UNITED STATES
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 September 30, 2002
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Commission File Number 0-19294
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REHABCARE GROUP, INC.
---------------------
(Exact name of Registrant as specified in its charter)
Delaware 51-0265872
- ------------------------------ ---------------------------------------
(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 November 11, 2002
- -------------------------------------- --------------------------------
Common Stock, par value $.01 per share 15,841,568
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1 of 23
REHABCARE GROUP, INC.
Index
Part I. - Financial Information
Item 1. - Condensed Consolidated Financial Statements
Condensed consolidated balance sheets,
September 30, 2002 (unaudited) and December 31, 2001 3
Condensed consolidated statements of earnings for the
three months and nine months ended September 30, 2002
and 2001 (unaudited) 4
Condensed consolidated statements of cash flows for the
nine months ended September 30, 2002 and 2001 (unaudited) 5
Condensed consolidated statements of comprehensive earnings
for the three months and nine months ended September 30, 2002
and 2001 (unaudited) 6
Notes to condensed consolidated financial statements (unaudited) 7
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. - Quantitative and Qualitative Disclosures about Market Risks 19
Item 4. - Controls and Procedures 19
Part II. - Other Information 19
Item 1. - Legal Proceedings 19
Item 6. - Exhibits and Reports on Form 8-K 20
Signatures 21
Certification of President and Chief Executive Officer 22
Certification of Chief Accounting Officer 23
2 of 23
PART 1. - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
- -----------------------------------------------------
REHABCARE GROUP, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share and per share data)
September 30, December 31,
2002 2001
---- ----
Assets (unaudited)
------
Current assets:
Cash and cash equivalents $ 5,728 $ 18,534
Marketable securities, available-for-sale 4 1,025
Accounts receivable, net of allowance for doubtful
accounts of $5,857 and $5,902, respectively 87,490 91,384
Income taxes receivable -- 2,055
Deferred tax assets 5,186 7,658
Prepaid expenses and other current assets 3,743 2,390
------- -------
Total current assets 102,151 123,046
Marketable securities, trading 3,295 2,870
Equipment and leasehold improvements, net 20,729 18,373
Excess cost over net assets acquired, net 101,685 101,685
Other 4,711 4,687
------- -------
Total assets $232,571 $250,661
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 1,912 $ 3,567
Accrued salaries and wages 28,825 27,141
Accrued expenses 13,247 14,814
Income taxes payable 329 --
------- -------
Total current liabilities 44,313 45,522
Deferred compensation and other long-term
liabilities 3,480 3,043
Deferred tax liabilities 3,766 3,060
------- -------
Total liabilities 51,559 51,625
------- -------
Stockholders' equity:
Preferred stock, $.10 par value, authorized
10,000,000 shares, none issued and outstanding -- --
Common stock, $.01 par value; authorized 60,000,000
shares, issued 19,841,040 shares and 19,631,789
shares as of September 30, 2002 and December 31,
2001, respectively 198 196
Additional paid-in capital 111,427 109,522
Retained earnings 124,094 107,057
Less common stock held in treasury at cost,
4,002,898 shares and 2,302,898 shares as
of September 30, 2002 and December 31,
2001, respectively (54,704) (17,757)
Accumulated other comprehensive earnings (loss) (3) 18
------- -------
Total stockholders' equity 181,012 199,036
------- -------
$232,571 $250,661
======= =======
See accompanying notes to condensed consolidated financial statements.
3 of 23
REHABCARE GROUP, INC.
Condensed Consolidated Statements of Earnings
(amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Operating revenues $142,690 $140,434 $421,755 $408,029
Costs and expenses:
Operating expenses 103,909 100,624 310,358 290,882
General and administrative 25,008 23,898 77,586 70,552
Depreciation and amortization 2,178 2,393 6,138 6,841
------- ------- ------- -------
Total costs and expenses 131,095 126,915 394,082 368,275
------- ------- ------- -------
Operating earnings 11,595 13,519 27,673 39,754
Interest income 88 107 299 243
Interest expense (183) (218) (508) (1,646)
Other income (expense) 11 (52) 15 (44)
------- ------- ------- -------
Earnings before income taxes 11,511 13,356 27,479 38,307
Income taxes 4,374 5,314 10,442 15,255
------- ------- ------- -------
Net earnings $ 7,137 $ 8,042 $ 17,037 $ 23,052
======= ======= ======= =======
Net earnings per common share:
Basic $ 0.43 $ 0.47 $ 0.99 $ 1.39
======= ======= ======= =======
Diluted $ 0.41 $ 0.44 $ 0.95 $ 1.28
======= ======= ======= =======
Weighted-average number of
common shares outstanding:
Basic 16,741 17,274 17,168 16,590
======= ======= ======= =======
Diluted 17,455 18,440 18,002 17,989
======= ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
4 of 23
REHABCARE GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Nine Months Ended
September 30,
2002 2001
---- ----
Cash flows from operating activities:
Net earnings $ 17,037 $ 23,052
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 6,138 6,841
Provision for doubtful accounts 3,227 3,378
Income tax benefit realized on employee
stock option exercises 565 6,213
Change in assets and liabilities:
Accounts receivable, net 667 (14,091)
Prepaid expenses and other current assets (1,353) (1,395)
Other assets 309 (165)
Accounts payable and accrued expenses (3,222) (1,710)
Accrued salaries and wages 1,684 375
Deferred compensation 337 251
Income taxes 5,562 3,403
------- -------
Net cash provided by operating activities 30,951 26,152
------- -------
Cash flows from investing activities:
Additions to equipment and leasehold improvements, net (7,559) (6,916)
Purchase of marketable securities (356) (851)
Proceeds from sale/maturities of marketable securities 1,030 402
Other, net (1,267) (1,245)
------- -------
Net cash used in investing activities (8,152) (8,610)
------- -------
Cash flows from financing activities:
Repayments on revolving credit facility
and other long term debt, net -- (64,973)
Proceeds from sale of common stock, net -- 49,447
Purchase of treasury stock (36,947) --
Exercise of stock options 1,342 4,396
------- -------
Net cash used in financing activities (35,605) (11,130)
------- -------
Net increase (decrease) in cash
and cash equivalents (12,806) 6,412
Cash and cash equivalents at beginning of period 18,534 7,942
------- -------
Cash and cash equivalents at end of period $ 5,728 $ 14,354
======= =======
See accompanying notes to condensed consolidated financial statements.
5 of 23
REHABCARE GROUP, INC.
Condensed Consolidated Statements of Comprehensive Earnings
(dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
Net earnings $ 7,137 $ 8,042 $ 17,037 $ 23,052
Other comprehensive losses net
of tax benefit:
Unrealized holding losses
arising during period on
securities(net of $5 & $8
tax benefit, respectively) (12) -- (21) --
------ ------ ------- ------
Comprehensive earnings $ 7,125 $ 8,042 $ 17,016 $ 23,052
====== ====== ======= ======
See accompanying notes to condensed consolidated financial statements.
6 of 23
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
Nine Month Periods Ended September 30, 2002 and 2001
(Unaudited)
Note 1. - Basis of Presentation
- -------------------------------
The condensed consolidated balance sheets and related condensed
consolidated statements of earnings, cash flows, and comprehensive earnings
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 nine months ended
September 30, 2002, 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, 2001 and 2000 and for each of the years in the three-year
period ended December 31, 2001, 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 the Company's accounting policies.
