RURAL/METRO CORPORATION
 CONSOLIDATED STATEMENTS OF INCOME
 For the three months and year ended June 30, 2002 and 2001
 (In thousands, except per share amounts)
 
 
 
 Three months ended June 30, Year Ended June 30,
 





 





 
 
 2002 2001 2002 2001
 (Unaudited) (Unaudited) (Unaudited)
 
NET REVENUE $122,951 $ 124,147  $ 497,038 $ 504,316
 
 
OPERATING EXPENSES
 Payroll and
 
 employee benefits 71,234 80,999 287,307 301,055
 
 Provision for doubtful
 
 accounts 18,238 34,944 69,900 102,470
 Depreciation 2,974 5,346 15,155 21,809
 
 Amortization of 
 
 intangibles 986 1,799 1,055 7,352
 
 Other operating
 
 expenses 27,066 50,037 97,639 142,009
 
 Asset impairment
 
 charges  -- 94,353 -- 94,353
 
 Loss on disposition of
 
 clinic operations -- 9,374 -- 9,374
 
 Contract termination 
 costs and related 
 
 asset impairment (107) 4,066 (107)  9,256
 
 Restructuring charge 
 
 and other (493) 9,091 (718) 9,091
 --------- ---------- ---------- ----------
 Total expenses 119,898 290,009 470,231 696,769
  --------- ---------- ---------- ----------
 
OPERATING INCOME (LOSS) 3,053 (165,862) 26,807 (192,453)
 Interest expense, net (6,157) (6,706) (24,976) (30,001)
 
 Other income (expense), 
 
 net  -- (3,699) 9 (2,402)
 --------- ---------- ---------- ----------
 
 
INCOME (LOSS) BEFORE 
 
 INCOME TAXES (3,104) (176,267) 1,840 (224,856)
 
 Income tax (provision) 
 
 benefit  650 (1,159) 2,050 (1,875)
 --------- ---------- ---------- ----------
 
 
NET INCOME (LOSS) BEFORE
 CUMULATIVE EFFECT OF 
 
 CHANGE IN ACCOUNTING (2,454) (177,426) 3,890 (226,731)
 
 PRINCIPLE
 
CUMULATIVE EFFECT OF 
 CHANGE IN ACCOUNTING 
 
 PRINCIPLE -- -- (49,514) --
 --------- ---------- ---------- ----------
 
NET LOSS $ (2,454) $(177,426) $ (45,624) $(226,731)
 ========= ========== ========== ==========

INCOME (LOSS) PER SHARE:

Basic Income (loss) before cumulative effect of a change in accounting

 principle $ (0.16) $ (11.91) $ 0.26 $ (15.38)
 
 Cumulative effect of 
 change in accounting 
 
 principle -- -- (3.26) --
 --------- ---------- ---------- ----------
 
 Net loss $ (0.16) $ (11.91) $ (3.00) $ (15.38)
 ========= ========== ========== ==========

Diluted Income (loss) before cumulative effect of a change in accounting

 principle $ (0.16) $ (11.91) $ 0.25 $ (15.38)
 
 Cumulative effect of 
 change in accounting 
 
 principle -- -- (3.14) --
 --------- ---------- ---------- ----------
 
 Net loss $ (0.16) $ (11.91) $ (2.89) $ (15.38)
  ========= ========== ========== ==========
 
 
 
AVERAGE NUMBER OF SHARES 
 
 OUTSTANDING - BASIC 15,508 14,900 15,190 14,744
 ========= ========== ========== ==========
 
 
AVERAGE NUMBER OF SHARES 
 
 OUTSTANDING - DILUTED 15,508 14,900 15,773 14,744
 ========= ========== ========== ==========
 
 
 
 RURAL/METRO CORPORATION
 CONSOLIDATED BALANCE SHEETS
  AS OF JUNE 30, 2002 AND JUNE 30, 2001
 
 (In Thousands)
 
 June 30, June 30,
 2002 2001
  ----------- -----------
 (Unaudited)
 
 ASSETS
 
 
CURRENT ASSETS
 
 Cash $ 9,828 $ 8,699
 Accounts receivable, net  99,115 103,260
 Inventories 12,220 13,173
 Prepaid expenses and other 9,597 6,753
 ----------- -----------
 Total current assets  130,760 131,885
 ----------- -----------
 
