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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2003

Commission file number 0-22056

Rural/Metro Corporation

(Exact name of registrant as specified in its charter)

8401 East Indian School Road, Scottsdale, Arizona 85251

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (480) 606-3886

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share

Preferred Stock Purchase Rights

(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

As of December 31, 2002, the aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the closing sales price of such stock as of such date on the Nasdaq SmallCap Market, was $33,247,400. Shares of Common Stock held by each officer and director and by each person who owned 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive.

As of October 3, 2003, there were 16,500,090 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2003 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.

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FORWARD LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT RESULTS

Forward Looking Statements. Statements in this Report that are not historical facts are hereby identified as “forward looking statements” as that term is used under the securities laws. We caution readers that such “forward looking statements,” including those relating to our future business prospects, working capital, accounts receivable collection, liquidity, cash flow, insurance coverage and claims reserves, capital needs, operational results and compliance with debt facilities, wherever they appear in this Report or in other statements attributable to us, are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the “forward looking statements.” You should consider such “forward looking statements” in light of various important factors, including those set forth below and others set forth from time to time in our reports and registration statements filed with the Securities and Exchange Commission.

These “forward looking statements” are found throughout this Report. Additionally, the discussions herein under the captions “Business — Introduction”, “Business — Market Reform and Changing Reimbursement Regulations”, “Business — Other Governmental Regulation”, “Business — Management Information Systems”, “Business — Billings and Collections”, “Legal Proceedings”, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are susceptible to the risks and uncertainties discussed under the caption “Management’s Discussion and Analysis Of Financial Condition And Results Of Operations — Risk Factors.” Moreover, we may from time to time make “forward looking statements” about matters described herein or other matters concerning us. We disclaim any intent or obligation to update “forward looking statements.”

All references to “we,” “our,” “us,” or “Rural/Metro” refer to Rural/Metro Corporation, and its predecessors, direct and indirect subsidiaries, and affiliates. Rural/Metro Corporation, a Delaware corporation, is strictly a holding company. All services, operations and management functions are provided through its subsidiaries and affiliated entities. The website for Rural/Metro Corporation is located at www.ruralmetro.com.

For a discussion of certain risks associated with our business, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Report and, specifically, “Risk Factors” included in such Item 7.

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PART I

Restatement of Consolidated Financial Statements

We identified certain accounting matters relating to our consolidated financial statements for years prior to 2003 that required restatement. The matters subject to the restatement, which are summarized below and discussed in Note 2 to the consolidated financial statements, increased our accumulated deficit by $59.3 million at June 30, 2000 after consideration of the related income tax effects. The restatement adjustments were necessary to (i) adjust the provisions for discounts applicable to Medicare, Medicaid and other third-party payers and for doubtful accounts recognized in prior years and to reduce our accounts receivable balance through March 31, 2003, and (ii) to defer enrollment fees charged to new subscribers under our fire protection service contracts and to recognize such fees over the estimated customer relationship period.

During the fourth quarter of fiscal 2003, we adopted Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (FIN 46). FIN 46 requires that variable interest entities or VIEs be consolidated by the primary beneficiary, as that term is defined in FIN 46. We determined that our investment in San Diego Medical Services Enterprise, LLC (SDMSE), the entity formed with respect to our public/private alliance with the City of San Diego, meets the definition of a VIE and that we are the primary beneficiary. Accordingly, our investment in SDMSE should be consolidated under FIN 46. We had previously accounted for our investment in SDMSE using the equity method. While consolidation of SDMSE did not impact our previously reported net income (loss) or stockholders deficit, our consolidated financial statements of prior periods have been restated for comparative purposes as allowed by FIN 46.

ITEM 1. Business

Introduction

Founded in 1948, we are a leading provider of medical transportation and related services, which include emergency and non-emergency ambulance and alternative transportation services to municipal, residential, commercial, and industrial customers. We also provide fire protection services and other safety and health care related services, which include dispatch, fleet services, and home health services. We believe we are the only multi-state provider of both ambulance and fire protection services in the United States and that we rank among the largest private-sector providers of ambulance and fire protection services in the world.

We currently serve approximately 400 communities in 24 states. Revenues for these services are primarily derived from fees charged for medical transportation and fire protection services. Our domestic operations generated net revenues of approximately $520.5 million, $489.0 million, and $479.4 million in fiscal years 2003, 2002 and 2001, respectively, and our Latin American operations generated revenues of approximately $2.4 million, $25.4 million and $43.1 million for the same respective periods. As discussed in “Business – Urgent Home Medical Care,” below as well as in Note 4 to the Consolidated Financial Statements, we disposed of our Latin American operations effective September 27, 2002.

We provide medical transportation services under contracts with governmental entities, hospitals, health care facilities and other health care organizations. We primarily derive our revenue under these contracts through reimbursements under private insurance programs and government programs such as Medicare and Medicaid and reimbursement from a variety of governmental entities, as well as through fees paid directly by the patients utilizing our services. Fire protection services are provided under contracts with municipalities, fire districts or other agencies or on a subscription fee basis to individual homeowners or commercial property owners. Medical transportation and related services and fire protection services accounted for approximately 85% and 13%, respectively, of our net revenue for the fiscal years ended June 30, 2003 and 2002.

We grew significantly from the late 1970s through the late 1990s through internal growth and acquisitions. This growth, consisting mainly of mergers and acquisitions in the 1990s as part of a consolidation of the domestic ambulance industry, provided us with significant market presence throughout the United States and parts of Latin

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America. To manage this growth, we invested in the development of management and operating systems in order to achieve productivity gains. While we believe that our prior growth strategy has created a strong platform of core businesses, commencing in fiscal year 2000, we focused on strengthening those core businesses and improving economies of scale. This focus included: (i) sustaining and enhancing positive cash performance, (ii) improving the quality and collectibility of medical transportation service revenue, (iii) reducing bad debt expense, and (iv) growth through same-service area expansion and targeted new opportunities. Our current business strategy includes continued emphasis on these focal points and on delivering high-quality, efficient and effective services to our customers and patients.

Industry Overview

Medical Transportation Business

Based on generally available industry data, it is estimated that annual expenditures for ambulance services in the United States are between $7 billion and $10 billion. The medical transportation industry in the United States is segmented into two market types: emergency and non-emergency services. Public-sector entities, private companies, hospitals, and volunteer organizations provide ambulance services. Public-sector entities often serve as the first responder to requests for such emergency ambulance services and often provide emergency medical transportation. When public sector entities serve as first responder, private sector companies often serve as the second responder and support the first responder as needed. Private sector entities provide the majority of non-emergency ambulance services. It is estimated that the ambulance service industry includes approximately 12,000 service providers including approximately 1,500 private providers, 1,200 hospital-owned providers, 2,600 non-profit entities, 2,700 government-owned providers, and 4,000 providers operated by fire departments. Most commercial providers are small companies serving one or a limited number of markets. Several multi-state providers, including us, have emerged through the acquisition and consolidation of smaller ambulance service providers in recent years.

Fire Protection Business

Municipal fire departments, tax-supported fire districts, and volunteer fire departments constitute the principal providers of fire protection services in the United States. In most of the communities served by municipal fire departments and tax-supported fire districts, the fire department is the first to respond to a call for emergency medical services. Approximately 26,000 fire departments operate throughout the United States, of which approximately 19,000 are volunteer fire departments. Volunteer fire departments range from departments consisting entirely of volunteer personnel to departments that utilize one or more paid personnel located at each station supplemented by volunteers who proceed directly to the fire scene. In addition to providing fire protection services to municipalities and tax-supported fire districts, we and other members of the private sector provide fire protection services to large industrial complexes, airports, petrochemical plants, power plants and other self-contained facilities. We also provide wild land fire fighting services on a seasonal basis generally under contracts and, as requested, by various forestry and governmental agencies.

Based on our experience, we believe that our ambulance and fire protection services are complementary and benefit us by providing diversification, shared resources, experience and competitive advantages in certain service areas.

Historical Growth in Medical Transportation Service Expenditures; Primary Demand Factors

Medical transportation service expenditures in the United States have grown as a result of an increase in the number of transports and an increase in the average expenditures per transport. Several primary factors are cited for the increase and continued demand of the emergency and non-emergency transportation services we provide:

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We believe that we are well situated to capitalize on the needs of the industry due to our emphasis on providing an effective, quality-care, service model, as enhanced by cost-efficiencies and centralized support functions from both local and national economies of scale.