Note 2. - Goodwill and Other Identifiable Intangible Assets
- -----------------------------------------------------------
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("Statement") No. 141, "Business
Combinations," and Statement No. 142, "Goodwill and Other Intangible Assets."
Statement No. 141 requires that the purchase method of accounting be used for
all business combinations initiated and completed after June 30, 2001. Statement
No. 141 also specifies certain criteria that intangible assets acquired in a
purchase method business combination must meet in order to be recognized and
reported apart from goodwill. The Company adopted the provisions of Statement
No. 141 on July 1, 2001.
Effective January 1, 2002, the Company adopted the provisions of Statement
No. 142, which requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually and any related losses recognized in earnings when identified.
Additionally, a transitional impairment test is required utilizing data as of
the beginning of the year. Statement No. 142 also requires that intangible
assets with estimable useful lives be amortized over their respective estimated
useful lives and reviewed for impairment in accordance with Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of."
The Company completed the transitional impairment tests of goodwill and
indefinite-lived intangible assets during the first quarter of 2002. The results
of these tests indicated that there was no impairment of goodwill or
indefinite-lived intangible assets as of January 1, 2002. As of the date of
adoption, the Company had unamortized goodwill in the amount of $101.7 million
and unamortized intangible assets in the amount of $0.1 million, all of which
are subject to the transition provisions of Statement No. 141 and Statement No.
142.
7 of 23
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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As of September 30, 2002, the Company had the following acquired
intangible assets recorded:
Gross Accumulated
Carrying Amount Amortization
--------------- ------------
(in thousands)
Amortized Intangible Assets:
Purchased contracts $ 100 $ 20
Purchased contracts are being amortized straight-line over the average life of
the contracts, which is 46 months.
The following table indicates the effect on net earnings and diluted
earnings per share if Statement No. 142 had been in effect for each of the
periods presented in the Condensed Consolidated Statements of Earnings:
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands, except per share data)
Reported net earnings $ 7,137 $ 8,042 $ 17,037 $ 23,052
Add back: goodwill amortization,
net of taxes -- 724 -- 2,135
------ ------ ------ ------
Adjusted net earnings $ 7,137 $ 8,766 $ 17,037 $ 25,187
====== ====== ====== ======
Basic net earnings per share:
As reported $ 0.43 $ 0.47 $ 0.99 $ 1.39
Add back: goodwill amortization,
net of taxes -- 0.04 -- 0.13
------ ------ ------ ------
Adjusted basic net earnings per share $ 0.43 $ 0.51 $ 0.99 $ 1.52
====== ====== ====== ======
Diluted net earnings per share:
As reported $ 0.41 $ 0.44 $ 0.95 $ 1.28
Add back: goodwill amortization,
net of taxes -- 0.04 -- 0.12
------ ------ ------ ------
Adjusted diluted net earnings per share $ 0.41 $ 0.48 $ 0.95 $ 1.40
====== ====== ====== ======
Note 3. - Common Stock Repurchase
- ---------------------------------
The Company repurchased 1.7 million shares of its common stock during the
third quarter of 2002 at a cost of $36.9 million. This represented the full
amount authorized by its Board of Directors in July 2002. The repurchase was
funded primarily by using Company cash and supplemented by short-term borrowings
on the Company's revolving credit facility. The short-term borrowings on the
revolving credit facility were fully repaid as of September 30, 2002.
Note 4. - Stockholder Rights Plan
- ---------------------------------
On October 1, 2002, the Company's stockholder rights plan that was
originally adopted in 1992 expired in accordance with its terms. The board of
directors of the Company adopted a new stockholder rights plan pursuant to which
preferred stock purchase rights were distributed as a dividend on each share of
8 of 23
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
the Company's outstanding common stock as of the close of business on October 1,
2002. Each right, when exercisable, will entitle the holders to purchase one
one-hundredth of a share of a newly designated series B junior participating
preferred stock of the Company at an exercise price of $150.00 per one
one-hundredth of a share.
The rights are not exercisable or transferable until a person or affiliated
group acquires beneficial ownership of 20% or more of the Company's common stock
or commences a tender or exchange offer for 20% or more of the stock, without
the approval of the board of directors. In the event that a person or group
acquires 20% or more of the Company's stock or if the Company or a substantial
portion of the Company's assets or earning power is acquired by another entity,
each right will covert into the right to purchase shares of the Company's or the
acquiring entity's stock, at the then-current exercise price of the right,
having a value at the time equal to twice the exercise price.
The series B preferred stock is non-redeemable and junior of any other
series of preferred stock that the Company may issue in the future. Each share
of series B preferred stock, upon issuance, will have a preferential dividend in
the amount equal to the greater of $1.00 per share or 100 times the dividend
declared per share on the Company's common stock. In the event of a liquidation
of the Company, the series B preferred stock will receive a preferred
liquidation payment equal to the greater of $100 or 100 times the payment made
on each share of the Company's common stock. Each one one-hundredth of a share
of series B preferred stock will have one vote on all matters submitted to the
stockholders and will vote together as a single class with the Company's common
stock.
Note 5. - Recent Accounting Pronouncements
- ------------------------------------------
In October 2001, the FASB issued Statement No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" which supersedes Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." Statement No. 144 also supersedes the accounting and reporting
provisions of APB Opinion No. 30 "Reporting the Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions." Statement No. 144 is
intended to establish one accounting model for long-lived assets to be disposed
of by sale and to address significant implementation issues. The Company adopted
Statement No. 144 on January 1, 2002. The adoption had no effect on the
condensed consolidated financial statements.
In April 2002, the FASB issued Statement No. 145 "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement eliminates the provisions of Statement No. 4
"Reporting Gains and Losses from Extinguishment of Debt", which required
classification of gain or loss on extinguishment of debt as an extraordinary
item of income, net of related income tax effect. Statement No. 145 states that
such gain or loss be evaluated for extraordinary classification under the
criteria of Accounting Principles Board No. 30 "Reporting Results of
Operations." Statement No. 145 is effective for fiscal periods beginning after
May 15, 2002, although early adoption is permitted. Management does not expect
this statement to have a material impact on its consolidated financial position
or results of operations.
9 of 23
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
In June 2002, the FASB issued Statement No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities." This statement nullifies Emerging
Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." This statement requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred rather than the date of an entity's commitment to
an exit plan. The Company will be required to implement Statement No. 146 on
January 1, 2003. Management does not expect that this statement will have an
impact on its consolidated financial position or results of operations.
Note 6. - Net earnings per share
- --------------------------------
Basic net earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted average common shares
outstanding for the period. Diluted net earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity (as
calculated utilizing the treasury stock method).
The following table sets forth the computation of basic and diluted net earnings
per share:
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands, except per share data)
Numerator:
Numerator for basic/diluted net earnings
per share - net earnings available
to common stockholders $ 7,137 $ 8,042 $17,037 $23,052
====== ====== ====== ======
Denominator:
Denominator for basic net earnings per share -
weighted-average shares outstanding 16,741 17,274 17,168 16,590
Effect of dilutive securities:
Stock options 714 1,166 834 1,399
------ ------ ------ ------
Denominator for diluted net earnings per share -
adjusted weighted-average shares 17,455 18,440 18,002 17,989
====== ====== ====== ======
Basic net earnings per share $ 0.43 $ 0.47 $ 0.99 $ 1.39
====== ====== ====== ======
Diluted net earnings per share $ 0.41 $ 0.44 $ 0.95 $ 1.28
====== ====== ====== ======
For the three month and nine months ended September 30, 2002, stock options
to purchase 1,126,771 and 861,460 shares, respectively of the Company's common
stock were not included in the computation of diluted net earnings per share, as
the effect of such stock options would be anti-dilutive.