PROPERTY AND EQUIPMENT, net 48,532 57,999
 
GOODWILL 41,244 90,757
 
OTHER ASSETS 16,902 17,893
 ----------- -----------
 
 Total assets $ 237,438 $ 298,534
 =========== ===========
 
 
 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
 
CURRENT LIABILITIES
 
 Accounts payable $ 11,961 $ 12,915
 Accrued liabilities 73,719 96,340
 Non-refundable subscription fee income 15,409 14,707
 Current portion of long-term debt 1,633 294,439
 ----------- -----------
 Total current liabilities 102,722 418,401
  ----------- -----------
 
LONG-TERM DEBT, net of current portion 298,529 1,286
 
OTHER LIABILITIES 477 994
 
DEFERRED INCOME TAXES 650  --
 ----------- -----------
 
 Total liabilities 402,378 420,681
 ----------- -----------
 
MINORITY INTEREST  379 8,379
 ----------- -----------
 
 
STOCKHOLDERS' EQUITY (DEFICIT)
 
 Common stock 159 152
 Additional paid-in capital 138,470  137,948
 Accumulated deficit (313,025) (267,401)
 Accumulated other comprehensive income 10,316 14
 Treasury stock (1,239) (1,239)
  ----------- -----------
 Total stockholders' deficit (165,319) (130,526)
 ----------- -----------
 
 $ 237,438 $ 298,534
  =========== ===========
 
 
 
 RURAL/METRO CORPORATION
 CONSOLIDATED STATEMENT OF CASH FLOWS
 FOR THE YEAR ENDED JUNE 30, 2002
 
 (In thousands)
 
  2002 2001
 (Unaudited)
 
CASH FLOW FROM OPERATING ACTIVITIES
 
 Net loss $ (45,624) $(226,731)
 
 Adjustments to reconcile net income to cash
 provided by operations--
 
 Non-cash portion of restructuring charge -- 4,092
 Non-cash portion of contract termination -- 8,086
 Asset impairment charges -- 94,353
 Loss on disposal of clinic operations -- 9,374
 
 Cumulative effect of change in accounting
 
 principle 49,514 --
 Depreciation and amortization 16,210 29,161
 Amortization of gain on sale of real estate -- (101)
 Gain on sale of property and equipment (285) (326)
 Provision for doubtful accounts 69,900 102,470
 Deferred income taxes  650 --
 
 (Undistributed earnings) losses of minority
 
 shareholder (9) 3,019

(Undistributed earnings) distributions in excess of earnings of public/private

 partnership  (249) 118
 Amortization of discount on Senior Notes 26 26
 
 Change in assets and liabilities -
 
 Increase in accounts receivable (67,322) (62,099)
 Decrease in inventories  948 5,811
 (Increase) decrease in prepaid expenses (3,018) 1,072
 (Increase) decrease in other assets (1,896) 2,463
 Increase (decrease) in accounts payable 1,337 (2,654)
 Increase (decrease) in accrued liabilities
 and other liabilities (11,629) 40,007
 Increase (decrease) in non-refundable
 subscription income 702 (282)
  ----------- -----------
 Net cash provided by operating activities 9,255 7,859
 ----------- -----------
 
 
CASH FLOW FROM INVESTING ACTIVITIES
 
 Capital expenditures  (6,854) (5,774)
 
 Proceeds from the sale of property and 
 
 equipment 1,022 1,969
 ----------- -----------
 Net cash used in investing activities (5,832) (3,805)
 ----------- -----------
 
 
CASH FLOW FROM FINANCING ACTIVITIES
 
 Repayments on revolving credit facility (1,263) (3,765)
 
 Repayment of debt and capital lease
 
 obligations (1,862) (2,773)
 Borrowings under capital lease obligations -- 283
 Issuance of common stock 529 348
 ----------- -----------
 Net cash used in financing activities (2,596) (5,907)
 ----------- -----------
 
 
EFFECT OF CURRENCY EXCHANGE RATE CHANGE 302 265
  ----------- -----------
 
INCREASE (DECREASE) IN CASH 1,129 (1,588)
 
CASH, beginning of period 8,699 10,287
 ----------- -----------
 
CASH, end of period $ 9,828 $ 8,699
 =========== ===========