Consolidation of the Medical Transportation Industry

During the 1990s, the fragmented nature of the medical transportation industry, combined with limited capital and management systems that typified many smaller providers, offered an opportunity to consolidate the industry with the goal of achieving improved productivity and enhanced levels of service. As a result, we and several other entities began consolidating the ambulance industry through mergers and acquisitions of smaller providers. Thereafter, as the industry became less fragmented and acquisition opportunities diminished, the number of acquisitions slowed. The larger consolidators, such as American Medical Response (AMR) and, to a lesser extent, Rural/Metro, incurred significant debt in order to compete for acquisition targets and subsequently fund integration. Accordingly, we are a highly leveraged company and face certain risk factors related to our debt structure. See Risk Factors — “We have significant indebtedness.” However, we believe that our timely participation in the consolidation of the industry has provided us with a strong domestic platform of core operations with a substantial revenue base and a marketable reputation for quality service, which enables us to capitalize on our position as a leader in the industry and build upon our business in existing service areas.

Competition

The medical transportation service industry continues to be highly competitive. Principal participants include governmental entities (including fire districts), other national ambulance service providers, large regional ambulance service providers, hospitals, and numerous local and volunteer private providers. Counties, municipalities, fire districts, hospitals, or health care organizations that presently contract for ambulance services may choose to provide ambulance services directly in the future. In addition, many of our contracts with governmental entities contain termination provisions for cause or without cause. We are experiencing increased competition from municipal fire departments in providing emergency ambulance service. However, we believe that the non-emergency transport services market currently is unattractive to municipal fire departments. Some of our competitors may have greater capital and other resources than we do and may not be subject to the same level of regulatory oversight as we are.

We believe that counties, fire districts, and municipalities consider quality of care, historical response time performance, and cost to be among the most important factors in awarding a contract, although other factors, such as customer service, financial stability, and personnel policies and practices, also may be considered. Although

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commercial providers often compete intensely for business within a particular community, it is generally difficult to displace a provider that has a history of satisfying the quality of care and response time performance criteria established within the service area. Moreover, significant start-up costs, together with the long-term nature of the contracts under which services are provided and the relationships many providers have within their communities, create barriers for entry into new markets other than through acquisition. We further believe that our status as an emergency ambulance service provider in a service area increases our visibility and stature, and enhances our ability to compete for non-emergency services within such areas. Because smaller ambulance providers typically do not have the infrastructure to provide emergency ambulance services, we believe we can compete favorably with such competitors for non-emergency service contracts in areas where we also provide emergency ambulance services.

In the fire protection industry, services for residential and commercial properties are provided primarily by tax-supported fire districts, municipal fire departments, and volunteer departments. Private providers, like us, represent a small portion of the total fire protection market and generally provide fire protection services where a tax-supported fire district or municipality has decided to contract for the provision of fire protection services or has not assumed financial responsibility for fire protection. Fire districts or municipalities may not continue to contract for fire protection services. In certain areas where no governmental entity has assumed financial responsibility for providing fire protection, we provide fire protection services on a subscription basis. Municipalities may annex a subscription area or that area may be converted to a fire district that provides service directly, rather than through a master contract.

Market Reform and Changing Reimbursement Regulations

Market reform and the passage of the Balanced Budget Act of 1997, along with other regulatory changes, have impacted and reshaped the health care delivery system in the United States and, by extension, the medical transportation industry. As with all other health care providers, emergency medical service providers, like us, must comply with various requirements in order to participate in Medicare and Medicaid. Medicare is a federal health insurance program for the elderly and for chronically disabled individuals, which, among other things, pays for ambulance services when medically necessary.

Medicaid is a combined federal-state program for medical assistance to impoverished individuals who are aged, blind, or disabled or members of families with dependent children. Medicaid programs or a state equivalent exist in all states in which we operate. Although Medicaid programs differ in certain respects from state to state, all are subject to federal requirements. State Medicaid agencies have the authority to set levels of reimbursement within federal guidelines. We receive only the reimbursement permitted by Medicaid and are not permitted to collect from the patient any difference between our customary charge and the amount reimbursed.

Like other Medicare and Medicaid providers, we are subject to governmental audits of our Medicare and Medicaid reimbursement claims. We take our compliance responsibilities very seriously. We have a national corporate compliance department that works closely with senior management, local managers, billing and collections personnel, and both the human resources and legal departments, as well as governmental agencies to ensure substantial compliance with all established regulations and procedures. Nevertheless, despite our best efforts, there can be no assurance that we can achieve 100% compliance at all times, particularly in light of the complicated and ever-changing nature of the reimbursement regulations, and the high volume of daily transports we provide nationwide. Failure to comply may lead to a significant penalty or lower levels of reimbursement, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. From time to time, we have taken corrective action to address billing inconsistencies, which we have identified through our periodic, internal reviews of billing procedures or which have been brought to our attention through governmental examination of our records and procedures. These matters cover periods prior to and after our acquisition of operations. As part of our commitment to working with those governmental agencies responsible for enforcement of Medicare and Medicaid compliance, we have voluntarily self-disclosed billing issues identified at some of our operations. For example, we self-disclosed Medicare overpayments from 1997 and 1998 in our former Scranton, Pennsylvania, operation to the Office of Inspector General. The billing practices that resulted in the Medicare overpayments were instituted by the former owners of that operation. We discovered the inconsistencies after acquiring the operation and promptly instituted new billing practices. We also entered into, and are currently in compliance with, a corporate integrity agreement with the State of Ohio in connection with the State’s review of Medicaid billing procedures and records. Due to the nature of our business and our participation in the Medicare and Medicaid reimbursement programs, we are routinely subject to regulatory reviews and/or inquiries by governmental

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agencies. We expect these regulatory agencies to continue their practice of performing periodic reviews related to our industry. We fully cooperate with such federal and state agencies to provide requested information and to incorporate any recommended modifications of our existing compliance programs.

Government funding for health care programs is subject to statutory and regulatory changes, administrative rulings, interpretations of policy, determinations by intermediaries and governmental funding restrictions, all of which could materially impact program reimbursements for ambulance services. In recent years, Congress has consistently attempted to curb federal spending on such programs. In June 1997, the Health Care Financing Administration, now renamed the Centers for Medicare and Medicaid Services (CMS), issued proposed rules that would revise Medicare policy on the coverage of ambulance services. The proposed rules were the result of a mandate under the Balanced Budget Act of 1997 to establish a national fee schedule for payment of ambulance services that would control increases in expenditures under Part B of the Medicare program, establish definitions for ambulance services that link payments to the type of services furnished, consider appropriate regional and operational differences, and consider adjustments to account for inflation, among other provisions.

Prior to April 1, 2002, when the national Fee Schedule began a five-year phase-in, Medicare used a charge-based reimbursement system for ambulance services and reimbursed 80% of charges determined to be reasonable, subject to the limits fixed for the particular geographic area. The patient was responsible for co-pay amounts, deductibles and the remaining balance, if we did not accept the assigned reimbursement, and Medicare required us to expend reasonable efforts to collect the balance. In determining reasonable charges, Medicare considered and applied the lowest of various charge factors, including the actual charge, the customary charge, the prevailing charge in the same locality, the amount of reimbursement for comparable services, or the inflation-indexed charge limit.

On April 1, 2002, the Medicare Ambulance Fee Schedule Final Rule became effective. The Final Rule categorizes seven levels of ground ambulance services, ranging from basic life support to specialty care transport, and two categories of air ambulance services. The base rate conversion factor for services to Medicare patients was set at $170.54 (which is adjusted each year by the CPI – 1%) plus separate mileage charges based on specified relative value units for each level of ambulance service. Adjustments also were included to recognize differences in relative practice costs among geographic areas, and higher transportation costs that may be incurred by ambulance providers in rural areas with low population density. The Final Rule requires ambulance providers to accept assignment on Medicare claims, which means a provider must accept Medicare’s allowed reimbursement rate as full payment. Medicare typically reimburses 80% of that rate and the remaining 20% is collectible from a secondary insurance or the patient. In addition, the Final Rule calls for a five-year phase-in period to allow time for providers to adjust to the new payment rates. The fee schedule will be phased in at 20-percent increments each year, with payments being made at 100 percent of the fee schedule in 2006 and thereafter. Reimbursement by Medicare accounted for 27%, 25%, and 25% of our domestic net ambulance fee collections for 2003, 2002, and 2001, respectively. We believe the Medicare Ambulance Fee Schedule will have a neutral impact on our medical transportation revenue at incremental and full phase-in periods, primarily due to the geographic diversity of our U.S. operations. These rules could, however, result in contract renegotiations or other actions by us to offset any negative impact at the regional level that could have a material adverse effect on our business, financial condition, results of operations and cash flows. Changes in reimbursement policies, or other governmental action, together with the financial challenges of some private, third-party payers and budget pressures on other payer sources could influence the timing and, potentially, the receipt of payments and reimbursements. A reduction in coverage or reimbursement rates by third-party payers, or an increase in our cost structure relative to the rate of increase in the Consumer Price Index (CPI), or costs incurred to implement the mandates of the fee schedule could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Other Governmental Regulations

Our business is also subject to other governmental regulations at the federal, state, local, and foreign levels. At the federal level, we are subject to regulations under the Occupational Safety and Health Administration (OSHA) designed to protect our employees, and regulations under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) which protects the privacy of patients’ health information handled by health care providers. The federal government also recommends standards for ambulance design and construction, medical training curriculum, and designation of appropriate trauma facilities and regulates our radio licenses. Various state agencies may modify these standards or require additional standards.

