SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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Commission File Number 0-19294
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REHABCARE GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 51-0265872
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
7733 Forsyth Boulevard, Suite 1700, St. Louis, MO 63105
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(Address of principal executive offices and zip code)
314-863-7422
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(Registrant's telephone number, including area code)
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 the number of shares outstanding of the Registrant's common stock, as
of the latest practicable date.
Class Outstanding at August 7, 2001
- -------------------------------------- ------------------------------
Common Stock, par value $.01 per share 17,258,159
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REHABCARE GROUP, INC.
Index
Part I. - Financial Information
Item 1. - Condensed Consolidated Financial Statements
Condensed consolidated balance sheets,
June 30, 2001 (unaudited) and December 31, 2000 3
Condensed consolidated statements of earnings for the three
months and six months ended June 30, 2001 and 2000 (unaudited) 4
Condensed consolidated statements of cash flows for the
six months ended June 30, 2001 and 2000(unaudited) 5
Notes to condensed consolidated financial statements (unaudited) 6
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. - Other Information
Item 6. - Exhibits and Reports on Form 8-K 13
Signatures 14
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PART 1. - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
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REHABCARE GROUP, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
June 30, December 31,
2001 2000
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Assets: (unaudited)
Current assets:
Cash and cash equivalents $ 5,402 7,942
Marketable securities, available-for-sale 3,025 3,025
Accounts receivable, net of allowance for doubtful
accounts of $6,453 and $5,347, respectively 93,306 84,033
Income taxes receivable 2,939 3,672
Deferred tax assets 6,069 4,872
Prepaid expenses and other current assets 1,239 1,158
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Total current assets 111,980 104,702
Marketable securities, trading 2,678 2,383
Equipment and leasehold improvements, net 14,955 12,427
Excess of cost over net assets acquired, net 103,094 104,782
Other 4,975 4,799
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$237,682 229,093
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Liabilities and Stockholders' Equity:
Current liabilities:
Current portion of long-term debt $ 2,618 2,868
Accounts payable 1,704 2,790
Accrued salaries and wages 26,536 24,846
Accrued expenses 8,031 10,012
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Total current liabilities 38,889 40,516
Deferred compensation and other long-term
liabilities 3,034 2,679
Deferred tax liabilities 2,654 2,504
Long-term debt, less current portion 1,634 65,434
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Total liabilities 46,211 111,133
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Stockholders' equity:
Preferred stock, $.10 par value,
10,000,000 shares, none issued and outstanding -- --
Common stock, $.01 par value; authorized 60,000,000
shares, issued 19,526,319 and 17,409,584 shares,
respectively 195 174
Additional paid-in capital 107,983 49,503
Retained earnings 101,032 86,022
Less common stock held in treasury at cost,
2,302,898 shares (17,757) (17,757)
Accumulated other comprehensive earnings 18 18
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Total stockholders' equity 191,471 117,960
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$237,682 229,093
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See accompanying notes to condensed consolidated financial statements.
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REHABCARE GROUP, INC.
Condensed Consolidated Statements of Earnings
(dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
---- ---- ---- ----
Operating revenues $ 136,871 107,721 267,595 213,654
Costs and expenses:
Operating expenses 97,225 76,621 190,258 151,865
General and administrative 24,127 19,040 46,654 37,626
Depreciation and amortization 2,326 1,622 4,448 3,138
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Total costs and expenses 123,678 97,283 241,360 192,629
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Operating earnings 13,193 10,438 26,235 21,025
Interest income 75 59 137 108
Interest expense (243) (1,328) (1,429) (2,652)
Other income (expense) (1) 20 8 28
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Earnings before income taxes 13,024 9,189 24,951 18,509
Income taxes 5,192 3,645 9,941 7,354
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Net earnings $ 7,832 5,544 15,010 11,155
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Net earnings per common share:
Basic $ .46 .38 .92 .79
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Diluted $ .43 .35 .85 .71
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Weighted average number of
common shares outstanding:
Basic 17,008 14,539 16,241 14,195
======= ======= ======= =======
Diluted 18,358 15,994 17,748 15,650
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See accompanying notes to condensed consolidated financial statements.
