMOUNT IN
AND AMOUNT EXCHANGE RATE PESOS
- ---------------------------------- --------------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
CURRENT
Cash US$ 9,990 1.00 9,990
Banks US$ 1,350 1.00 1,350
-------- -------
Total US$ 11,340 11,340
-------
LIABILITIES
CURRENT
Bank loans US$ 131,290 1.00 131,290
NON-CURRENT
Bank loans US$ 4,167 1.00 4,167
-------- -------
Total US$ 135,457 135,457
======== =======
</TABLE>
JUAN JOSE FEDRIGOTTI
Chairperson
<PAGE> 23
The following combined balance sheet of Peimu S.A., Semercor S.A., Marlon S.A.
and Emergencias Recor S.A. as of March 25, 1998 and the related combined
statements of operations and cash flows for the period from October 1, 1997 to
March 25, 1998 have been prepared in accordance with U.S. Generally Accepted
Accounting Principles (GAAP) and are stated in U.S. dollars.
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED BALANCE SHEET
MARCH 25, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 890
Accounts receivable, net 2,956
Inventories 66
Prepaid expenses and other 516
-------
Total current assets 4,428
PROPERTY AND EQUIPMENT, net 1,523
DEFERRED TAX ASSET 388
OTHER ASSETS 241
-------
$ 6,580
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,581
Accrued liabilities 4,339
-------
Total current liabilities 5,920
OTHER LIABILITIES 1,275
-------
Total liabilities 7,195
-------
STOCKHOLDERS' EQUITY/(DEFICIT)
Total stockholders' equity (deficit) (615)
-------
$ 6,580
=======
</TABLE>
<PAGE> 24
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED STATEMENT OF INCOME
FOR THE PERIOD FROM OCTOBER 1, 1997 TO MARCH 25, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUE
Ambulance services $22,468
Other 177
-------
Total revenue 22,645
-------
OPERATING EXPENSES
Payroll and employee benefits 10,174
Provision for doubtful accounts 537
Depreciation 324
Other operating expenses 8,587
-------
Total expenses 19,622
-------
OPERATING INCOME 3,023
Interest expense, net 44
-------
INCOME BEFORE INCOME TAXES 2,979
PROVISION FOR INCOME TAXES 1,028
-------
NET INCOME $ 1,951
=======
</TABLE>
<PAGE> 25
PEIMU S.A., SEMERCOR S.A., MARLON S.A. AND EMERGENCIAS RECOR S.A.
COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 1, 1997 TO MARCH 25, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 1,951
Adjustments to reconcile net income to cash provided by operations -
Depreciation 324
Provision for doubtful accounts 537
Change in assets and liabilities
Decrease in accounts receivable 2,315
Decrease in inventories 3
Increase in prepaid expenses and other (261)
Decrease in deferred tax asset 111
Increase in accounts payable 340
Decrease in accrued liabilities and other (498)
-------
Net cash provided by operating activities 4,822
-------
CASH FLOW FROM FINANCING ACTIVITIES
Loan payments (131)
Capital distribution to shareholders (4,666)
-------
Net cash used in financing activities (4,797)
-------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (83)
Increase in other assets (173)
-------
Net cash used in investing activities (256)
-------
DECREASE IN CASH (231)
CASH, beginning of period 1,121
-------
CASH, end of period $ 890
=======
</TABLE>
<PAGE> 26
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following pro forma financial data of the Company presents the Company's
unaudited pro forma combined statements of income for the fiscal year ended June
30, 1997 and the nine months ended March 31, 1998.