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Each state where we operate regulates various aspects of its ambulance and fire business. These regulations may vary widely from state to state. State requirements govern the licensing or certification of ambulance service providers, training and certification of medical personnel, the scope of services that may be provided by medical personnel, staffing requirements, medical control, medical procedures, communication systems, vehicles, and equipment. State or local government regulations or administrative policies regulate rate structures in most states in which we conduct ambulance operations. The process of determining rates includes cost reviews, analyses of levels of reimbursement from all sources, and determination of reasonable profits. In certain service areas in which we are the exclusive provider of services, the municipality or fire district sets the rates for emergency ambulance services pursuant to a master contract as well as establishes the rates for general ambulance services that we are permitted to charge.

Applicable federal, state and local laws and regulations are subject to change. We believe that we currently are in substantial compliance with applicable regulatory requirements. These regulatory requirements, however, may require us in the future to increase our capital and operating expenditures in order to maintain current operations or initiate new operations. See “Risk Factors —Certain state and local governments regulate rate structures and limit rates of return,” “— Numerous governmental entities regulate our business,” and “— Health care reforms and cost containment may affect our business” contained in Item 7 of this Report.

Our Current Service Areas

We currently provide our services in approximately 400 communities in the following 24 states

We provide ambulance services in each of these states primarily under the names Rural/Metro Ambulance or Rural/Metro Medical Services, and in New Mexico and certain areas of Arizona under the name Southwest Ambulance, except in Oregon, North Dakota and Wisconsin where we exclusively provide fire protection services. We also operate under other names depending upon local statutes or contractual agreements. We provide fire protection services under the name Rural/Metro Fire Department in 12 states, and also in Oregon under the name Valley Fire Services.

We generally provide our ambulance services pursuant to a contract or certificate of necessity on an exclusive or nonexclusive basis. We provide emergency ambulance services primarily pursuant to contracts or as a result of providing fire protection services. In certain service areas, we are the only provider of both emergency ambulance and non-emergency ambulance services. In other service areas, we compete for non-emergency ambulance contracts.

Medical Transportation Services

Emergency Ambulance Services

We generally provide emergency ambulance response and medical transportation services pursuant to contracts with counties, fire districts, and municipalities. These contracts typically appoint us as the exclusive provider of emergency ambulance services in designated service areas and require us to respond to every emergency medical call in those areas. The level of response to the call is dependent upon the underlying contract. We typically respond to virtually all calls with Advanced Life Support (ALS) ambulance units, unless otherwise specified by contract.

ALS ambulances are staffed with either two paramedics or one paramedic and an emergency medical technician (EMT) and are equipped with ALS equipment (such as cardiac monitors, defibrillators, advanced airway equipment and oxygen delivery systems) as well as pharmaceuticals and medical supplies.

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Upon arrival at an emergency medical call, the ALS crew members deploy portable life support equipment, ascertain the patient’s medical condition, and if required, administer advanced life support techniques and procedures that may include tracheal intubation, cardiac monitoring, defibrillation of cardiac arrhythmias, and the administration of medications and intravenous solutions under the direction of a physician. The crew also may perform Basic Life Support (BLS) services, which include cardiopulmonary resuscitation (CPR), basic airway management, and basic first aid including splinting, spinal immobilization, recording of vital signs and other non-invasive procedures. As soon as medically appropriate, the patient is placed on a portable gurney and transferred into the ambulance. While one crew member monitors and treats the patient, the other crew member drives the ambulance to a hospital designated either by the patient or the applicable medical protocol. While on scene or en route, the ambulance crew alerts the hospital regarding the patient’s medical condition, and if necessary, the attending ambulance crew member seeks advice from an emergency physician as to treatment. Upon arrival at the hospital, the patient generally is taken to the emergency department where care is transferred to the emergency department staff.

Non-Emergency Ambulance Services

We also provide non-emergency ambulance services to patients requiring either advanced or basic levels of medical supervision and treatment during transfer to and from residences, hospitals, long-term care centers, and other health care facilities. These services may be provided when a home-bound patient requires examination or treatment at a health care facility or when a hospital patient requires tests or treatments (such as MRI testing, CAT scans, dialysis, or chemotherapy) at another facility. We utilize ALS or BLS ambulance units to provide non-emergency ambulance services, depending on the patient’s needs and the proximity of available units. We generally staff our BLS ambulance units with two EMTs and equip these units with medical supplies and equipment necessary to administer first aid and basic medical treatment.

We provide ambulance services, critical care transports, and non-medical transportation services pursuant to contracts with non-emergency governmental agencies, health care facilities, or at the request of a patient. Such services may be scheduled in advance or provided on an as-needed basis. Contracts with managed care organizations provide for reimbursement on a per-transport basis or on a capitated basis under which we receive a fixed fee, per person, per month.

Critical Care Transport Services

We provide critical care transport services to medically unstable patients (such as cardiac patients and neonatal patients) who require critical care while being transported between health care facilities. Critical care services differ from ALS services in that the ambulance may be equipped with additional medical equipment and may be staffed by a medical specialist provided by us or by a health care facility to attend to a patient’s special medical needs. Typically, staffing may include the use of critical care trained professional nurses, respiratory therapists and/or neo-natal nurse specialists.

Alternative Transport Services

In addition to ambulance services, we provide non-medical transportation for the handicapped and certain non-ambulatory persons in very limited service areas. Such transportation generally takes place between residences or nursing homes and hospitals or other health care facilities. In providing this service, we typically utilize vans that contain hydraulic wheelchair lifts or ramps.

Disaster Response Teams

Aside from our day-to-day operations, we maintain disaster response teams that are occasionally called upon by the federal government, through the Federal Emergency Management Agency (FEMA), and by state, county and local governments to assist in responding to local or national fire and medical emergencies. For example, at the request of FEMA and the New York State Emergency Management Office, we provided assistance for the efforts in New York City following the September 11, 2001 terrorist attacks on the World Trade Center. In addition, following the September 11, 2001 terrorist attack on the Pentagon, we responded to requests to move patients from area hospitals to outlying facilities thereby clearing hospital beds for more seriously injured patients. We staff these emergencies based upon available resources from our existing pool of employees and equipment around the country, committing resources in a manner that is designed to avoid any interruption of service in our existing service areas.

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Such services are typically paid for and provided on a fee-for-service basis pursuant to contracts with the requesting agency or governmental entity.

Medical Personnel and Quality Assurance

Paramedics and EMTs must be state certified in order to transport patients and to perform emergency care services. Certification as an EMT requires completion of a minimum of 164 hours of training in a program designated by the United States Department of Transportation and supervised by state authorities. EMTs also may complete advanced training courses to become certified to provide certain additional emergency care services, such as administration of intravenous fluids and advanced airway management. In addition to completion of the EMT training program, the certification as a paramedic requires the completion of more than 800 hours of training in advanced patient care assessment, pharmacology, cardiology, and clinical and field skills. Many of the paramedics currently employed by us served as EMTs for us prior to their certification as paramedics. We are subject to nationwide and area-wide shortages of qualified EMTs and paramedics. We compete with hospitals, municipal fire departments and other health care providers for these valued individuals. We have undertaken efforts to minimize the effect of these shortages and have implemented a number of programs to attract and retain a quality workforce.