10 of 23
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
Note 7. - Industry Segment Information
- --------------------------------------
The Company operates in two business segments that are managed separately
based on fundamental differences in operations: temporary healthcare staffing
services and therapy program management. Therapy program management includes
inpatient programs (including acute rehabilitation and skilled nursing units),
contract therapy programs and outpatient therapy programs. All of the Company's
services are provided in the United States. Summarized information about the
Company's operations for the three months and nine months ended September 30,
2002 and 2001 in each industry segment is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Revenues from Unaffiliated Customers
Healthcare staffing $ 70,257 $ 79,926 $ 211,722 $232,274
Therapy program management:
Inpatient 33,113 30,846 96,939 92,662
Contract therapy 27,223 17,700 76,245 45,095
Outpatient 12,097 11,962 36,849 37,998
------- ------- ------- -------
Therapy program management total 72,433 60,508 210,033 175,755
------- ------- ------- -------
Total $142,690 $ 140,434 $ 421,755 $408,029
======= ======= ======= =======
Operating Earnings (Loss) (1)
- --------------------------
Healthcare staffing $ 185 $ 4,103 $ (1,812) $ 11,667
Therapy program management:
Inpatient 8,009 7,669 20,718 22,521
Contract therapy 2,581 874 6,236 1,970
Outpatient 820 873 2,531 3,596
------- ------- ------- -------
Therapy program management total 11,410 9,416 29,485 28,087
------- ------- ------- -------
Total $ 11,595 $ 13,519 $ 27,673 $ 39,754
======= ======= ======= =======
(1) Operating earnings for the prior year period have been adjusted to reflect
the corporate expense allocation methodology being utilized in the current
year period.
11 of 23
REHABCARE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
----------------------------------------------------------------
Note 7. - Industry Segment Information (Continued)
- --------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
---- ---- ---- ----
(in thousands)
Depreciation and Amortization
Healthcare staffing $ 446 $ 836 $ 1,368 $ 2,427
Therapy program management:
Inpatient 1,209 898 3,388 2,680
Contract therapy 296 282 788 703
Outpatient 227 377 594 1,031
------- ------- ------- -------
Therapy program management total 1,732 1,557 4,770 4,414
------- ------- ------- -------
Total $ 2,178 $ 2,393 $ 6,138 $ 6,841
======= ======= ======= =======
Capital Expenditures
Healthcare staffing $ 69 $ 238 $ 363 $ 1,207
Therapy program management:
Inpatient 442 792 3,127 2,440
Contract therapy 523 1,044 2,850 2,137
Outpatient 203 266 1,219 1,132
------- ------- ------- -------
Therapy program management total 1,168 2,102 7,196 5,709
------- ------- ------- -------
Total $ 1,237 $ 2,340 $ 7,559 $ 6,916
======= ======= ======= =======
As of
September 30,
2002
----
(in thousands)
Unamortized Goodwill
Healthcare staffing $ 52,956
Therapy program management:
Inpatient 17,162
Contract therapy 12,990
Outpatient 18,577
-------
Therapy program management total 48,729
-------
Total $ 101,685
=======
As of
September 30,
2002 2001
---- ----
(in thousands)
Total Assets
Healthcare staffing $ 95,723 $110,196
Therapy program management:
Inpatient 74,561 75,750
Contract therapy 31,899 30,517
Outpatient 30,388 30,545
------- -------
Therapy program management total 136,848 136,812
------- -------
Total $232,571 $247,008
======= =======
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REHABCARE GROUP, INC.
Item 2. - Management's Discussion and Analysis of Financial Condition and
- --------------------------------------------------------------------------------
Results of Operations
- ---------------------
This Quarterly Report on Form 10-Q contains forward-looking statements that
are made 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 the Company's actual results in
future periods to differ materially from forecasted results. These risks and
uncertainties may include, but are not limited to, the effect of certain
corrective actions already taken in supplemental staffing, the timing and
magnitude of volume improvements, new program openings and planned cost
controls, fluctuations in occupancy of the Company's hospital and long-term care
clients, changes in and compliance with governmental reimbursement regulations
or policies, the inability to attract new client relationships or to retain
existing client relationships, the inability to attract operational and
professional employees, the adequacy and effectiveness of operating and
administrative systems, litigation risks (including an inability to predict
ultimate costs and liabilities and disruptions to the Company's operations) and
general economic downturn.
Results of Operations
The Company provides temporary healthcare staffing and therapy program
management services for hospitals and long-term care facilities. The Company
derives its revenue from two business segments: temporary healthcare staffing
services and therapy program management. The Company's temporary healthcare
staffing segment includes both supplemental personnel and traveling personnel
who are typically on 13 week assignments. The Company's therapy program
management segment includes inpatient programs (including acute rehabilitation
and skilled nursing units), contract therapy programs and outpatient therapy
programs.
Three Months Ended Nine Months Ended
September 30, September 30,
Operating Statistics: 2002 2001 2002 2001
---- ---- ---- ----
Healthcare staffing:
Average number of staffing branch offices 106.3 109.8 109.8 107.3
Number of weeks worked (supplemental
and travel) 45,256 60,292 140,752 181,619
Average revenue per week worked $ 1,552 $ 1,326 $ 1,504 $ 1,279
Therapy program management:
Inpatient units (acute rehabilitation and
skilled nursing):
Average number of programs 136.6 135.6 135.1 136.8
Average bed capacity 2,756 2,696 2,718 2,710
Average length of stay (days/admissions) 13.3 13.8 13.4 13.8
Patient days 185,775 185,124 556,996 559,805
Admissions 13,970 13,433 41,616 40,615
Total programs in operation at end of
period 132 139 132 139
Contract therapy:
Average number of locations 396.4 259.7 369.4 235.0
Number of locations at end of period 394 270 394 270
Average revenue per location $ 68,674 $ 68,163 $206,428 $190,918
Outpatient programs:
Average number of programs 54.7 60.2 55.5 62.5
Patient visits 332,628 345,962 1,036,189 1,091,650
Units of service 916,626 991,643 2,831,455 3,129,469
Total programs in operation at end of period 53 59 53 59
Average revenue per program $ 221,003 $198,607 $664,308 $608,066
13 of 23
Three Months Ended September 30, 2002 Compared to Three Months Ended
- ---------------------------------------------------------------------
September 30, 2001
- ------------------
REVENUES
Operating revenues during the third quarter of 2002 increased by $2.3
million, or 1.6%, to $142.7 million as compared to $140.4 million in operating
revenues during the third quarter of 2001. Revenue increases in contract
therapy, inpatient and outpatient were offset by declines in staffing.