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REHABCARE GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
2001 2000
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Cash flows from operating activities:
Net earnings $ 15,010 11,155
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,448 3,138
Provision for losses on accounts receivable 2,129 1,752
Income tax benefit realized on employee
stock option exercises 5,249 1,456
Change in assets and liabilities:
Deferred compensation 355 20
Accounts receivable, net (11,402) (10,733)
Prepaid expenses and other current assets (81) 305
Other assets (59) (243)
Accounts payable and accrued expenses (3,067) (2,024)
Accrued salaries and wages 1,690 3,116
Income taxes payable and deferred (314) (3,800)
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Net cash provided by
operating activities 13,958 4,142
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Cash flows from investing activities:
Purchase of marketable securities (696) (617)
Proceeds from sale/maturities of investments 401 166
Additions to equipment and leasehold improvements, net (4,576) (2,892)
Deferred contract costs (309) (484)
Other (520) (644)
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Net cash used in investing activities (5,700) (4,471)
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Cash flows from financing activities:
Proceeds from long-term debt -- 4,000
Repayments on long-term debt (64,050) (6,068)
Proceeds from sale of common stock, net 49,468 --
Exercise of stock options 3,784 2,790
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Net cash (used in)provided by
financing activities (10,798) 722
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Net (decrease) increase in cash and
cash equivalents (2,540) 393
Cash and cash equivalents at beginning of period 7,942 738
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Cash and cash equivalents at end of period $ 5,402 1,131
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See accompanying notes to condensed consolidated financial statements.
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REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Six Month Periods Ended June 30, 2001 and 2000
(Unaudited)
Note 1. - Basis of Presentation
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The condensed consolidated balance sheets and related condensed
consolidated statements of earnings and cash flows contained in this Form 10-Q,
which are unaudited, include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and activity have been
eliminated in consolidation. In the opinion of management, all entries necessary
for a fair presentation of such financial statements have been included. These
entries consisted only of normal recurring items. The results of operations for
the three months and six months ended June 30, 2001, are not necessarily
indicative of the results to be expected for the fiscal year. Certain prior year
amounts have been reclassified to conform with the current year presentation.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flows in conformity with accounting
principles generally accepted in the United States of America. Reference is made
to the Company's audited consolidated financial statements and the related notes
as of December 31, 2000 and 1999 and for each of the years in the three year
period ended December 31, 2000, included in the Annual Report on Form 10-K on
file with the Securities and Exchange Commission, which provide additional
disclosures and a further description of our accounting policies.
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Note 2. - Earnings per Share
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The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
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(in thousands, except per share data)
Numerator:
Numerator for basic earnings
per share - earnings available
to common stockholders
(net earnings) $ 7,832 5,544 15,010 11,155
Effect of dilutive securities -
after-tax interest on convertible
subordinated promissory notes -- -- -- 28
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Numerator for diluted earnings per
share - earnings available to
common stockholders after assumed
conversions $ 7,832 5,544 15,010 11,183
====== ====== ====== ======
Denominator:
Denominator for basic earnings per
share - weighted-average shares
outstanding 17,008 14,539 16,241 14,195
Effect of dilutive securities:
Stock options 1,350 1,455 1,507 1,350
Convertible subordinated
promissory notes -- -- -- 105
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Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions 18,358 15,994 17,748 15,650
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Basic earnings per share $ .46 .38 .92 .79
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Diluted earnings per share $ .43 .35 .85 .71
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Note 3. - Industry Segment Information
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The Company operates in two product lines that are managed separately based
on fundamental differences in operations: temporary healthcare staffing services
and physical rehabilitation program management services. Physical rehabilitation
program management includes inpatient programs (including acute rehabilitation
and skilled nursing units), outpatient therapy programs, and contract therapy
programs. All of the Company's services are provided in the United States.