Local physician advisory boards and medical directors develop medical protocols to be followed by paramedics and EMTs in a service area. In addition, instructions are conveyed on a case-by-case basis through direct communications between the ambulance crew and hospital emergency room physicians during the administration of advanced life support procedures. Both paramedics and EMTs must complete continuing education programs and, in some cases, state supervised refresher training examinations to maintain their certifications. Certification and continuing education requirements for paramedics and EMTs vary among states and counties.

We maintain a commitment to provide high quality pre-hospital emergency medical care. In each location in which we provide services, a medical director, who usually is a physician associated with a hospital we serve, monitors adherence to medical protocol and conducts periodic audits of the care provided. In addition, we hold retrospective care audits with our employees to evaluate compliance with medical and performance standards.

We are members of a number of professional organizations, namely, the American Ambulance Association, National Emergency Number (911) Association, International Association of Fire Chiefs, and National Association of EMS Physicians. In those states where we provide service, we are involved in the state ambulance association, if one exists, and in many instances our involvement includes holding elected positions. In addition, we also are involved in the Commission on Accreditation of Ambulance Services (CAAS), the National Registry of Emergency Medical Technicians, the National Fire Protection Association, and the ASTM International. Also, many of our employees are members of the National Association of EMTs, National Association of EMS Educators and other EMS organizations. We were one of the first ambulance service providers to obtain accreditation for many of our larger ambulance operations from CAAS, a joint program between the American Ambulance Association and the American College of Emergency Physicians. The process is voluntary and evaluates numerous qualitative factors in the delivery of services. We believe municipalities and managed care providers may consider accreditation as one of the criteria in awarding contracts in the future.

Urgent Home Medical Care

Due to the deteriorating economic conditions and continued devaluation of the local currency, we reviewed our strategic alternatives with respect to the continuation of operations in Latin America, primarily in Argentina, and determined that we would benefit from focusing on our domestic operations. Effective September 27, 2002, we sold our Latin American operations to local management. The following describes the type of revenue that is included in the accompanying Consolidated Financial Statements related to our operations in Latin America prior to September 27, 2002.

In Argentina, individual and business customers paid monthly for urgent home medical care and ambulance services. Our personnel conducted telephone triage and prioritized the dispatch of services to subscribers. Mobile services included the dispatch of physicians to the patient in an ambulance for serious, life-threatening situations, or more frequently, in the physician’s car, thus covering a wider scope of services than the traditional U.S. ambulance service model. Doctors and nurses also performed urgent and primary care services for our business customers.

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Fire Protection Services

Fire protection services consist primarily of fire prevention, fire suppression, and first responder medical care. We provide various levels of fire protection services, ranging from fire stations that are fully staffed 24 hours per day to reserve stations. We generally provide our services to municipalities and other governmental bodies pursuant to master contracts funded through the tax base and to residences, commercial establishments, airports and industrial complexes pursuant to subscription fee and other fee-for-service arrangements. Federal and state governments contract with us from time to time to suppress wild fires on government lands.

We have placed fire prevention and education in the forefront of our fire protection services and have developed a comprehensive program to prevent and minimize fires. We believe that effective fire protection requires the intensive training of personnel, the effective utilization of fire equipment, the establishment of effective communication centers for the receipt of emergency calls and the dispatch of equipment and personnel, the establishment and enforcement of strict fire codes, and community educational efforts.

Fire Protection Personnel

Our ability to provide our fire protection services at relatively low costs results from our efficient use of personnel in addition to our fire prevention efforts. Typically, personnel costs represent more than two-thirds of the cost of providing fire protection services. We have been able to reduce our labor costs through a system that utilizes full-time firefighters complemented by paid part-time reservists as well as a modified every other day shift schedule. By using trained reservists on an as-needed basis, we have the ability to supplement full-time firefighters on a cost-effective basis.

All full-time and reserve firefighters undergo extensive training, which exceeds the standards recommended by the National Fire Protection Association (NFPA), and must qualify for state certification before being eligible for full-time employment by us. Because approximately 70% to 80% of our fire response activity consists of emergency medical response, all of our full-time firefighters are trained EMTs or paramedics. Ongoing training includes instruction in new fire service tactics and fire fighting techniques as well as continual physical conditioning.

Each year we respond to an increasing number of specialty rescues. For this reason, in certain of our fire operations we operate a Special Operations Rescue Team (SORT) comprised of firefighters who have advanced training in hazardous materials, water rescue, high and low angle and rope rescue, and confined space rescue.

Fire Response

An alarm typically results in the dispatch of one or more engine companies (each of which consists of an engine and two to four firefighters, including a captain), a fire chief, and such other personnel and equipment as circumstances warrant. The amount of equipment and personnel depends upon the type, location, and severity of the incident. We utilize our dispatch capabilities to reposition equipment and firefighters to maximize the availability and use of resources in a cost-effective manner.

Fire Prevention

We believe that fire prevention programs result in both lower fire loss and significant overall cost savings. Our fire prevention programs include recommendations for and the encouragement of various fire prevention methods, including fire code design, building design to inhibit the spread of fire, the design of automatic fire suppression sprinklers, fire detector and smoke detector installations, the design of monitoring and alarm systems, the placement and inspection of fire hydrants, fire code inspection and enforcement, and the determination of fire cause and origin in arson suspected fires. In addition, our personnel perform community education programs designed to reduce the risk of fire and increase our community profile.

We believe that our long-standing public/private relationship with the City of Scottsdale provides an example of an effective, cost-efficient fire protection program. The Scottsdale program emphasizes our philosophy of fire prevention. With our cooperation and assistance, the City of Scottsdale has designed comprehensive fire prevention measures, including fire codes, inspections, and sprinkler and smoke detector ordinances. We believe that as a result

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of strict fire codes, the enactment of a sprinkler ordinance, and the effectiveness of the services we provide, Scottsdale’s per capita cost for fire protection is lower than for other cities of similar size.

Wild Land Fire Protection Services

We provide disaster response fire protection services when requested by the federal government, through the U.S. Forest Service, and other governmental entities to assist in responding to fire emergencies such as the multiple wild land fires that occurred during the past year in the western United States. We staff these emergencies based upon available resources from our existing pool of employees and equipment around the country, committing resources in a manner that is designed to avoid any interruption of service in our existing service areas. Such services are typically paid for and provided on a fee-for-service basis pursuant to contracts with the requesting agency or governmental entity.

Industrial Fire Protection Services

We provide fire protection services and, on a limited basis, unarmed security services to large industrial complexes, petrochemical plants, power plants, and other self-contained facilities. The combination of fire protection services with security services in large industrial complexes has the potential to provide for greater efficiency and utilization in the delivery of such services and to result in reduced cost to our industrial customers for such services. We have contracts ranging up to three years in duration and expiring at various dates up to October 31, 2005 to provide firefighting and hazardous materials response services at locations in several states. We intend to pursue similar contracts in the future.

Aircraft, Rescue And Fire Fighting Services (ARFF)

We also provide aircraft rescue and firefighting services at a variety of airports throughout the United States, including the FedEx Express airport hub in Memphis, Tennessee, and the international airport in Port Columbus, Ohio. In addition to aircraft rescue and fire fighting services, we also provide structural firefighting and emergency medical response for airport terminals. Our ARFF firefighters, many of whom have extensive military and civilian ARFF experience, have completed comprehensive professional training programs. Our personnel are cross-trained as EMTs or paramedics, as well as in hazardous materials response. Our capabilities include value-added services such as first responder medical service in support of local fire departments for in-terminal medical emergencies, safety training for fuel handlers and other airport personnel, fire prevention activities, and testing and maintenance of fire suppression equipment.

Contracts

We enter into contracts with counties, municipalities, fire districts, and other governmental entities to provide emergency ambulance services in designated service areas. These contracts typically specify maximum fees that we may charge and set forth required criteria, such as response times, staffing levels, types of vehicles and equipment, quality assurance, indemnity and insurance coverage. In certain instances, we are required by contract or by law to post a surety bond or other assurance of financial or performance responsibility. The rates that we may charge under a contract for emergency ambulance services depends largely on patient mix; the nature of services rendered; the local political climate; and the amount of subsidy, if any, that will be considered by a governmental entity to cover costs of uncompensated care. Our four largest ambulance contracts accounted for approximately 17%, 16% and 15% of net revenue during fiscal years 2003 and 2002 and 2001.