During the fiscal year ended June 30, 1997 and the nine months ended March 31,
1998, the Company purchased either the stock or certain of the assets and
assumed certain of the liabilities of twenty-three ambulance service providers
and merged under pooling-of-interests transactions with five ambulance service
providers. Eighteen acquisitions were completed during the fiscal year ended
June 30, 1997 and ten such acquisitions were made during the nine months ended
March 31, 1998. The acquisitions occurring during the year ended June 30, 1997
are referred to as "the fiscal 1997 acquisitions" and the acquisitions occurring
during the nine months ended March 31, 1998 are referred to as "the fiscal 1998
acquisitions". All of these acquisitions, with the exception of the
pooling-of-interests transactions, were accounted for as purchases in accordance
with Accounting Principles Board Opinion ("APB") No. 16. The aggregate purchase
price for the fiscal 1997 acquisitions and for the fiscal 1998 acquisitions
accounted for as purchases consisted of the following:
<TABLE>
<CAPTION>
FISCAL 1997 ACQUISITIONS FISCAL 1998 ACQUISITIONS TOTAL
------------------------ ------------------------ -----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash $ 35,512 $ 34,221 $ 69,733
Rural/Metro common stock 18,699 8,520 27,219
Notes payable to sellers 4,477 6,470 10,947
Assumption of liabilities 23,915 28,109 52,024
-------- -------- --------
$ 82,603 $ 77,320 $159,923
======== ======== ========
</TABLE>
In addition, the Company issued 361,970 and 803,565 shares of Common Stock,
related to pooling-of-interests transactions during the fiscal year ended
June 30, 1997 and the nine months ended March 31, 1998, respectively.
The unaudited pro forma combined statement of income for the year ended June 30,
1997 was prepared as if each of the fiscal 1997 acquisitions and fiscal 1998
acquisitions was consummated as of July 1, 1996. The unaudited pro forma
combined statement of income for the nine months ended March 31, 1998 was
prepared as if each of the fiscal 1998 acquisitions was consummated as of July
1, 1997.
The unaudited pro forma combined financial data should be read in conjunction
with the Consolidated Financial Statements of the Company and related notes
thereto.
The pro forma financial data does not purport to represent what the Company's
actual results of operations would have been had each transaction occurred as of
the beginning of each respective period nor does it project the Company's
results of operations for any future period.
<PAGE> 27
RURAL/METRO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BUSINESSES PRO FORMA PRO FORMA
HISTORICAL (1) ACQUIRED (2) ADJUSTMENTS COMBINED
-------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
REVENUE
Ambulance services $257,488 $158,825 $ -- $416,313
Fire protection services 42,163 -- -- 42,163
Other 20,154 2,757 -- 22,911
-------- -------- -------- --------
Total revenue 319,805 161,582 -- 481,387
-------- -------- -------- --------
OPERATING EXPENSES
Payroll and employee benefits 170,833 77,722 (4,699)(4) 243,856
Provision for doubtful accounts 43,424 21,257 -- 64,681
Depreciation 12,136 5,382 (110)(5) 17,408
Amortization of intangibles 4,660 292 3,402(6) 8,354
Other operating expenses 54,922 43,565 (2,981)(7) 95,506
Loss contract/restructuring charge 6,026 -- -- 6,026
-------- -------- -------- --------
Total expenses 292,001 148,218 (4,388) 435,831
-------- -------- -------- --------
OPERATING INCOME 27,804 13,364 4,388 45,556
Interest expense, net 5,720 2,387 4,396(8) 12,503
Other -- -- 152 152
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 22,084 10,977 (160) 32,901
PROVISION FOR INCOME TAXES 9,364 2,362 2,289(9) 14,015
-------- -------- -------- --------
NET INCOME $ 12,720 $ 8,615 $ (2,449) $ 18,886
======== ======== ======== ========
BASIC EARNINGS PER SHARE $ 1.10 $ 1.38
DILUTED EARNINGS PER SHARE $ 1.04 $ 1.31
AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC 11,585 2,148(10) 13,733
AVERAGE NUMBER OF SHARES
OUTSTANDING - DILUTED 12,271 2,148(10) 14,419
</TABLE>
The accompanying notes to pro forma combined
statements of income are an integral part of this statement.