7 of 14
Summarized information about the Company's operations for the three months and
six months ended June 30, 2001 and 2000 in each industry segment is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
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(dollars in thousands)
Revenues from Unaffiliated Customers
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Healthcare staffing $ 78,067 61,936 152,348 121,498
Program management:
Inpatient 30,759 29,288 61,816 59,799
Contract therapy 15,055 6,655 27,395 12,855
Outpatient 12,990 9,842 26,036 19,502
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Program management subtotal 58,804 45,785 115,247 92,156
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Total $ 136,871 107,721 267,595 213,654
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Operating Earnings *
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Healthcare staffing $ 3,294 2,891 6,747 5,358
Program management:
Inpatient 6,397 5,207 12,658 10,861
Contract therapy 1,605 544 3,024 1,156
Outpatient 1,897 1,796 3,806 3,650
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Program management subtotal 9,899 7,547 19,488 15,667
------- ------- ------- -------
Total $ 13,193 10,438 26,235 21,025
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Total Assets
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Healthcare staffing $ 110,746 101,435 110,746 101,435
Program management:
Inpatient 71,469 55,088 71,469 55,088
Contract therapy 26,823 21,363 26,823 21,363
Outpatient 28,644 20,934 28,644 20,934
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Program management subtotal 126,936 97,385 126,936 97,385
------- ------- ------- -------
Total $ 237,682 198,820 237,682 198,820
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Depreciation and Amortization
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Healthcare staffing $ 822 674 1,591 1,298
Program management:
Inpatient 875 682 1,782 1,313
Contract therapy 255 92 421 188
Outpatient 374 174 654 339
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Program management subtotal 1,504 948 2,857 1,840
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Total $ 2,326 1,622 4,448 3,138
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Capital Expenditures
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Healthcare staffing $ 525 800 969 1,356
Program management:
Inpatient 1,036 521 3,119 1,433
Contract therapy 181 48 209 57
Outpatient 166 7 279 46
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Program management subtotal 1,383 576 3,607 1,536
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Total $ 1,908 1,376 4,576 2,892
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* Operating earnings for the three months and six months ended June 30, 2000
have been adjusted to reflect the corporate expense allocation methodology
utilized in the current year.
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Item 2. - Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Results of Operations
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The Company provides temporary healthcare staffing and physical
rehabilitation program management services for hospitals, nursing homes and
other long-term care facilities. The Company derives its revenue from two
product line segments: temporary healthcare staffing services and physical
rehabilitation program management services. Our physical rehabilitation program
management services include inpatient programs (including acute rehabilitation
and skilled nursing units), outpatient therapy programs, and contract therapy
programs.
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
---- ---- ---- ----
Operating Statistics:
Healthcare staffing:
Average number of staffing offices 109 86 106 84
Weeks worked 61,957 54,253 121,327 107,117
Average revenue per week worked $1,260 $1,142 $1,256 $1,134
Program management:
Inpatient (acute rehabilitation and
skilled nursing):
Average number of programs 136.7 133.1 137.4 133.9
Average admissions per program 99.1 93.0 197.9 187.0
Average bed capacity 2,712 2,615 2,718 2,625
Average billable length of stay (days) 13.7 14.1 13.7 14.2
Billable patient days served 184,892 174,400 371,902 356,256
Admissions 13,548 12,368 27,182 25,049
Average daily billable census 2,032 1,917 2,055 1,957
Average billable occupied beds per program 14.9 14.4 15.0 14.6
Total programs in operation at end of period 136 138 136 138
Contract therapy:
Average number of locations 230.3 144.5 222.7 139.7
Number of locations at end of period 240 149 240 149
Average revenue per location $65,361 $46,053 $122,755 $92,046
Outpatient programs:
Average number of programs 62.7 48.3 63.6 47.2
Patient visits 370,680 276,790 745,688 536,199
Units of service 1,065,197 766,728 2,137,826 1,484,540
Average units of service per program 16,989 15,874 33,614 31,452
Total programs in operation at end of period 60 49 60 49
Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
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Operating revenues during the second quarter 2001 increased by $29.2
million, or 27.1%, to $136.9 million as compared to the second quarter of 2000.
The September 15, 2000 acquisition of DiversiCare Rehab Services, Inc.
("DiversiCare") accounted for 7.0% of the net increase, or $2.1 million.
Staffing revenue increased by 26.0% from $61.9 million in the second
quarter of 2000 to $78.1 million in the second quarter of 2001, reflecting a
14.2% increase in weeks worked from 54,253 to 61,957 and a 10.3% increase in
average revenue per week worked to $1,260. Operating earnings for the staffing
division were $3.3 million, a 13.9% increase over the $2.9 million (as adjusted
for current year corporate expense allocation methodology) earned in the second
quarter of 2000.