Staffing revenue decreased by 12.1% from $79.9 million in the third quarter
of 2001 to $70.3 million in the third quarter of 2002. Supplemental staffing
revenues decreased 27.5% from $59.1 million in the third quarter of 2001 to
$42.8 million in the third quarter of 2002, as the Company continued the
management transition initiated in the fourth quarter of 2001 and focused on
placing more highly credentialed staff. A 35.2% decrease in weeks worked from
48,336 in the third quarter of 2001 to 31,315 in the third quarter of 2002 was
partially offset by an 11.9% increase in average revenue per week worked from
$1,222 to $1,368. The increase in average revenue per week worked was primarily
the result of placing more highly credentialed staff such as registered nurses
and licensed practical nurses versus certified nurse assistants, as well as
increased bill rates. Travel staffing revenues increased 31.6% from $20.8
million in the third quarter of 2001 to $27.4 million in the third quarter of
2002, reflecting a 16.6% increase in weeks worked from 11,956 in the third
quarter of 2001 to 13,941 in the third quarter of 2002 and a 12.9% increase in
average revenue per week worked from $1,743 to $1,968.
Inpatient program revenue increased by 7.3% from $30.8 million in the third
quarter of 2001 to $33.1 million in the third quarter of 2002. The increase in
revenue was primarily a result of a 7.0% increase in revenue per patient day and
a 0.4% increase in patient days from 185,124 to 185,775. The increase in patient
days was a result of an increase in admissions per program of 3.2% over the
prior year to 102.3 and a 0.7% increase in the average number of programs to
136.6, offset by a 3.6% decline in average length of stay to 13.3 days.
Contract therapy revenue increased by 53.8% from $17.7 million in the third
quarter of 2001 to $27.2 million in the third quarter of 2002, reflecting a
52.6% increase in the average number of contract therapy locations managed from
259.7 to 396.4, and a 0.7% increase in revenue per location from $68,163 to
$68,674. The increase in revenue per location is primarily the result of same
store growth and a continued focus on opening larger locations.
Outpatient revenue increased by 1.1% from $12.0 million in the third
quarter of 2001 to $12.1 million in the third quarter of 2002, reflecting an
11.3% increase in the average revenue per location from $198,607 to $221,003 and
a 1.7% increase in units of service per program to 16,747, offset by a 9.1%
decrease in the average number of outpatient programs managed from 60.2 to 54.7.
OPERATING EARNINGS
Operating earnings decreased by 14.2% from $13.5 million in the third
quarter of 2001 to $11.6 million in the third quarter of 2002. Operating
expenses as a percentage of revenues increased from 71.7% in the third quarter
of 2001 to 72.8% in the third quarter of 2002, primarily reflecting narrower
spreads between bill and pay rates in the supplemental staffing division and
higher labor costs in the therapy program management group. General and
administrative expenses as a percentage of revenue increased from 17.0% in the
third quarter of 2001 to 17.5% in the third quarter of 2002, primarily as a
result of lower revenues in the staffing division. Depreciation and amortization
as a percentage of revenues decreased from 1.7% in the third quarter of 2001 to
1.5% in the third quarter of 2002 as a result of the elimination of goodwill
amortization from the adoption of Statement No. 142 on January 1, 2002. The
elimination of goodwill amortization was partially offset by increased
depreciation expense recorded on capital expenditures. The following discussion
by division includes the effect of adjusting the third quarter of 2001 operating
earnings to reflect the current overhead allocation method being utilized in the
third quarter of 2002.
14 of 23
Operating earnings in the staffing group decreased from $4.1 million in the
third quarter of 2001 to $0.2 million in the third quarter of 2002, reflecting a
decrease in weeks worked associated with management reorganization. Gross profit
margin decreased from 25.7% in the third quarter of 2001 to 23.1% in third
quarter of 2002, primarily as a result of placing more highly credentialed staff
which deliver greater profitability but less margin, market-driven pricing
adjustments and increases in salary related expenses. General and administrative
expenses as a percentage of revenues increased from 18.5% in the third quarter
of 2001 to 21.6% in the third quarter of 2002, primarily due to lower revenues.
Depreciation and amortization expense as a percentage of revenues decreased from
1.0% in the third quarter of 2001 to 0.6% in the third quarter of 2002 as a
result of the elimination of goodwill amortization from the adoption of
Statement No. 142.
Inpatient operating earnings increased 4.4% from $7.7 million in the third
quarter of 2001 to $8.0 million in the third quarter of 2002, reflecting a 7.3%
increase in revenues and a decrease in general and administrative expenses as a
percent of revenues from 11.3% to 10.7%, partially offset by a decrease in
contribution margin from 39.3% to 38.7%. The decrease in contribution margin was
primarily the result of higher labor costs. Depreciation and amortization as a
percentage of revenues increased from 2.9% in 2001 to 3.7% in 2002, as
depreciation on increased capital expenditures more than offset the elimination
of goodwill amortization related to Statement No. 142.
Contract therapy operating earnings increased 195.3% from $0.9 million in
the third quarter of 2001 to $2.6 million in the third quarter of 2002,
reflecting a 53.8% increase in operating revenues, partially offset by a
decrease in contribution margin from 28.8% to 27.9% as a result of higher labor
costs. General and administrative expenses as a percentage of revenues decreased
from 20.3% to 15.8%, primarily the result of increased revenues. Depreciation
and amortization expense as a percentage of revenues decreased from 1.6% in the
third quarter of 2001 to 1.1% in the third quarter of 2002, reflecting the
elimination of goodwill amortization expense related to Statement No. 142.
Outpatient operating earnings decreased 6.1% from $0.9 million in the third
quarter of 2001 to $0.8 million in the third quarter of 2002, reflecting a
decrease in the average number of programs from 60.2 to 54.7 and a decrease in
contribution margin from 27.6% to 25.7% as a result of increased labor expenses
and lower productivity. General and administrative expenses as a percentage of
revenues decreased from 16.8% to 16.7%. Depreciation and amortization expense as
a percentage of revenues decreased from 3.2% in 2001 to 1.9% in 2002, reflecting
the elimination of goodwill amortization expense related to Statement No. 142.
NONOPERATING ITEMS
Interest income decreased by $19,000 or 17.8% from the third quarter of
2001 to $88,000 for the third quarter 2002, primarily due to decreased cash
balances as a result of the stock repurchase.
Interest expense decreased by $35,000 or 16.1% from $218,000 in the third
quarter of 2001 to $183,000 in the third quarter of 2002 due to the repayment of
all subordinated debt during the fourth quarter 2001.
15 of 23
Earnings before income taxes decreased by $1.8 million from $13.4 million
in the third quarter of 2001 to $11.5 million in the third quarter of 2002. The
provision for income taxes in the third quarter of 2001 was $5.3 million
compared to $4.4 million in the third quarter of 2002, reflecting effective
income tax rates of 39.8% and 38.0%, respectively. Net earnings decreased by
$0.9 million, or 11.3%, to $7.1 million in the third quarter of 2002 from $8.0
million in the third quarter of 2001. Diluted net earnings per share decreased
by 6.8% from $0.44 in the third quarter of 2001 to $0.41 in the third quarter of
2002 on a 5.3% decrease in the weighted-average shares outstanding. The decrease
in the weighted-average shares outstanding was attributable primarily to the
repurchase of 1.7 million shares of common stock during the third quarter 2002
and a decrease in the dilutive effect of stock options resulting from a lower
average stock price.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended
- ------------------------------------------------------------------
September 30, 2001
- ------------------
REVENUES
Operating revenues during the first nine months of 2002 increased by $13.7
million, or 3.4%, to $421.8 million as compared to $408.0 million in operating
revenues during the first nine months of 2001. Revenue increases in contract
therapy and inpatient were offset by declines in staffing and outpatient.
