UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 9, 2006
REHABCARE GROUP, INC.
(Exact name of Company as specified in its charter)
| Delaware | 0-19294 | 51-0265872 | |
| (State or other jurisdiction | (Commission | (I.R.S. Employer | |
| of incorporation) | File Number) | Identification No.) |
| | | | | | | | | | | |
| 7733 Forsyth Boulevard | |
| Suite 2300 | |
| St. Louis, Missouri | 63105 | |
(Address of principal executive offices) | (Zip Code) |
| | | | | | | | |
(314) 863-7422
(Company's telephone number, including area code)
Not applicable
(Former name or former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 | Regulation FD Disclosure |
Beginning on May 9, 2006, RehabCare executives will make presentations at investor conferences to analysts and in other forums using the slides as included in this Form 8-K as Exhibit 99. Presentations will be made using these slides, or modifications thereof, in connection with other presentations in the foreseeable future.
Information contained in this presentation is an overview and intended to be considered in the context of RehabCare's SEC filings and all other publicly disclosed information. We undertake no duty or obligation to update or revise this information. However, we may update the presentation periodically in a Form 8-K filing.
Forward-looking statements have been provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties may include but are not limited to, our ability to consummate acquisitions and other partnering relationships at reasonable valuations; our ability to integrate recent and pending acquisitions and partnering relationships within the expected timeframes and to achieve the revenue, earnings and cost savings levels from such acquisitions and relationships at or above the levels projected; changes in governmental reimbursement rates and other regulations or policies affecting the services provided by us to clients and/or patients; the operational, administrative and financial effect of our compliance with other governmental regulations and applicable licensing and certification requirements; our ability to attract new client relationships or to retain and grow existing client relationships through expansion of our hospital rehabilitation and contract therapy service offerings and the development of alternative product offerings; the future financial results of our unconsolidated affiliates; the adequacy and effectiveness of our operating and administrative systems; our ability to attract and the additional costs of attracting and retaining administrative, operational and professional employees; shortages of qualified therapists and other healthcare personnel; significant increases in health, workers compensation and professional and general liability costs; litigation risks of our past and future business, including our ability to predict the ultimate costs and liabilities or the disruption of our operations; competitive and regulatory effects on pricing and margins; our ability to effectively respond to fluctuations in our census levels and number of patient visits; the proper functioning of our information systems; natural disasters and other unexpected events which could severely damage or interrupt our systems and operations; and general and economic conditions, including efforts by governmental reimbursement programs, insurers, healthcare providers and others to contain healthcare costs.
Item 9.01 | Financial Statements and Exhibits. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: May 9, 2006
By: /s/ Jay W. Shreiner
Name: Jay W. Shreiner
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
99 | Investor Relations Presentation in use beginning May 9, 2006. |
Exhibit 99
Investor Presentation
First Quarter, 2006
0
Safe Harbor
Forward-looking statements have been provided pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown
risks and uncertainties that may cause our actual results in future periods to differ materially from
forecasted results. These risks and uncertainties may include but are not limited to, our ability to
consummate acquisitions and other partnering relationships at reasonable valuations; our ability to
integrate recent and pending acquisitions and partnering relationships within the expected timeframes
and to achieve the revenue, earnings and cost savings levels from such acquisitions and relationships
at or above the levels projected; changes in governmental reimbursement rates and other regulations
or policies affecting the services provided by us to clients and/or patients; the operational,
administrative and financial effect of our compliance with other governmental regulations and
applicable licensing and certification requirements; our ability to attract new client relationships or to
retain and grow existing client relationships through expansion of our hospital rehabilitation and
contract therapy service offerings and the development of alternative product offerings; the future
financial results of our unconsolidated affiliates; the adequacy and effectiveness of our operating and
administrative systems; our ability to attract and the additional costs of attracting and retaining
administrative, operational and professional employees; shortages of qualified therapists and other
healthcare personnel; significant increases in health, workers compensation and professional and
general liability costs; litigation risks of our past and future business, including our ability to predict
the ultimate costs and liabilities or the disruption of our operations; competitive and regulatory effects
on pricing and margins; our ability to effectively respond to fluctuations in our census levels and
number of patient visits; the proper functioning of our information systems; natural disasters and
other unexpected events which could severely damage or interrupt our systems and operations; and
general and economic conditions, including efforts by governmental reimbursement programs,
insurers, healthcare providers and others to contain healthcare costs.