We provide fire protection services pursuant to master contracts or on a subscription basis. Master contracts provide for negotiated rates with governmental entities. Certain contracts are performance-based and require us to meet certain dispatch and response times in a certain percentage of responses. These contracts also set maximum thresholds for variances from the performance criteria. These contracts establish the level of service required and may encompass fire prevention and education activities as well as fire suppression. Other contracts are level-of-effort based and require us to provide a certain number of personnel for a certain time period for a particular function, such as fire prevention or fire suppression. We provide fire protection services on a subscription basis in areas where no governmental entity has assumed the financial responsibility for providing fire protection. We derived approximately 47% of our fire protection service revenue from subscriptions in fiscal years 2003 and 2002 and 45% in fiscal year 2001. Fire subscription rates are not currently regulated by any governmental agency in our service areas.

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Our contracts generally extend for terms of two to five years. We attempt to renegotiate contracts in advance of the expiration date and generally have been successful in these renegotiations. From time to time, we may decide that certain contracts are no longer favorable and may seek to modify or terminate these contracts. At any given time, we estimate that we have approximately 125 agreements with counties, fire districts, and municipalities for ambulance services and for fire protection services. The following table sets forth certain information regarding our six largest contracts, based on revenue, during fiscal 2003 with counties, fire districts, and municipalities for ambulance services and for fire protection services.

In addition to the contracts listed above, we were awarded several other contracts under which we began or continued to provide service during fiscal 2003:

Ohio State University Medical Center – We announced a renewal contract on March 31, 2003 for a new, three-year agreement, with one two-year optional renewal, for a maximum term of five years. We have served OSU since 1997.

Loudon County, Tennessee – We were awarded a new contract to serve the emergency ambulance needs of Loudon County, Tennessee, a 229-square-mile community adjacent to Knox County, Tennessee. The one-year-agreement began January 1, 2003.

City of Chandler, Arizona – Our Southwest Ambulance division was awarded a renewal contract to extend our 15-year relationship with the City of Chandler. The three-year contract, which commenced January 1, 2003, includes a three-year optional extension.

Augusta, Georgia – The Augusta Commission unanimously awarded to us an exclusive five-year contract to continue providing emergency ambulance services, which began January 1, 2003.

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Sikorsky Aircraft Corporation, West Palm Beach, Florida – Our industrial fire protection division was awarded a three-year contract to serve the industrial fire protection needs of Sikorsky’s helicopter testing facility in Florida. The contract began November 1, 2002.

McClellen-Palomar Airport, Carlsbad, California – Our aircraft rescue and firefighting division was awarded a five-year contract to serve the aircraft rescue and fire fighting needs of the municipal airport in Carlsbad, California. The contract, which began on October 1, 2002, was won in a competitive bidding process that included the incumbent provider.

Port Columbus International Airport, Columbus, Ohio – Our aircraft rescue and firefighting division was awarded a 17-month extension of its previous five-year contract with the airport for specialty fire and EMS services, which began August 1, 2002 and expires December 31, 2003.

Knox County, Tennessee – The Knox County Commission unanimously awarded to us the exclusive contract to continue providing emergency ambulance services in Knox County (Knoxville) Tennessee. The initial five-year contract includes two, three-year renewal terms, and the contract began August 1, 2002.

City of Rochester, New York – The Rochester City Council unanimously awarded to us an exclusive six-year agreement (four years plus two one-year optional renewal terms) to continue providing emergency ambulance services. The new contract began October 1, 2002.

CITGO Petroleum Corp. – Our specialty fire division was awarded a three-year contract to continue providing fire protection services to CITGO’s Lake Charles, Louisiana, petrochemical refinery. The contract began July 1, 2002

Additionally, we were awarded the following contracts during fiscal year 2003 under which we will begin to provide services or we will continue to provide services under a new contract in fiscal year 2004:

Morristown Municipal Airport, New Jersey – Our aircraft rescue and firefighting division was awarded a three-year contract to continue providing exclusive aircraft rescue and fire fighting services beginning July 1, 2003.

Shelby County (Memphis-area), Tennessee – We were awarded a one-year contract with four one-year renewal terms to continue to provide exclusive ambulance services to Shelby County, Tennessee. The contract began September 1, 2003.

City of Tucson, Arizona – Our Southwest Ambulance division was awarded a one-year contract renewal to continue providing exclusive Basic Life Support ambulance services in conjunction with the Tucson Fire Department which began July 1, 2003. The contract marks the sixth year that Southwest has been providing this service to the citizens of Tucson.

City of Aurora, Colorado – We were awarded an exclusive two-year renewal contract to continue as the emergency ambulance service provider for the City of Aurora. The new agreement was approved June 2, 2003 on a unanimous vote of the Aurora City Council and began July 1, 2003.

Fort Worth, Texas – On a unanimous vote of the Fort Worth Area Metropolitan Ambulance Authority, we were awarded a one-year contract with five one-year renewal terms to continue providing emergency and non-emergency ambulance service in Fort Worth and twelve surrounding communities. The new contract term begins August 1, 2004.

Doña Ana County (Las Cruces area), New Mexico – Our Southwest Ambulance division was awarded an exclusive, four-year contract to provide all emergency and non-emergency medical transportation services within Doña Ana County. The contract began July 1, 2003.

We also enter into contracts with hospitals, nursing homes, and other health care facilities to provide non-emergency and critical care ambulance services. These contracts typically designate us as the preferred provider of non-emergency ambulance services to those facilities and typically permit us to charge a base fee, mileage

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reimbursement, and additional fees for the use of particular medical equipment and supplies. We provide a reduced rate to facilities that assume the responsibility for payment of the charges to the persons receiving services. At any given time, we have approximately 1,000 agreements with counties, fire districts, municipalities, airports, hospitals, health care facilities, nursing homes, and other contracting entities for ambulance services or for fire protection services.

During fiscal years 2000 and 2001, in connection with our domestic EMS restructuring initiative, we renegotiated a number of contracts where the rates, services or market conditions were not conducive to operational profitability. Additionally, we exited certain contracts in connection with the closure or downsizing of financially under-performing service areas, the majority of which solely provided non-emergency services and which could not meet our financial performance criteria on a sustained basis. In each situation where we have closed a service area, our operational teams have endeavored to ensure that an orderly transition occurs with no service interruptions. In many areas, we worked closely with the community, local governmental entities and alternative providers until our departure date, which in some cases extended for a number of months so that the transition could be properly effectuated. We believe that our actions under these circumstances are consistent with our commitment and reputation as a dependable, high-quality service provider. See “Risk Factors — We depend on certain business relationships” contained in Item 7 of this Report.

Counties, fire districts, and municipalities generally award contracts to provide emergency ambulance services either through requests for competitive proposals or bidding processes. In some instances in which we are the existing provider, the county or municipality may elect to renegotiate our existing contract rather than re-bid the contract. We will continue to seek to enter into public/private alliances to compete for new business. For example, during fiscal year 2002, our alliance with the City of San Diego allowed the partnership to bid for and win multi-year contracts to provide emergency ambulance services throughout San Diego and Northern San Diego County.

We market our non-emergency medical transportation services to hospitals, health maintenance organizations, convalescent homes, and other health care facilities that require a stable and reliable source of medical transportation for their patients. We believe that our status as an emergency ambulance service provider in a designated service area increases our visibility and enhances our marketing efforts for non-emergency services in that area. Contracts for non-emergency services usually are based on criteria (such as quality of care, customer service, response time, and cost) similar to those in contracts for emergency services.

We market our fire protection services to subscribers in rural and suburban areas, volunteer staffed fire departments, tax-supported fire districts, and large industrial complexes, petrochemical plants, power plants, and other self-contained facilities. Contract and/or subscription fees are collected annually in advance. In the event that we provide service for a non-subscriber, we directly bill the property owner for the cost of services rendered. We also provide fire protection services to newly developed communities where the subscription fee may be included in the homeowner’s association assessment.

Management Information Systems

We utilize sophisticated management information systems, which we believe enhance the productivity of our existing operations. These systems permit us to achieve efficiencies in the areas of billings, collections, purchasing, finance, cash management, human resources, compliance, informational systems, legal, risk management, and in the utilization of personnel and equipment.

Our centralized systems significantly augment local processes and permit managers to direct their attention primarily to the performance and growth of their operations. Centralized billing and collection procedures provide for more efficient tracking and collection of accounts receivable. Centralized purchasing permits us to achieve discounts in the purchase of medical equipment and supplies. Other centralized infrastructure components such as accounts payable, legal, compliance, human resources and risk management provide the capability to purchase related products and services on a national basis, identify and respond to national trends, and provide internal support and administrative services in a more cost-effective, efficient and consistent manner across all operations. We provide services and allocate costs for these centralized systems pursuant to administrative services agreements with each of our direct and indirect wholly-owned subsidiaries. Accordingly, each subsidiary’s operational management has the ultimate responsibility and decision-making authority for the utilization and direction of these corporate services, so as to best serve the needs of their individual markets.