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Inpatient program revenue increased by 5.0% from $29.3 million in the
second quarter of 2000 to $30.8 million in the second quarter of 2001. A 2.7%
increase in the average number of inpatient programs managed from 133.1 to
136.7, and a 3.5% increase in the average daily billable census per inpatient
program from 14.4 to 14.9 resulted in a 6.0% increase in billable patient days
to 184,892. The increase in billable census per program for inpatient programs
is primarily attributable to a 6.6% increase in average admissions per program
from 93.0 to 99.1 offset by a 2.8% decrease in the average length of stay to
13.7. The increase in patient days was offset by a 0.9% decrease in the average
per diem billing rates. Operating earnings for the inpatient division increased
by 22.9% to $6.4 million in the second quarter of 2001, compared to $5.2 million
(as adjusted for current year corporate expense allocation methodology) in the
second quarter of 2000.
Contract therapy revenue increased by 126.2% from $6.7 million in the
second quarter of 2000 to $15.1 million in the second quarter of 2001,
reflecting a 59.4% increase in the average number of contract therapy locations
managed from 144.5 to 230.3, and a 41.9% increase in average revenue per
location. Operating earnings for the contract therapy division were $1.6 million
in the second quarter of 2001, a $1.1 million increase from the $544,000 (as
adjusted for current year corporate expense allocation methodology) in operating
earnings for the second quarter of 2000.
Outpatient revenue increased by 32.0% from $9.8 million in the second
quarter of 2000 to $13.0 million in the second quarter of 2001, reflecting $2.1
million from the September 15, 2000 acquisition of DiversiCare, an increase in
the average number of outpatient programs managed from 48.3 to 62.7 (including
13.0 from DiversiCare) and a 7.0% increase in units of service per program.
Operating earnings from the outpatient division were $1.9 million in the second
quarter of 2001, a 5.6% increase compared to the $1.8 million (as adjusted for
current year corporate expense allocation methodology) earned in the second
quarter of 2000.
Operating expenses for the three months ended June 30, 2001 increased by
$20.6 million, or 26.9%, to $97.2 million as compared to the three months ended
June 30, 2000. The DiversiCare acquisition accounted for approximately 6.9% of
the net increase. The remaining increase in operating expenses is attributable
to a 14.2% increase in the number of weeks worked by travel and per diem
staffing, a 59.4% increase in the average number of contract therapy locations,
a 22.3% increase in outpatient units of service (excluding 127,684 units of
service from DiversiCare), and a 2.7% increase in the average number of
inpatient programs.
General and administrative expenses as a percentage of revenue decreased
from 17.7% in the second quarter of 2000 to 17.6% in the second quarter of 2001
as a result of the consolidation of certain corporate office functions. General
and administrative expenses increased by $5.1 million, or 26.7% from $19.0
million in the second quarter of 2000 to $24.1 million in the second quarter of
2001, reflecting increases in corporate office expenses as well as marketing,
business development, operations and professional services in support of the
increase in outpatient programs, contract therapy locations managed and per diem
staffing offices operated, plus the addition of general and administrative
expenses from the DiversiCare acquisition.
Depreciation and amortization increased $704,000 reflecting an increase in
goodwill from acquisitions and depreciation on equipment purchased, plus the
change in goodwill amortization period from 40 years to 25 years, effective
prospectively on January 1, 2001 on the acquisitions of Physical Therapy
Resources, Inc., Team Rehab, Inc./Moore Rehabilitation Services, Inc.;
RehabUnlimited, Inc/Cimarron Health Care, Inc. Rehabilitative Care Systems of
America, Inc.; Therapeutic Systems, Inc.; Salt Lake Physical Therapy Associates,
Inc.; AllStaff, Inc.; and DiversiCare Rehab Services, Inc. The amortization
periods for the acquisitions of Advanced Rehabilitation Resources, Inc,;
Healthcare Staffing Solutions, Inc,; StarMed Staffing, Inc.; and eai Healthcare
Staffing Solutions, Inc., which had businesses that were more national in scope,
10 of 14
remain at 40 years. See discussion of Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and
Other Intangible Assets" under "New Accounting Pronouncements".
Interest expense decreased $1.1 million, primarily reflecting the repayment
of $49.5 million in principal as a result of the March 20, 2001 publicly
underwritten equity offering and cash generated from operations.