<PAGE> 28
RURAL/METRO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BUSINESSES PRO FORMA PRO FORMA
HISTORICAL (1) ACQUIRED (3) ADJUSTMENTS COMBINED
-------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
REVENUE
Ambulance services $274,646 $ 53,992 $ -- $328,638
Fire protection services 34,110 -- -- 34,110
Other 30,142 685 -- 30,827
-------- -------- -------- --------
Total revenue 338,898 54,677 -- 393,575
-------- -------- -------- --------
OPERATING EXPENSES
Payroll and employee benefits 179,103 26,960 (1,093)(4) 204,970
Provision for doubtful accounts 46,223 3,398 -- 49,621
Depreciation 13,684 1,382 -- 15,066
Amortization of intangibles 5,155 119 1,112(6) 6,386
Other operating expenses 57,905 17,595 (896)(7) 74,604
-------- -------- -------- --------
Total expenses 302,070 49,454 (877) 350,647
-------- -------- -------- --------
OPERATING INCOME 36,828 5,223 877 42,928
Interest expense, net 9,114 751 1,586(8) 11,451
Other 4 -- 51 55
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 27,710 4,472 (760) 31,422
PROVISION FOR INCOME TAXES 11,256 1,464 68(9) 12,788
-------- -------- -------- --------
NET INCOME $ 16,454 $ 3,008 $ (828) $ 18,634
======== ======== ======== ========
BASIC EARNINGS PER SHARE $ 1.23 $ 1.34
DILUTED EARNINGS PER SHARE $ 1.18 $ 1.28
AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC 13,332 614(10) 13,946
AVERAGE NUMBER OF SHARES
OUTSTANDING - DILUTED 13,968 614(10) 14,582
</TABLE>
The accompanying notes to pro forma combined
statements of income are an integral part of this statement.
<PAGE> 29
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(1) Reflects the results of operations of the respective acquisitions from the
dates of acquisition through the end of each respective period.
(2) Reflects the results of operations of the fiscal 1997 and 1998
acquisitions from the beginning of the period through the respective dates
of acquisition.
(3) Reflects the results of operations for the fiscal 1998 acquisitions from
the beginning of the period through the respective dates of acquisition.
(4) Adjustment for payroll and employee benefits to reflect the effects of
certain employees of the acquired businesses not being employed by the
Company and to reflect the differences between the actual compensation
paid to officers of the businesses acquired and the aggregate compensation
such individuals would have received under the terms of employment
agreements with the Company as if the businesses had been acquired as of
the beginning of the period.
(5) Adjustment for depreciation on assets not purchased in the acquisition
transactions.
(6) Adjustment for amortization to reflect amortization of the cost in excess
of the fair value of net assets acquired over a 35-year period.
(7) Adjustment for other operating expenses to reflect the reduction of
expenses related to certain real estate and buildings not acquired and
sellers' costs incurred in connection with the sale of their respective
businesses, had each of the acquisitions occurred as of the beginning of
the period.
(8) Adjustment for interest expense to reflect the interest expense related to
the debt issued in connection with the acquisitions.
(9) Adjustment for provision for income taxes to reflect the effect of the
adjustments described above and the tax effect of treating each domestic
acquisition as if it had C corporation tax status and treating each
international acquisition in accordance with the statutory rates in effect
for the applicable foreign tax jurisdictions.
(10) Adjustment for average number of shares outstanding as if the common stock
issued in connection with certain of the acquisitions had occurred as of
the beginning of the period.
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RURAL/METRO CORPORATION
Date: June 5, 1998 By: /s/ Dean Hoffman
-----------------------
Dean Hoffman, Vice President
and Principal Accounting Officer
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included (or incorporated by reference) in this Form 8-K/A, into
the Company's previously filed Registration Statements File Nos., 333-51455,
333-37393, 333-39453, 333-07457, 33-76526, 33-80454, 33-88302, and 333-2818.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
June 1, 1998