1
RehabCare, primarily in partnership with hospitals and nursing homes,
provides post-acute program management, medical direction, physical
rehabilitation, quality assurance, specialty programs and community relations
at more than 940 locations treating approximately 14,000 patients each day
Hospital-Based Rehabilitation Programs
118 Acute Rehabilitation Units (ARUs) – 54,000 inpatient discharges in FY05
17 Subacute/Transitional Care Units (TCUs)
42 Outpatient Rehabilitation Programs (OP) – 1.1 million outpatient visits FY05
Skilled Nursing Facility-Based Rehabilitation Programs
764 Programs – 4.5 million SNF patient visits FY05
Freestanding Facilities
4 Acute Rehab Hospitals*
2 Long Term Acute Care Hospitals
Previously Announced
Midland - 38-bed Freestanding Rehab Hospital – anticipated close 7/1/06
Amarillo – 44-bed Rehab Hospital – anticipated opening 3Q/06
New Orleans – 44-bed Long Term Acute Care Hospital – anticipated close 6/1/06
Overview
*Includes Howard Regional Specialty Care, LLC, Kokomo, IN, which is 40% owned by RehabCare
2
RehabCare’s vision is to provide a clinically-integrated post acute
continuum of care, resulting in patients regaining their lives
RehabCare’s Patient-Focused
Approach
3
Information Technology & Management
To support continuum of care, RHB has developed a
single-technology platform
RHB PDA based clinical system
Patient-centric view, episodic data capture by clinical setting
Care management system, with total plan of care discharge
planning and management tool
Clinical and financial outcomes management tools
Manage staff and patients across continuum
Wireless Connectivity will allow 2-way real time communication
at point of service
Clinical pathways decision support
Patient protocols
Real time expertise available: clinical, technical, operational
Developed tools to manage 75% rule
MeadowBrook Hospital systems will be utilized for new
freestanding hospitals (Arlington, Amarillo, etc.)
4
Recruiting and retaining therapists are key to our
success
89% annualized retention rate for full-time and part-
time clinicians compared to 85% in 2005
Recruiting and Retention
9% improvement sequentially in
average time to fill an opening
from 45 days to 42 days
Approximately 47% of open
positions are due to new program
openings or same store growth
Campus relations initiative
resulted in 55 hires YTD from
targeted schools
Follow on FuturePoint Summit
with University of Missouri School
of Health Professions scheduled
June 2006
5
Expanding Continuum to 55 Markets
Began with 5 markets 18 months ago
Therapist retention significantly better than the company
average
Staff working across all venues: ARU, OP, SNF & HH
Accelerated growth in four out of five markets
50 Additional Markets
Geographic areas covering majority of existing business
Greater disposition for patients moving through continuum
Access to additional therapists will improve quality of
patient care
Competitive advantage when securing new business
More clinical data to study and develop better outcomes
6
North Kansas City Hospital, North Kansas City,
MO and Liberty Hospital, Liberty, MO
Currently operating 1 ARU at North Kansas City
Hospital
35-bed LTACH currently under development
OSF Saint Francis Medical Center and
Methodist Medical Center of Illinois, Peoria, IL
In the process of applying for a certificate of need
for the construction of an LTACH
14 non-binding joint venture letters of intent
Symphony Health Services
Joint ventures help us create longer term relationships and
enhance market presence
Joint Venture/Acquisitions
7
Transaction Summary
Announced definitive agreement on May 3 to acquire Symphony and its
subsidiaries, RehabWorks, VTA Management Services, and Polaris Group
$101.5 million in cash with no assumption of debt; expected to yield $15 million
NPV tax benefit
Not dilutive in second half 2006
Will harvest $8-12 million in annualized synergies over next 24 months
Subsidiaries
RehabWorks provides physical therapy, occupational therapy, speech-
language pathology, wellness/fitness and short-term staffing services to over
500 facilities
VTA Management Services provides contract therapists and nurses to 1,000
school districts in New York State
Polaris Group provides strategic consulting services focused on the skilled
nursing market drawing from the expertise of its consultants and over
1,500,000 days of patient benchmarking data
Symphony Health Services Acquisition
8
Symphony Health Services Acquisition
Strategic Rationale
Accelerates market based strategy of providing post-acute continuums of
care in key geographic markets
Combines nationwide provider of rehab services in hospitals with leading
provider of rehab services in skilled nursing facilities
Creates efficiencies and economies of scale
Powerful Combined Entity
Services more than 24,000 patient visits per day in more than 1,400 facilities
15,000 employees (more than 11,000 therapists) in 42 states, the District of
Columbia and Puerto Rico
Combined 2005 revenues approaching $700 million