Earnings before income taxes increased by $3.8 million, or 41.7%, from $9.2
million in the second quarter of 2000 to $13.0 million in the second quarter of
2001. The provision for income taxes for 2001 was $5.2 million compared to $3.6
million in 2000, reflecting effective income tax rates of 39.9% and 39.7%,
respectively. Net earnings increased by $2.3 million, or 41.3%, to $7.8 million
from $5.5 million in 2000. Diluted earnings per share increased by 23.1% to $.43
from $.35 on a 14.8% increase in the weighted-average shares and assumed
conversions outstanding. The increase in weighted average shares outstanding is
attributable primarily to 1.5 million shares issued in the publicly underwritten
equity offering, stock option grants and exercises and the increase in the
dilutive effect of stock options as a result of an increase in the average
market price of the Company's stock relative to the underlying exercise prices
of outstanding options.
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
- -------------------------------------------------------------------------
Operating revenues during the first six months 2001 increased by $53.9
million, or 25.2%, to $267.6 million as compared to the first six months of
2000. The September 15, 2000 acquisition of DiversiCare accounted for 7.5% of
the net increase, or $4.1 million.
Staffing revenue increased by 25.4% from $121.5 million in the first six
months of 2000 to $152.3 million in the first six months of 2001, reflecting a
13.3% increase in weeks worked from 107,117 to 121,327 and a 10.8% increase in
average revenue per week worked to $1,256. Operating earnings for the staffing
division were $6.7 million, a 25.9% increase over the $5.4 million (as adjusted
for current year corporate expense allocation methodology) earned in the first
six months of 2000.
Inpatient program revenue increased by 3.4% from $59.8 million in the first
six months of 2000 to $61.8 million in the first six months of 2001. A 2.6%
increase in the average number of inpatient programs managed from 133.9 to
137.4, and a 2.7% increase in the average daily billable census per inpatient
program from 14.6 to 15.0 resulted in a 4.4% increase in billable patient days
to 371,902. The increase in billable census per program for inpatient programs
is primarily attributable to a 5.8% increase in average admissions per program
from 187.0 to 197.9 offset by a 3.5% decrease in the average length of stay to
13.7. The increase in patient days was offset by a 1.0% decrease in the average
per diem billing rates. Operating earnings for the inpatient division increased
by 16.5% to $12.7 million in the first six months of 2001, compared to $10.9
million (as adjusted for current year corporate expense allocation methodology)
in the first six months of 2000.
Contract therapy revenue increased by 113.1% from $12.9 million in the
first six months of 2000 to $27.4 million in the first six months of 2001,
reflecting a 59.4% increase in the average number of contract therapy locations
managed from 139.7 to 222.7, and a 33.4% increase in average revenue per
location. Operating earnings for the contract therapy division were $3.0 million
in the first six months of 2001, a $1.9 million increase from the $1.2 million
(as adjusted for current year corporate expense allocation methodology) in
operating earnings for the first six months of 2000.
Outpatient revenue increased by 33.5% from $19.5 million in the first half
of 2000 to $26.0 million in the first half of 2001, reflecting $4.1 million from
the September 15, 2000 acquisition of DiversiCare, an increase in the average
number of outpatient programs managed from 47.2 to 63.6 (including 13.5 from
DiversiCare) and a 6.9% increase in units of service per program. Operating
earnings from the outpatient division were $3.8 million in the first six months
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of 2001, a 4.3% increase compared to the $3.7 million (as adjusted for current
year corporate expense allocation methodology) earned in the first six months of
2000.
Operating expenses for the six months ended June 30, 2001 increased by
$38.4 million, or 25.3%, to $190.3 million as compared to the six months ended
June 30, 2000. The DiversiCare acquisition accounted for approximately 7.3% of
the net increase. The remaining increase in operating expenses is attributable
to a 13.3% increase in the number of weeks worked by travel and per diem
staffing, a 59.4% increase in the average number of contract therapy locations,
a 26.7% increase in outpatient units of service (excluding 257,258 units of
service from DiversiCare), and a 2.6% increase in the average number of
inpatient programs.
General and administrative expenses as a percentage of revenue decreased
from 17.6% in the first six months of 2000 to 17.4% in the first six months of
2001 as a result of the consolidation of certain corporate office functions.