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We believe our investment in management information systems and our effective use of these systems represent key components of our success. Process and personnel improvements in these areas are continuing. We are committed to further strengthening the productivity and efficiency of our business and believe that our management systems have the capability to support future growth.

Dispatch and Communications

We use system status plans and flexible deployment systems to position our ambulances within a designated service area because effective fleet deployment represents a key factor in reducing response times and efficient use of resources. We analyze data on traffic patterns, demographics, usage frequency, and similar factors with the aid of computers to help us determine optimal ambulance deployment and selection. The center that controls the deployment and dispatch of ambulances in response to calls for ambulance service may be owned and operated either by the applicable county or municipality or by us. Each control center utilizes computer hardware and software and sophisticated communications equipment and maintains responsibility for fleet deployment and utilization 24 hours a day, seven days a week.

Depending on the emergency medical dispatch system used in a designated service area, the public authority that receives 911 emergency medical calls either dispatches our ambulances directly from the public control center or communicates information regarding the location and type of medical emergency to our control center, which in turn dispatches ambulances to the scene. In most service areas, our control center receives the call from the police after the police have determined the call is for emergency medical services. When we receive a 911 call, we dispatch one or more ambulances directly from our control center while the call taker communicates with the caller. All call takers and dispatchers are trained EMTs or Emergency Medical Dispatchers (EMD) with additional training that enables them to instruct a caller on pre-arrival emergency medical procedures, if necessary. In our larger control centers, a computer assists the dispatcher by analyzing a number of factors, such as time of day, ambulance location, and historical traffic patterns, in order to recommend optimal ambulance selection. In all cases, a dispatcher selects and dispatches the ambulance. While the ambulance is en route to the scene, the emergency medical team receives information concerning the patient’s condition prior to arrival at the scene. Also, in various operations across the country, we use AVL (auto vehicle locator) technology in the vehicles to enhance our dispatch system.

In the delivery of emergency ambulance services, our communication systems allow the ambulance crew to communicate directly with the destination hospital to alert hospital medical personnel of the arrival of the patient and the patient’s condition, and to receive instructions directly from emergency department personnel on specific pre-hospital medical treatment. These systems also facilitate close and direct coordination with other emergency service providers, such as the appropriate police and fire departments that also may be responding to a call.

Deployment and dispatch also represent important factors in providing non-emergency ambulance services. We implement system status plans for these services designed to assure appropriate response times to non-emergency calls. We have developed extensive customer service models that enable our communications centers to meet these customer needs. We have established such procedures based on patient condition, specialized equipment needed, and the level of care that will be required by the patient.

We utilize communication centers in our community fire protection activities for the receipt of fire alarms and the dispatch of equipment and personnel that are the same as or similar to those maintained for our ambulance services. Response time represents an important criteria in the effectiveness of fire suppression, which is dependent on the level of protection sought by our customers in terms of fire station spacing, the size of the service area covered, and the amount of equipment and personnel dedicated to fire protection.

Billings and Collections

As described in Note 2 to our consolidated financial statements, we determined that collections on accounts receivable relating to medical transportation revenue, primarily revenue recognized prior to fiscal 2001, were substantially less than originally anticipated and the aggregate amount of provisions for discounts applicable to Medicare, Medicaid and other third-party payers and for doubtful accounts recognized in such prior years were inadequate. The inadequacy of such provisions caused our period-end allowance for doubtful accounts through March 31, 2003 to be understated and our accounts receivable to be overstated. We determined that this situation was

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primarily attributable to inaccurate assumptions utilized in the provision estimation process in use prior to fiscal 2001 as well as in the process utilized to assess the adequacy of the allowance for doubtful accounts through March 31, 2003.

We determined that our consolidated financial statements of prior years required restatement as a result of this matter. The portion of the restatement adjustments relating to discounts applicable to Medicare, Medicaid and other third-party payers has been reflected as a reduction of net revenue in the respective periods while the portion relating to uncollectible accounts has been reflected as an increase or decrease in the provision for doubtful accounts in the respective periods. The after-tax effect of the related restatement adjustments increased our accumulated deficit as of June 30, 2000 by $58.0 million.

We currently maintain 12 domestic regional billing and payment processing centers and a centralized private-pay collection system at our headquarters in Scottsdale, Arizona. Invoices are generated at the regional level, and the account is processed by the centralized collection system for private-pay accounts only if payment is not received in a timely manner. Customer service is directed from each of the regional centers. Substantially all of our revenue is billed and collected through our integrated billing and collection system, except for our operations in Rochester, New York which bills and collects revenue through an independent billing and collections system.

We derive a substantial portion of our ambulance fee collections from reimbursement by third-party payers, including payments under Medicare, Medicaid, and private insurance programs, typically invoicing and collecting payments directly to and from those third-party payers. We also collect payments directly from patients, including payments under deductible and co-insurance provisions and otherwise. The composition of our domestic net ambulance fee collections is as follows:

Our domestic net ambulance fee collections noted above have shifted away from patient payers to Medicare and Medicaid payers. We believe this shift is due, in part, to the following factors:

Companies in the ambulance service industry maintain significant provisions for doubtful accounts compared to companies in other industries. Collection of complete and accurate patient billing information during an emergency service call is sometimes difficult, and incomplete information hinders post-service collection efforts. In addition, it is not possible for us to evaluate the creditworthiness of patients requiring emergency transport services. Our allowance for doubtful accounts generally is higher with respect to revenue derived directly from patients than for revenue derived from third-party payers and generally is higher for transports resulting from emergency ambulance calls than for non-emergency ambulance requests. See “Risk Factors — We depend on reimbursements by third-party payers and individuals” contained in Item 7 of this Report.

We have substantial experience in processing claims to third-party payers and employ a billing staff specifically trained in third-party coverage and reimbursement procedures. Our integrated billing and collection system uses proprietary software to specifically tailor the submission of claims to Medicare, Medicaid, and certain other third-party payers and has the capability to electronically submit claims to the extent third-party payers’ systems permit. Our integrated billing and collection system provides for tracking of accounts receivable and status pending payment,

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which facilitates the utilization of personnel resources to resolve workload distribution. When billing individuals, we sometimes use an automated dialer that pre-selects and dials accounts based on their status within the billing and collection cycle, which we believe enhances the efficiency of the collection staff. The practices and procedures utilized at our non-integrated billing center in Rochester, New York are generally consistent with those in use at our integrated billing centers.

State licensing requirements as well as contracts with counties, municipalities, and health care facilities typically require us to provide ambulance services without regard to a patient’s insurance coverage or ability to pay. As a result, we often receive partial or no compensation for services provided to patients who are not covered by Medicare, Medicaid, or private insurance. The anticipated level of uncompensated care and uncollectible accounts may be considered in determining a government-paid subsidy to provide for uncompensated care, if any, and permitted rates under contracts with a county or municipality.

Insurance and Surety Bonding

Many of our contracts and certain provisions of local law require us to carry specified amounts of insurance coverage. We carry a broad range of comprehensive general liability, automobile, property damage, professional, workers’ compensation, and other liability insurance policies that are renewed annually. As a result of the nature of our services and the day-to-day operation of our vehicle fleet, we are subject to accident, injury and professional claims in the ordinary course of business. We operate in some states that adhere to a gross negligence standard for the delivery of emergency medical care, which potentially lessens our exposure for tort judgments.

Based upon historical claim trends, we consider our insurance program adequate for the protection of our assets and operations. Our insurance policies are either occurrence or claims-made policies and are subject to certain deductibles and self-insured retention limits. The coverage limits of our policies may not be sufficient, we may experience claims within our deductibles or self-insured retentions in amounts greater than anticipated, or our insurers may experience financial difficulties that would require us to pay unanticipated claims. In addition, insurance may not continue to be available on commercially reasonable terms. A successful claim or claims against us in excess of our insurance coverage, or claims within our deductibles or self insured retentions in amounts greater than anticipated, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Claims against us, regardless of their merit or outcome, also may have an adverse effect on our reputation. We have attempted to minimize our claims exposure by instituting process improvements and increasing the utilization of experts in connection with our legal, risk management and safety programs. One such safety program is our Driver Development Program (DDP). DDP uses the Coaching Emergency Vehicle Operator or CEVO program, which is sponsored by the National Safety Council (NSC) and is nationally recognized as drivers’ training for emergency services vehicle operators. The program consists of training in the classroom as well as field training, and the curriculum includes, among other topics, instruction related to staging, proper inspection of the vehicles and driving in emergency settings. We modified and enhanced CEVO based on our analysis of over ten years of vehicle incidents as well as drivers’ experiences. We began developing the program in December 2002 and began training in July 2003. We have also partnered with NSC to develop policies related to patient lifting and moving. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.