Staffing revenue decreased by 8.8% from $232.3 million in the first nine
months of 2001 to $211.7 million in the first nine months of 2002. Supplemental
staffing revenues decreased 24.4% from $176.3 million in the first nine months
of 2001 to $133.2 million in the first nine months of 2002, as the Company
completed the implementation in the supplemental staffing division of new
software and systems training and database repopulation, focused on placing more
highly credentialed staff, and continued the management transition initiated in
the fourth quarter of 2001. A 32.5% decrease in weeks worked from 148,806 in the
first nine months of 2001 to 100,507 in the first nine months of 2002 was
partially offset by an 11.8% increase in average revenue per week worked from
$1,185 to $1,325. The increase in average revenue per week worked was primarily
the result of increased bill rates and an increased focus on placing more highly
credentialed staff such as registered nurses and licensed practical nurses
versus certified nurse assistants. Travel staffing revenues increased 40.3% from
$56.0 million in the first nine months of 2001 to $78.5 million in the first
nine months of 2002, reflecting a 22.6% increase in weeks worked from 32,813 in
the first nine months of 2001 to 40,244 in the first nine months of 2002 and a
14.5% increase in average revenue per week worked from $1,704 to $1,951.
Inpatient program revenue increased by 4.6% from $92.7 million in the first
nine months of 2001 to $96.9 million in the first nine months of 2002. A 5.1%
increase in revenue per patient day was offset by a 0.5% decrease in patient
days from 559,805 to 556,996. The decline in patient days compared to the prior
year reflects a 3.7% increase in admissions per program to 308.0 offset by the
combination of a 1.2% decline in the average number of programs to 135.1 and a
2.9% decline in average length of stay to 13.4.
Contract therapy revenue increased by 69.1% from $45.1 million in the first
nine months of 2001 to $76.2 million in the first nine months of 2002,
reflecting a 57.2% increase in the average number of contract therapy locations
managed from 235.0 to 369.4, and an 8.1% increase in revenue per location from
$190,918 to $206,428. The increase in revenue per location is primarily the
result of same store growth and a continued focus on opening larger locations.
Outpatient revenue decreased by 3.0% from $38.0 million in the first nine
months of 2001 to $36.8 million in the first nine months of 2002, reflecting an
11.2% decrease in the average number of outpatient programs managed from 62.5 to
55.5, offset by a 9.2% increase in the average revenue per location from
$608,066 to $664,308.
16 of 23
OPERATING EARNINGS
Operating earnings decreased by 30.4% from $39.8 million in the first nine
months of 2001 to $27.7 million in the first nine months of 2002. Operating
expenses as a percentage of revenues increased from 71.3% in the first nine
months of 2001 to 73.6% in the first nine months of 2002, primarily reflecting a
narrower spread between bill and pay rates in the supplemental staffing division
and lower productivity and higher labor costs in the therapy program management
division. General and administrative expenses as a percentage of revenue
increased from 17.3% in the first nine months of 2001 to 18.4% in the first nine
months of 2002, primarily a result of lower revenues in the supplemental
staffing and outpatient divisions. Depreciation and amortization as a percentage
of revenues decreased from 1.7% in the first nine months of 2001 to 1.5% in the
first nine months of 2002 as a result of the elimination of goodwill
amortization from the adoption of Statement No. 142 on January 1, 2002. The
elimination of goodwill amortization was partially offset by increased
depreciation expense recorded on capital expenditures. The following discussion
by division includes the effect of adjusting the first nine months of 2001
operating earnings to reflect the current overhead allocation method being
utilized in the first nine months of 2002.
Operating earnings in the staffing group decreased from $11.7 million in
the first nine months of 2001 to a loss of $1.8 million in the first nine months
of 2002, reflecting a decrease in weeks worked associated with management
reorganization, system roll-out and training. Gross profit margin decreased from
26.0% in the first nine months of 2001 to 22.7% in the first nine months of 2002
as a result of changes in skill mix, market-driven pricing adjustments and
increases in salary-related expenses. General and administrative expenses as a
percentage of revenues increased from 18.9% in the first nine months of 2001 to
22.1% in the first nine months of 2002, primarily due to lower revenues.
Depreciation and amortization expense as a percentage of revenues decreased from
1.0% in the first nine months of 2001 to 0.6% in the first nine months of 2002
as a result of the elimination of goodwill amortization from the adoption of
Statement No. 142.
Inpatient operating earnings decreased 8.0% from $22.5 million in the first
nine months of 2001 to $20.7 million in the first nine months of 2002,
reflecting a decrease in contribution margin from 38.8% to 37.2%, and an
increase in general and administrative expenses as a percent of revenues from
11.6% to 12.1%. The decrease in contribution margin was primarily the result of
lower productivity related to the further preparation for the implementation of
a prospective payment system and higher labor costs. Depreciation and
amortization as a percentage of revenues increased from 2.8% in 2001 to 3.5% in
2002, as depreciation on increased capital expenditures more than offset the
elimination of goodwill amortization related to Statement No. 142.
Contract therapy operating earnings increased 216.6% from $2.0 million in
the first nine months of 2001 to $6.2 million in the first nine months of 2002,
reflecting a 69.1% increase in operating revenues, partially offset by a
decrease in contribution margin from 29.6% to 27.4% as a result of higher labor
costs. General and administrative expenses as a percentage of revenues decreased
from 21.7% to 16.6%, primarily as a result of increased revenues. Depreciation
and amortization expense as a percentage of revenues decreased from 1.7% in the
first nine months of 2001 to 1.0% in the first nine months of 2002, reflecting
the elimination of goodwill amortization expense related to Statement No. 142.
Outpatient operating earnings decreased 29.6% from $3.6 million in the
first nine months of 2001 to $2.5 million in the first nine months of 2002,
reflecting a decrease in contribution margin from 28.5% to 26.1% as a result of
increased labor expenses and an increase in general and administrative expenses
as a percentage of revenues from 16.0% to 17.3%. Depreciation and amortization
expense as a percentage of revenues decreased from 2.8% in 2001 to 1.6% in 2002,
reflecting the elimination of goodwill amortization expense related to Statement
No. 142.
17 of 23
NONOPERATING ITEMS
Interest income increased by $56,000 or 23.0% to $299,000 due to increased
average cash balances.
Interest expense decreased by $1.1 million or 69.1% from $1.6 million in
the first nine months of 2001 to $0.5 million in the first nine months of 2002,
primarily reflecting the repayment of the line of credit debt during March 2001
and the repayment of all subordinated debt during the fourth quarter 2001.
Earnings before income taxes decreased by $10.8 million from $38.3 million
in the first nine months of 2001 to $27.5 million in the first nine months of
2002. The provision for income taxes in the first nine months of 2001 was $15.3
million compared to $10.4 million in the first nine months of 2002, reflecting
effective income tax rates of 39.8% and 38.0%, respectively. Net earnings
decreased by $6.0 million, or 26.1%, to $17.0 million in the first nine months
of 2002 from $23.1 million in the first nine months of 2001. Diluted net
earnings per share decreased by 25.8% from $1.28 in the first nine months of
2001 to $0.95 in the first nine months of 2002 on a 0.1% increase in the
weighted-average shares outstanding. The increase in the weighted-average shares
outstanding was attributable primarily to the secondary equity offering during
March 2001, and stock option grants and exercises, offset by the repurchase of
common stock in the third quarter 2002 and a decrease in the dilutive effect of
stock options resulting from a lower average stock price.