Next Steps
Following FTC and DOJ clearance, anticipated to close on or about June 30
President and CEO of Symphony to head up integration team during
transition to harvest short-term synergies
Continued focus on growing all divisions
9
Expanding Geographic Markets
Represents overlap markets
Represents RehabCare only markets
8 states with significant Symphony
locations
38% of markets overlap
10
2005 Revenues Comparison
RehabCare and Symphony
RehabCare 2005 Total Revenue
$454.3 million
Hospital-Based
Rehabilitation Programs
(HRS Division)
$189.9M
SNF-Based
Rehabilitation Programs
(Contract Therapy Division)
$232.2M
Healthcare
Consulting
(Phase 2)
$10.5M
Freestanding Hospitals
$21.7M
2%
Symphony 2005 Total Revenue
$233.4 million
SNF-Based
Rehabilitation Programs
(RehabWorks)
$197.5M
Therapy Assistance
and Staffing
(VTA)
$32.2M
Healthcare
Consulting
(Polaris)
$3.7M
14%
2%
84%
42%
51%
5%
11
RHB/Symphony Combined 2005 Revenues
Hospital-Based
Rehabilitation
Programs
$189.9M
SNF-Based
Rehabilitation Programs
$429.7M
Total Revenue $687.7 million
Healthcare
Consulting
$14.2M
3%
28%
62%
Freestanding
Hospitals
$21.7M
2%
Therapy Assistance and Staffing
$32.2M
5%
12
Strong cash flows from operations - $36.3 million
TTM
$24.2 million in cash at 3/31/06
$6.4 million in subordinated debt related to
acquisitions at 3/31/06
$90 million credit facility; expandable to $125 million
In conjunction with acquisition of Symphony, recently
negotiated commitment to expand senior credit facility
to $150 million
Access To Capital
13
Hospital-Based
Rehabilitation Programs
(HRS Division)
$46.4M
SNF-Based
Rehabilitation Programs
(Contract Therapy Division)
$57.4M
Total Revenue $121.7 million
Healthcare Consulting
$2.7M
2%
38%
47%
Freestanding Hospitals
$15.2M
12%
RHB Revenues 1Q/06
14
Successfully managing the 75% rule
Q1 YOY same store ARU discharges increased 0.2%
Compares favorably with previously reported estimated industry
impact
1.5% YOY increase in same store external admissions
As of March 31, our units, on average, were at the 63% level of
compliance
114 of our 118 units have entered the 60% compliance period as of
March 31
Remaining 4 will transition to the 60% compliance period between
March 31 and June 30
One-year freeze at 60% through June 30, 2007
Expect 1-3% decline in YOY same store discharge for FY 2006
Number of Programs
Operating Margin*
Revenue (Millions)
17
26
Subacute/Transitional Care Units
42
41
Outpatient Rehabilitation Programs
8
16
HRS Backlog
4
12
HRS Signings
118
115
Acute Rehab Units
Q1/06
Q1/05
Hospital-Based
Rehabilitation Programs
*Q4/05 Includes $4.2 VitalCare impairment charge
Expect 184 HRS programs at 12/31/06 – net addition of 5 units
15
Operating Margin*
Number of
Programs
Revenue (Millions)
Revenue
Total programs 764 (Q1/06) vs. 716 (Q1/05)
Same store revenue growth year-over-year of 1.2%
New pricing strategy to re-coup increased labor costs
Operating Earnings
Manage variable cost
Continued division SG&A leverage
Challenges
Client retention
Part B therapy caps
Moratorium lifted 1/1/06
Auto exception process communicated mid-February 2006
Educating clients, therapists and patients on exception process
Negative impact on Q1 Part B revenue in January and February;
recovery began with communication of exception process
Subsequently, have seen 85% recovery in same store Part B
revenues
Believe on track to return to pre-cap same store revenue, and
operating margin levels by end of Q2
Skilled Nursing Facility-Based
Rehabilitation Programs
16
Revenues and Operating Earnings
$15.2 revenues 1Q/06
$300,000 operating losses
Sequential improvement
Challenges
Re-establish patient referral networks
Stabilize patient census, medical director/staff
recruitment campaign
Strengthen physician relationships, physician
recruitment strategy
Final LTACH rule issued May 2, 2006; no significant
impact expected on current LTACH business
Freestanding Hospitals
17
$(0.03)(2)
$(1.89)(1)
$0.26
$0.32
$0.29
EPS (fully diluted)
$3.9
$3.5
$10.9
$9.8
$9.0
Operating Earnings
(millions)
$121.7
$123.4
$120.0
$108.4
$102.4
Revenue
(millions)
Q1/06
Q4/05
Q3/05
Q2/05
Q1/05
GAAP
(1) Includes VitalCare impairment charge of $4.2 million equal to $2.15 per diluted share after tax
(2) Includes $0.5 million pretax stock-based compensation expense equal to $0.02 per diluted share
Quarterly Update
InteliStaf equity loss included in results
$0.17
$2.00
$0.12
$0.02
$0.02
Impact on diluted
EPS
$2.8
$33.7
$2.0
$0.3
$0.4
Equity in net loss of
InteliStaf (millions)
18
Challenges
Integration of Symphony
Continued 75% rule implementation
Managing growth in tight labor market
Client retention (Hospital-Based and Skilled Nursing-Based)
Startup and integration of JVs and acquisitions
Part B Therapy Caps
Opportunities
Symphony
New Skilled Nursing-Based, Hospital-Based and Freestanding Hospital
business growth
Development of joint venture relationships
Acquisitions
Maturity of continuum of care strategy
RehabCare Summary
19
Investor Presentation
First Quarter, 2006
20