Counties, municipalities, and fire districts sometimes require us to provide a surety bond or other assurance of financial and performance responsibility. We may also be required by law to post a surety bond as a prerequisite to obtaining and maintaining a license to operate. As a result, we have a portfolio of surety bonds that is renewed annually.

Employees

At October 3, 2003, we employed approximately 5,700 full-time and 3,300 part-time employees, including approximately 5,300 involved in ambulance services, 1,000 in fire protection services, 300 in integrated ambulance and fire protection services, 150 in urgent home medical care, 500 in dispatch/communications, 200 in alternative transportation services (ATS), and 1,600 in management, administrative, clerical and billing activities. Of these employees, approximately 2,000 are paramedics and 3,100 are EMTs. We are party to collective bargaining agreements relating to certain of our paramedics and EMTs in Rochester, New York; Buffalo, New York; Corning, New York; Youngstown, Ohio; San Diego, California; Gadsden, Alabama; Knoxville, Tennessee; and Seattle,

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Washington. We also have collective bargaining agreements in place for certain of our Maricopa County, Arizona, Integrated Fire employees; and certain of our ambulance services employees in Arizona. We consider our relations with employees to be good.

Strategy

Our strategy is to continue strengthening our existing core businesses and to continue building upon our economies of scale, while providing the most proficient levels of medical transportation and related services possible for the customers and communities we serve. Over the past year, our efforts to strengthen our business have been primarily focused on (i) sustaining and enhancing positive cash performance, (ii) improving the quality and collection of medical transportation service revenue, (iii) reducing bad debt expense, and (iv) growth through same-service area expansion and targeted new opportunities. Throughout fiscal 2003, we also focused on the continuing implementation of programs designed to maximize and expedite reimbursement for our medical transportation services. Our business strategy for fiscal year 2004 includes continued emphasis on these focal points supplemented by our long-standing commitment to delivering high-quality, efficient and cost-effective services to our patients and customers.

Cash Performance

We focused extensively throughout fiscal 2003 on further enhancing cash performance. Initiatives undertaken related specifically to maximizing and accelerating reimbursement for our services, which drives positive cash-flow trending. New and ongoing programs target improvements to our field documentation procedures and pre-screening non-emergency medical transportation requests to ensure patients’ conditions meet medical necessity standards.

Revenue Quality and Collection

Our objective to improve the quality of our revenue is related directly to cash performance and effective collection efforts. Throughout fiscal year 2003, we have continued to devote significant effort to negotiating enhanced rates on continuing medical transportation contracts. We have also intensified and refined our systems in order to maximize collection percentages and minimize the number of days revenue is outstanding from the time we provide service to the time we are paid.

Reducing Bad Debt Expense

In fiscal 2003, we continued to streamline our overall ambulance billing processes and to improve our related performance. Improvements in fiscal 2003 included programs designed to expedite the timely filing of ambulance claims and to create added controls over the day-to-day flow of aging claims. Additionally, significant attention was placed during fiscal 2003 on improving our return on certain Medicare accounts that become difficult to collect. We also placed a high priority on submitting ambulance claims electronically in order to expedite payment and maximize the efficiencies afforded by such systems.

Growth

A key element of our internal growth strategy is to extend our reach in existing service areas. We believe a variety of opportunities are available in proven service areas with good payer mixes to create new growth. This type of growth is primarily targeted to non-emergency medical transportation services among hospitals, health-care centers, nursing homes, rehabilitation centers, and other related health-care entities. Additionally, we achieve same-service-area revenue growth through increases in rates and the addition of subsidies provided in locations where uncompensated care is on the rise. As a result of our efforts in fiscal year 2003, we achieved 5.9% improvement in same-service area growth over fiscal year 2002 levels. We are encouraged by these results and will remain focused on same-service-area opportunities in fiscal year 2004. We also seek to maximize return on our investments in EMS operations by increasing utilization of ambulances through a balanced growth of both emergency and non-emergency medical transportation services.

We also have pursued highly selective new growth opportunities in fiscal year 2003. We evaluate new growth opportunities based on a number of criteria, including geographic proximity to existing regional operations, payer mix, medical transportation demands, competitive profiles, and demographic trends. We believe that by targeting

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specific locations, we can identify and pursue profitable new growth. For example, our Southwest Ambulance division targeted an opportunity that emerged in the spring of 2003 in Doña Ana County, New Mexico, which includes the City of Las Cruces and its surrounding areas. Southwest Ambulance bid for and was awarded the contract to provide all emergency and non-emergency medical transportation services within Doña Ana County during the third quarter of fiscal 2003, unseating the incumbent provider. On a smaller scale, our Southeast EMS Group secured a new emergency ambulance service contract in Loudon County, Tennessee, which is adjacent to our large base of operations in Knox County. We will continue to evaluate selective opportunities for new growth in the future.

We will market our emergency ambulance services through the pursuit of new contracts and alliances with municipalities, other governmental entities, hospital-based emergency providers, and fire districts. Based on our successful public/private alliance with the City of San Diego, our ambulance service contract in Aurora, Colorado, and contracts with numerous Arizona municipalities, we believe that contracting may provide a cost-effective approach to expansion into certain existing and new service areas. We believe that our strategic public/private alliances can provide operating economies, coordination of the delivery of services, efficiencies in the use of personnel and equipment, and enhanced levels of service, while saving taxpayer dollars. We will continue to seek such mutually beneficial public/private alliances and municipal contracts in existing and, to a limited extent, new service areas.

ITEM 2. Properties

Facilities and Equipment

We lease our principal executive offices in Scottsdale, Arizona. In those areas where we provide ambulance and fire services, we also lease facilities at which we base and maintain ambulances and fire apparatus. We also own 14 facilities within our service areas. Rental expense totaled $11.5 million, $11.5 million, and $12.1 million in fiscal 2003, 2002 and 2001, respectively. At October 3, 2003, our fleet included approximately 1,350 owned and 225 leased ambulances and alternative transportation vehicles, 120 owned and 30 leased fire vehicles, and 250 owned and 20 leased other vehicles. We use a combination of in-house and outsourced maintenance services to maintain our fleet, depending on the size of the market and the availability of quality outside maintenance services.

ITEM 3. Legal Proceedings

From time to time, we are subject to litigation and regulatory investigations arising in the ordinary course of business. We believe that the resolution of currently pending litigation and regulatory investigations will not have a material adverse effect on our business, financial condition, results of operations and cash flows. However, we are unable to predict with certainty the outcome of such matters. In some pending cases, our insurance coverage may not be adequate to cover all liabilities in excess of our deductible or self-insured retention arising out of such claims. In addition, due to the nature of our business, CMS and other regulatory agencies are expected to continue their practice of performing periodic reviews and initiating investigations related to our compliance with billing regulations. Unfavorable resolutions of pending or future litigation, regulatory reviews and/or investigations, either individually or in the aggregate, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Haskell v. Rural/Metro Corporation, et al. and Ruble v. Rural/Metro Corporation

We, Warren S. Rustand, our former Chairman of the Board and Chief Executive Officer, James H. Bolin, our former Vice Chairman of the Board, and Robert E. Ramsey, Jr., our former Executive Vice President and former Director, were named as defendants in two purported class action lawsuits: HASKELL V. RURAL/METRO CORPORATION, ET AL., Civil Action No. C-328448 filed on August 25, 1998 in Pima County, Arizona Superior Court and RUBLE V. RURAL/METRO CORPORATION, ET AL., CIV 98-413-TUC-JMR filed on September 2, 1998 in United States District Court for the District of Arizona. The two lawsuits, which contained virtually identical allegations, were brought on behalf of a class of persons who purchased our publicly traded securities including our common stock between April 24, 1997 and June 11, 1998. Haskell v. Rural/Metro sought unspecified damages under the Arizona Securities Act, the Arizona Consumer Fraud Act, and under Arizona common law fraud, and also sought punitive damages, a constructive trust, and other injunctive relief. Ruble v. Rural/Metro sought unspecified damages under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. The complaints in both actions

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alleged that between April 24, 1997 and June 11, 1998 the defendants issued certain false and misleading statements regarding certain aspects of our financial status and that these statements allegedly caused our common stock to be traded at artificially inflated prices. The complaints also alleged that Mr. Bolin and Mr. Ramsey sold stock during this period, allegedly taking advantage of inside information that the stock prices were artificially inflated.