General and administrative expenses increased by $9.0 million, or 24.0% from
$37.6 million in the first six months of 2000 to $46.7 million in the first six
months of 2001, reflecting increases in corporate office expenses as well as
marketing, business development, operations and professional services in support
of the increase in outpatient programs, contract therapy locations managed and
per diem staffing offices operated, plus the addition of general and
administrative expenses from the DiversiCare acquisition.
Depreciation and amortization increased $1.3 million reflecting an increase
in goodwill from acquisitions and depreciation on equipment purchased, plus the
change in goodwill amortization period from 40 years to 25 years, effective
prospectively on January 1, 2001 on certain acquisitions as previously disclosed
in the three month operating results. See discussion of SFAS No. 142, "Goodwill
and Other Intangible Assets" under "New Accounting Pronouncements".
Interest expense decreased $1.2 million primarily reflecting the repayment
of $49.5 million in principal as a result of the March 20, 2001 publicly
underwritten equity offering and cash generated from operations.
Earnings before income taxes increased by $6.4 million, or 34.8%, from
$18.5 million in the first six months of 2000 to $25.0 million in the first six
months of 2001. The provision for income taxes for 2001 was $9.9 million
compared to $7.4 million in 2000, reflecting effective income tax rates of 39.8%
and 39.7%, respectively. Net earnings increased by $3.9 million, or 34.6%, to
$15.0 million from $11.2 million in 2000. Diluted earnings per share increased
by 18.7% to $.85 from $.71 on a 13.4% increase in the weighted-average shares
and assumed conversions outstanding. The increase in weighted average shares
outstanding is attributable primarily to the secondary equity offering, stock
option grants and exercises and the increase in the dilutive effect of stock
options as a result of an increase in the average market price of the Company's
stock relative to the underlying exercise prices of outstanding options.
Liquidity and Capital Resources
- -------------------------------
As of June 30, 2001, the Company had $8.4 million in cash and current
marketable securities and a current ratio, the amount of current assets divided
by current liabilities, of 2.9:1. Working capital increased by $8.9 million to
$73.1 million as of June 30, 2001, compared to $64.2 million as of December 31,
2000. The increase in working capital is primarily due to working capital
generated from operations and the exercise of stock options.
Net accounts receivable were $93.3 million at June 30, 2001, compared to
$84.0 million at December 31, 2000. The number of day's average net revenue in
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net receivables was 62.0 at June 30, 2001 compared to 63.8 at December 31, 2000.
This decrease was the result of the consolidation of our financial back office
during the fourth quarter of 2000, the implementation of new financial software
enabling improved tracking of receivables and payables, and the vigilance of our
billing and collections team.
The Company's operating cash flows constitute its primary source of
liquidity and historically have been sufficient to fund its working capital,
capital expenditures, internal business expansion and debt service requirements.
The Company expects to meet its future working capital, capital expenditures,
internal and external business expansion and debt service requirements from a
combination of internal sources and outside financing. The Company has a $125.0
million revolving line of credit with no balance outstanding as of June 30,
2001.
New Accounting Pronouncements
- -------------------------------
In July 2001, the FASB issued SFAS No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that
the purchase method be used for all business combinations initiated after June
30, 2001 and eliminates the pooling-of-interests method. SFAS No. 142 requires
that goodwill no longer be amortized regularly as a charge to earnings. As a
result, the amortization of goodwill is eliminated upon adoption of SFAS No.
142, which will be January 1, 2002. In addition, SFAS No. 142 requires an
initial (and annually thereafter) test of the goodwill's impairment.
Management does not expect SFAS No. 141 to have a material effect on
the consolidated financial statements. Management does expect SFAS No. 142
to result in the elimination of amortization of goodwill from previous
acquisitions in the amount of $3.6 million pre-tax in 2002. Management will test
for impairment of goodwill from previous acquisitions at least annually.
Part II. - Other Information
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REHABCARE GROUP, INC.
August 8, 2001
By /s/ Gregory J. Eisenhauer
---------------------------------
Gregory J. Eisenhauer
Senior Vice President and
Chief Financial Officer
By /s/ James M. Douthitt
---------------------------------
James M. Douthitt
Senior Vice President and
Chief Accounting Officer
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