Liquidity and Capital Resources
As of September 30, 2002, the Company had $5.7 million in cash and
short-term investments and a current ratio, the amount of current assets divided
by current liabilities, of 2.3 to 1. Working capital decreased by $19.7 million
to $57.8 million as of September 30, 2002, compared to $77.5 million as of
December 31, 2001. The decrease in working capital is primarily due to the
repurchase of 1.7 million shares of common stock in the third quarter 2002 at a
cost of $36.9 million, partially offset by an increase in working capital
generated from operations.
Net accounts receivable were $87.5 million at September 30, 2002, compared
to $91.4 million at December 31, 2001. The number of days' average net revenue
in net receivables was 56.6 at September 30, 2002, compared to 63.8 at December
31, 2001.
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 expiring in August 2005 with no balance
outstanding as of September 30, 2002, and no other debt obligations. The Company
also has a $1.5 million letter of credit and a $3.1 million promissory note
issued to the worker's compensation carrier as collateral for reimbursement of
claims. This letter of credit reduces the amount the Company may borrow under
the lines of credit. The promissory note would become payable only upon an event
of default as described in the security agreement with the worker's compensation
carrier.
18 of 23
Item 3. - Quantitative and Qualitative Disclosures About Market Risks
- ---------------------------------------------------------------------
There have been no material changes in the reported market risks since the
filing of the Company's Annual Report on Form 10K for the year ended December
31, 2001.
Item 4. - Controls and Procedures
- ---------------------------------
Based on their evaluation as of September 30, 2002, our Chief Executive
Officer and Chief Accounting Officer have concluded that our disclosure controls
and procedures (as defined in Rule 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934, as amended) are effective. There have been no significant
changes in internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Part II. - Other Information
- ----------------------------
Item 1 - Legal Proceedings
- --------------------------
The Company is subject to various claims and legal actions in the ordinary
course of business. These matters include, without limitation, professional
liability, employee-related matters and inquiries and investigations by
governmental agencies relating to Medicare or Medicaid reimbursement and other
issues.
On May 28, 2002, the Company, H. Edwin Trusheim and Alan C. Henderson were
named as defendants in a complaint filed in the United States District Court for
the Eastern District of Missouri alleging violations of federal securities laws
by the Company. Additional suits similar in substance to the first suit were
filed in the same court thereafter. These suits have been consolidated and the
court has appointed a lead plaintiff and a lead counsel in the combined action.
The proposed class consists of persons and entities that purchased shares of the
Company's common stock between February 7, 2001 and January 21, 2002. The case
appears to have been precipitated by a decline in the stock's market price that
occurred after the public announcement of revised earnings expectations for the
fourth quarter of 2001. The Company has notified its director and officer
liability insurance carrier of the suits and expects it to provide coverage,
including the payment of defense costs after satisfaction of the deductible by
the Company. The Company and Messrs. Trusheim and Henderson have agreed to be
jointly defended in the action.
On August 5, 2002, each of the directors of the Company was named as a
defendant and the Company was named as the nominal defendant in a derivative
suit filed in the Circuit Court in St. Louis County, Missouri. The complaint,
which is based upon substantially the same facts as are alleged in the federal
class action, was filed on behalf of the derivative plaintiff by one of the law
firms that had earlier filed one of the actions in the federal class action. The
Company has filed a motion to dismiss based primarily on the derivative
plaintiff's failure to make a pre-suit demand on the board. Alternatively, the
Company has filed a motion to stay the derivative action until the final
resolution of the federal class action. A hearing on the motions is currently
scheduled for December 13, 2002.
19 of 23
In the fourth quarter 2001, the Company and the United States Department of
Labor agreed to settle a suit seeking payment by the Company of unpaid overtime
to certain temporary employees of the staffing division for the period from
January 1, 1998 to December 31, 2001. As required by the Court order
implementing the agreement, the Company completed a self-audit of its wage and
hour records during the relevant period and submitted it to the Department of
Labor for its review. The audit has been completed and the results approved by
the United States Department of Labor. The Company expects to begin mailing
checks to affected employees based upon the results of the audit within the next
several weeks, and the Department of Labor will have a period of time from that
date to object as to the amount due to any temporary employee covered by the
lawsuit. The Company recorded a $6 million charge in the fourth quarter of 2001
relating to the costs associated with these overtime payments and the
self-audit. The Company expects that the actual costs incurred by the Company
based upon the audit results will not exceed the reserve amounts.
In addition, the Company's clients may become subject to claims, legal
activities, or governmental inquiries and investigations, which may relate to
services provided by the Company. From time to time and depending on the
particular facts and circumstances, the Company may be subject to claims that
the Company has indemnification obligations relating to these matters under the
Company's contracts with its clients. The Company has pending a formal demand
for indemnification by one of the Company's clients for liabilities, including
attorneys' fees and expenses, incurred by the client that allegedly relate to
the Company's services. The claim involves the client's Medicare billing and
cost reporting related to an inpatient rehabilitation unit that the Company
manages at the client facility. It has been reported that the client has settled
a False Claims Act lawsuit related to the indemnification claim with the United
States Department of Justice in the amount of $9,750,000. The Company was not a
party to this settlement and has denied any indemnification liability based upon
its belief that the Company was not responsible, either contractually or
otherwise, for the alleged inaccuracies in Medicare billing and cost reporting
and that the claim does not arise from the Company's actions or omissions.
Although the Company believes that the indemnification claim lacks any merit, it
is possible that the claim could result in litigation. The Company cannot
predict the result of litigation if it is commenced in this matter.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
See exhibit index
(b) Reports on Form 8-K
Date Descripton of Event
---- -------------------
10-30-02 Item 9 Regulation FD Disclosure - the script
for a conference call held by the Registrant
on October 30, 2002
20 of 23
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.
Date: November 12, 2002 By: /s/ James M. Douthitt
----------------------
James M. Douthitt
Senior Vice President of Finance
and Chief Accounting Officer
21 of 23
CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
- ------------------------------------------------------
I, Alan C. Henderson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RehabCare Group,
Inc.:
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002 By: /s/ Alan C. Henderson
------------------------
Alan C. Henderson
President and Chief Executive Officer
22 of 23
CERTIFICATION OF CHIEF ACCOUNTING OFFICER
- -----------------------------------------
I, James M. Douthitt, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RehabCare Group,
Inc.:
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002 By: /s/ James M. Douthitt
----------------------
James M. Douthitt
Senior Vice President of Finance
and Chief Accounting Officer
23 of 23
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1, dated May 9, 1991
[Registration No. 33-40467], and incorporated herein by reference)
3.2 Certificate of Amendment of Certificate of Incorporation (filed as Exhibit
3.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1995 and incorporated herein by reference)
3.3 Amended and Restated Bylaws
4.1 Rights Agreement, dated August 28, 2002, by and between the Registrant and
Computershare Trust Company, Inc. (filed as Exhibit 1 to the Registrant's
Registration Statement on Form 8-A filed September 5, 2002 and incorporated
herein by reference)
99.1 Certification of periodic financial report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
99.2 Certification of periodic financial report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
- -------------------------
Exhibit 3.3
AMENDED AND RESTATED BYLAWS
(as amended and restated on March 6, 2002)
OF
REHABCARE GROUP, INC.