On April 17, 2003, we and the individual defendants agreed to settle the Ruble v. Rural/Metro and Haskell v. Rural/Metro cases with plaintiffs, subject to notice to the class and final court approval. Our primary and excess directors and officers insurance carriers funded the settlement on June 5, 2003 by depositing the funds in a designated escrow account and waived any claims for reimbursement of the funds subject to final court approval of the class action settlement. On August 20, 2003, the plaintiffs submitted an application for preliminary approval of the class action settlement. On September 3, 2003, the court signed an order granting preliminary approval of the stipulated settlement and set forth a schedule for the events required for final settlement approval, including notice to the class, requests for exclusion, written objections and responses. The hearing for consideration of the final settlement agreement is scheduled for December 9, 2003.

In the settlement agreement, we and the individual defendants expressly denied all charges of liability or wrongdoing and continued to assert that at all relevant times we and the individual defendants acted in good faith and in a manner they reasonably believed to be in the best interests of us and our stockholders.

Springborn et al. v. Rural/Metro Corporation, et al.

We, Arthur Andersen LLP, Cor Clement and Jane Doe Clement, Randall L. Harmsen and Jane Doe Harmsen, Warren S. Rustand and Jane Doe Rustand, James H. Bolin and Jane Doe Bolin, Jack E. Brucker and Jane Doe Brucker, Robert B. Hillier and Jane Doe Hillier, John S. Banas III and Jane Doe Banas, Louis G. Jekel and Karen Whitmer, Mary Anne Carpenter and John Doe Carpenter, William C. Turner and Jane Doe Turner, Henry G. Walker and Jane Doe Walker, Louis A. Witzeman and Jane Doe Witzeman, John Furman and Jane Doe Furman, and Mark Liebner and Jane Doe Liebner were named as defendants in a purported class action lawsuit: STEVEN A. SPRINGBORN V. RURAL/METRO CORPORATION, ET AL., Civil Action No. CV 2002-019020 filed on September 30, 2002 in Maricopa County, Arizona Superior Court. The lawsuit was brought on behalf of employee firefighters in Maricopa County who participated in our Employee Stock Ownership Plan (“ESOP”), Employee Stock Purchase Plan (“ESPP”) and/or Retirement Savings Value Plan (“401(k) Plan”), collectively, the “Plans.” The action purports to cover a class period of July 1, 1996 through June 30, 2001. The plaintiffs amended the Complaint on October 17, 2002 adding Barry Landon and Jane Doe Landon as defendants and making certain additional allegations and claims. The primary allegations of the complaint included violations of various state and federal securities laws, breach of contract, common law fraud, and mismanagement of the Plans. The plaintiffs sought unspecified compensatory and punitive damages.

On October 30, 2002, defendant Arthur Andersen LLP removed the action to the United States District Court, District of Arizona, CIV-02-2183-PHX-JWS. We and the individual defendants consented to this removal. On February 21, 2003, we and our current directors and officers moved to dismiss the amended complaint, and our former directors and officers subsequently joined in this motion.

On July 29, 2003, the court granted the motion to dismiss, which disposed of all claims against us and our current and former officers and directors. On August 28, 2003, plaintiffs filed a notice of appeal from the court’s July 29, 2003 order to the Ninth Circuit. The court has yet to consider and rule upon defendant Arthur Andersen’s motion to dismiss.

Legion Insurance Company and Reliance Insurance Company

With regard to certain issues relating to the liquidation of Legion Insurance Company (Legion) and Reliance Insurance Company (Reliance) that are being litigated before the Commonwealth Court of Pennsylvania, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for additional information.

ITEM 4. Submission of Matters to a Vote of Security Holders

Not applicable.

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PART II

ITEM 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

Our common stock trades on the Nasdaq SmallCap Market pursuant to a conditional listing under the symbol RUREC. If we meet the requirements associated with our conditional listing upon filing of this Report on Form 10-K and meet the requirements for continued listing, then we will resume trading on the Nasdaq SmallCap Market under the symbol RURL. See “Risk Factors — We may be delisted from the Nasdaq SmallCap Market.”

The following table sets forth the high and low sale prices of the common stock for the fiscal quarters indicated.

On October 3, 2003, the closing sale price of our common stock was $1.40 per share. On October 3, 2003, there were approximately 1,015 holders of record of our common stock.

Dividend Policy

We have never paid any cash dividends on our common stock. We currently plan to retain earnings, if any, for use in our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations and capital requirements as well as other factors deemed relevant by our Board of Directors. Our Senior Notes, 2003 Amended Credit Facility, and Series B and Series C redeemable preferred stock contain restrictions on our ability to pay cash dividends, and future borrowings may contain similar restrictions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” contained in Item 7 of this Report.

ITEM 6. Selected Financial Data

The following selected financial data for fiscal years 2003, 2002 and 2001 has been derived from our audited consolidated financial statements and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes appearing elsewhere in this Report. The selected financial data set forth for fiscal years 1999 and 2000 has been derived from our unaudited consolidated financial statements.

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Accounts Receivable: As described in Note 2 to our consolidated financial statements, we determined that collections on accounts receivable relating to medical transportation revenue, primarily revenue recognized prior to fiscal 2001, were substantially less than originally anticipated and the aggregate amounts of provisions for discounts applicable to Medicare, Medicaid and other third-party payers and for doubtful accounts recognized in such prior years were inadequate. The inadequacy of such provisions caused our period-end allowance for doubtful accounts through March 31, 2003 to be understated and our accounts receivable to be overstated. We determined that this situation was primarily attributable to inaccurate assumptions utilized in the provision estimation process in use prior to fiscal 2001 as well as in the process utilized to assess the adequacy of the allowance for doubtful accounts through March 31, 2003.

We determined that our consolidated financial statements for years prior to 2003 required restatement as a result of this matter. The portion of the restatement adjustments relating to discounts applicable to Medicare, Medicaid and other third-party payers has been reflected as a reduction of net revenue in the respective periods while the portion relating to uncollectible accounts has been reflected as an adjustment to the provision for doubtful accounts in the respective periods. The after-tax effect of the related restatement adjustments increased our accumulated deficit as of June 30, 1998 by $60.0 million.

Enrollment Fees: We charge an enrollment fee for new subscribers under our fire protection service contracts. We previously recognized these enrollment fees at the time of billing but have subsequently determined that such fees should be deferred and recognized over the estimated customer relationship period of nine years.

We determined that our consolidated financial statements for years prior to 2003 required restatement as a result of this matter. The after-tax effect of the related restatement adjustments increased our deferred revenue and accumulated deficit as of June 30, 1998 by $1.3 million. The effect of the restatement adjustments on our operating income (loss) in fiscal 2002, 2001, 2000 and 1999 was immaterial.

San Diego Medical Services Enterprises, LLC: During the fourth quarter of fiscal 2003, we adopted Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51” (FIN 46). FIN 46 requires that variable interest entities or VIEs be consolidated by the primary beneficiary, as that term is defined in FIN 46. We determined that our investment in San Diego Medical Services Enterprise, LLC (SDMSE), the entity formed with respect to our public/private alliance with the City of San Diego, meets the definition of a VIE and that we are the primary beneficiary. Accordingly, our investment in SDMSE should be consolidated under FIN 46. We had previously accounted for our investment in SDMSE using the equity method. While consolidation of SDMSE did not impact our

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previously reported net income (loss) or stockholders deficit, our consolidated financial statements of prior periods have been restated for comparative purposes as allowed by FIN 46.

A summary of the statement of operations and balance sheet data impacted by the restatement adjustments is provided on the following page. Our historical cash flow data was not impacted by the restatements. See Note 2, Restatement of Consolidated Financial Statements in our consolidated financial statements included elsewhere in this report.

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Restatement Adjustments:

A—To adjust provisions for discounts applicable to Medicare, Medicaid and other third-party payers and doubtful accounts.

B—To defer enrollment fees relating to new fire protection service contracts.

C—Adoption of FIN 46 and related consolidation of investment in San Diego Medical Services Enterprises LLC.

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