(a Delaware corporation)
- --------------------------------------------------------------------------------
ARTICLE I
Offices
Section 1.01 Registered Office. The registered office of RehabCare Group,
Inc. (hereinafter called the Corporation) in the State of Delaware shall be at
1209 Orange Street, City of Wilmington, County of New Castle, and the name of
the registered agent in charge thereof shall be The Corporation Trust Company.
Section 1.02 Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 2.01 Annual Meetings. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
Section 2.02 Special Meetings. A special meeting of the stockholders for
the transaction of any proper business may be called at the time by the Board,
by the Chairman of the Board or by the Chief Executive Officer.
Section 2.03 Place of Meetings. All meetings of the stockholders shall be
held at such places, within or without the State of Delaware, as may from time
to time be designated by the person or persons calling the respective meeting
and specified in the respective notices or waivers of notice hereof.
Section 2.04 Notice of Meetings. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the stockholders shall be
required. Every notice of a meeting of the stockholders shall state the place,
date and hour of the meeting, and, in the case of a special meeting, shall also
state the purpose or purposes for which the meeting is called. Notice of any
meeting of stockholders shall not be required to be given to any stockholder to
whom notice may be omitted pursuant to Delaware law or who shall have waived
such notice and such notice shall be deemed waived by any stockholder who shall
attend such meeting in person or by proxy; except a stockholder who shall attend
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.
Section 2.05 Quorum. Except as provided by law, the holders of record of a
majority in voting interests of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
Section 2.06 Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) On the date fixed pursuant to Section 2.10 of these Bylaws as the
record date for the determination of stockholders entitled to notice of and
to vote at such meeting, or
(ii) If no such record date shall have been so fixed, then (a) at the
close of business on the day next preceding the day on which notice of the
meeting shall be given or (b) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the
meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledgee to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three (3) years from its date unless said
proxy shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
Section 2.07 List of Stockholders. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 2.08 Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and shall
report the number of shares represented at the meeting and entitled to vote on
such question, shall conduct and accept the votes, and when the voting is
completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The judges
need not be stockholders of the Corporation, and any officer of the Corporation
may be a judge on any question other than a vote for or against a proposal in
which he shall have a material interest.
Section 2.09 Action Without a Meeting. Any action required to be taken at
any annual or special meting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 2.10 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting, nor
more than sixty (60) days prior to any other action. If in any case involving
the determination of stockholders for any purpose other than notice of or voting
at a meeting of stockholders the Board shall not fix such a record date, the
record date for determining stockholders for such purpose shall be the close of
business on the day on which the Board shall adopt the resolution relating
thereto. A determination of stockholders entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
Section 2.11 Notice of Stockholder Nominees. Only persons who are nominated
in accordance with the procedures set forth in this Section 2.11 shall be
eligible to stand for election as a director of the Corporation. Nominations of
persons for election to the Board of the Corporation may be made at a meeting of
the stockholders (a) by or at the direction of the Board or (b) by any
stockholder of the Corporation entitled to vote for the election of directors at
such meeting who complies with the procedures set forth in this Section 2.11.
All nominations by stockholders shall be made pursuant to timely notice in
proper written form delivered to the Secretary of the Corporation. To be timely,
a stockholder notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not later than the close of
business on the 60th day nor earlier than the close of business on the 90th day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days before or more than 60 days after such anniversary date, notice by the
stockholder shall be timely if so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. Notwithstanding anything in the
previous sentence to the contrary, in the event that the number of directors of
the Corporation is increased, and there is not public announcement by the
Corporation naming all of the nominees for director or specifying the size of
the increased Board at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder notice required by this Section
2.11 shall also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered not later than
the close of business on the 10th day following the day upon which the public
announcement with respect to the increased Board is first made by the
Corporation. In no event shall the public announcement of an adjournment of the
annual meeting commence a new time period for the giving of stockholder notice
as described above. For purposes of this Section 2.11, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
the Associated Press, Reuters or a comparable national or international new
service or in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended. To be in proper written form, such stockholder
notice shall set forth in writing (x) as to each person who the stockholder
proposes to nominate for election or re-election as a director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for the election of directors, or as is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, including without limitation, such person's written consent to be named
in the Corporation's proxy statement as a nominee and to serve as a director if
elected; and (y) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the notice is given (i) the name and address, as
they appear on the Corporation's books, of such stockholder and such beneficial
owner and (ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner. At the
request of the Board, any person nominated by the Board for election as a
director shall furnish the Secretary of the Corporation with the information to
be set forth in the stockholder notice of nomination which pertains to the
nominee. In the event that a stockholder seeks to nominate one or more
directors, the Secretary shall appoint two inspectors who are not affiliated
with the Corporation to determine whether the stockholder has complied with this
Section 2.11. If the inspectors determine that a stockholder has not complied
with this Section 2.11, the inspectors shall direct the chairman of the meeting
to declare to the meeting that the nomination was not made in accordance with
the procedures prescribed by this Section 2.11, and the chairman shall so
declare to the meeting that the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 2.11, a stockholder
shall also be required to comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder with respect to the matters set forth in this Section
2.11. Nothing in this Section 2.11 shall be deemed to affect any rights of
holders of any series of Preferred Stock to elect directors under the specified
circumstances attached to a particular series of Preferred Stock.
Section 2.12 Procedures for Submission of Stockholder Proposals at the
Annual Meeting. At the annual meeting of the stockholders of the Corporation,
only such business shall be conducted as shall have been brought before the
meeting (a) by or at the direction of the Board; or (b) by any stockholder of
the Corporation entitled to vote for the election of directors at such meeting
who complies with the procedures set forth in this Section 2.12. For business to
be properly brought before the annual meeting by a stockholder, the stockholder
must give timely notice thereof in proper written form to the Secretary of the
Corporation and such other business must otherwise be a proper matter for
stockholder action. To be timely, a stockholder notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
later than the close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made by the Corporation. In no event shall the
public announcement of an adjournment of the annual meeting commence a new time
period for the giving of stockholder notice as described above. For purposes of
this Section 2.12, "public announcement" shall have the same meaning as set
forth in Section 2.11 of these bylaws. To be in proper written form, a
stockholder notice shall set forth in writing as to each matter the stockholder
proposes to bring before the meeting: (w) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting; (x) the name and address, as they appear on
the Corporation's book, of the stockholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is being made; (y) the
class and number of shares of the Corporation which are owned beneficially and
of record by the stockholder and the beneficial owner; and (z) any material
interest of the stockholder or the beneficial owner in such business. In the
event that a stockholder seeks to propose business at the annual meeting, the
Secretary shall appoint two inspectors who are not affiliated with the
Corporation to determine if the stockholder has complied with this Section 2.12.
If the inspectors determine that a stockholder has not complied with this
Section 2.12, the inspectors shall direct the chairman of the meeting to declare
to the meeting that the business was not properly brought before the meeting and
that any such business shall not be transacted at the meeting. Notwithstanding
the foregoing provisions of this Section 2.12, a stockholder shall also comply
with all the applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder with respect to
the matters set forth in this Section 2.12. Nothing in this Section 2.12 shall
be deemed to affect any rights of any stockholder to request inclusion of a
proposal or proposals in the Corporation's proxy statement pursuant to the rules
and regulations promulgated under the Securities Exchange Act of 1934, as
amended.
ARTICLE III
Board of Directors
Section 3.01 General Powers. The property, business and affairs of the
Corporation shall be managed by the Board.
Section 3.02 Number and Term of Office. The Corporation shall not have less
than three (3), nor more than fifteen (15) directors, with the exact number at
any given time to be fixed within these limits by approval of the directors.
Directors need not be stockholders. Each of the directors of the Corporation
shall hold office until his successor shall have been duly elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
Section 3.03 Election of Directors. The directors shall be elected annually
by the stockholders of the Corporation and the persons receiving the greatest
number of votes, up to the number of directors to be elected, shall be the
directors.
Section 3.04 Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.05 Vacancies. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office until
his successor shall have been elected and shall qualify or until he shall resign
or shall have been removed in the manner hereinafter provided.
The vacancy created by the removal of any director by the affirmative vote
of the stockholders having a majority of the voting power of the Corporation can
only be filled by a director elected by the affirmative vote of the stockholders
having a majority of the voting power of the Corporation given at a special
meeting of the stockholders called for the purpose of filling such vacancy.
Should the stockholders fail to fill the existing vacancy, then in that event
the vacancy may be filled by the remaining directors in the manner set forth
above.
Section 3.06 Place of Meeting, Etc. The Board may hold any of its meetings
at such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice of a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting of
the Board by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in person at such
meeting.
Section 3.07 First Meeting. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
Section 3.08 Regular Meetings. Regular meetings of the Board may be held at
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
Section 3.09 Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman, Vice Chairman, President or a majority of the
authorized number of directors to be held at the principal office of the
Corporation, or at such other place or places within or without the State of
Delaware as the person or persons calling the meeting shall designate. Except as
otherwise provided by law or by the Bylaws, notice of the time and place of each
such special meeting shall be mailed to each director, addressed to him at his
residence or usual place of business, at four (4) days before the day on which
the meeting is to be held, or shall be sent to him at such place by telegraph,
telecopier or cable or be delivered personally not less than twenty-four (24)
hours before the time at which the meeting is to be held. Except where otherwise
required by law or by the Bylaws, notice of the purpose of a special meeting
need not be given. Notice of any meeting of the Board shall not be required to
be given to any director who is present at such meeting, except a director who
shall attend such meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
Section 3.10 Quorum and Manner of Acting. Except as otherwise provided in
these Bylaws, the Certificate of Incorporation, or by law, the presence of a
majority of the authorized number of directors shall be required to constitute a
quorum for the transaction of business at any meeting of the Board, and all
matters shall be decided at any such meeting, a quorum being present, by the
affirmative votes of a majority of the directors present. A meeting at which a
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, provided any action taken is approved by at least a
majority of the required quorum for such meeting. In the absence of a quorum, a
majority of directors present at any meeting may adjourn the same from time to
time until a quorum shall be present. Notice of any adjourned meeting need not
be given. The directors shall act only as a Board, and the individual directors
shall have no power as such.
Section 3.11 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be and such written consent is
filled with the minutes of proceedings of the Board or committee.
Section 3.12 Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders being a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
Section 3.13 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefore.
Section 3.14 Committees. The Board may, by resolution passed by a majority
of the whole Board, designate one (1) or more committees, each committee to
consist of one (1) or more of the directors of the Corporation. Any such
committee, to the extent provided in the resolution of the Board and except as
otherwise limited by law, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Any such committee shall keep written minutes of
its meetings and report the same to the Board at the next regular meeting of the
Board. In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member.
ARTICLE IV
Officers
Section 4.01 Corporate Officers.
(a) The officers of the Corporation shall be a President, one (1) or more
Vice Presidents (the number thereof and their respective titles to be determined
by the Board), a Secretary and a Treasurer, and such other officers as may be
appointed at the discretion of the Board in accordance with the provisions of
Section 4.01(b).
(b) In addition to the officers specified in Section 4.01(a), the Board may
appoint other officers, as it may deem necessary or advisable, including one (1)
or more Assistant Secretaries, and one (1) or more Assistant Treasurers, each of
whom shall hold office for such period, have such authority, and perform such
duties as the Board may from time to time determine. The Board may delegate to
any officer of the Corporation or any committee of the Board the power to
appoint, remove and prescribe the duties of any such officer.
(c) One person may hold two or more offices, except that the Secretary may
not hold the office of President.
Section 4.02 Election, Term of Office and Qualifications. The officers of
the Corporation, except such officers as may be appointed in accordance with
Section 4.01(b) or 4.05, shall be appointed annually by the Board at the first
meeting thereof held after the election thereof. Each officer shall hold office
until such officer shall resign or shall be removed or otherwise disqualified to
serve, or the officer's successor shall be appointed and qualified.
Section 4.03 Removal. Any officer of the Corporation may be removed, with
or without cause, at any time at any regular or special meeting of the Board by
a majority of the directors at the time in office or, except in the case of an
officer appointed by the Board, by any officer of the Corporation or committee
of the Board upon whom or which such power of removal may be conferred by the
Board.
Section 4.04 Resignations. Any officer may resign at any time by giving
written notice of his resignation to the Board, President or the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, upon receipt thereof by the Board,
President or the Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4.05 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or other event, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments to such office.
Section 4.06 The President. The President of the Corporation shall be the
chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, agents and employees.
Section 4.07 The Vice Presidents. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe. At
the request of the President, or in case of the President's absence or inability
to act upon the request of the Board, a Vice President shall perform the duties
of the President and when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the President.
Section 4.08 The Secretary. The Secretary shall, if present, record the
proceedings of all meetings of the Board, of the stockholders, and of all
meetings of the Board of stockholders, and all committees of which a secretary
shall not have been appointed. The Secretary shall see that all notices are duly
given in accordance with these Bylaws and as required by law; shall be custodian
of the seal of the Corporation and shall affix and attest the seal to all
documents to be executed on behalf of the Corporation under its seal; and, in
general, shall perform all the duties incident to the office of the Secretary
and such other duties as may from time to time be assigned to the Secretary by
the Board.
Section 4.09 The Treasurer. The Treasurer shall have the general care and
custody of the funds and securities of the Corporation and shall deposit all
such funds in the name of the Corporation in such banks, trust companies or
other depositories as shall be selected by the Board or in accordance with
authority delegated by the Board. He shall receive, and give receipts for,
monies due and payable to the Corporation from any source whatsoever. He shall
exercise general supervision over expenditures and disbursements made by
officers, agents and employees of the Corporation and the preparation of such
records and reports in connection therewith as may be necessary or desirable. He
shall, in general, perform all other duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board.
Unless otherwise provided by the Board, the Treasurer shall be the Chief
Financial Officer of the Corporation.
Section 4.10 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. No officer shall be
prevented from receiving such compensation by reason of the fact that the
officer is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefore.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
Section 5.01 Execution of Contracts. The Board, except as in these Bylaws
otherwise provided, may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances; and unless so authorized by the Board or by these Bylaws, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or in any amount.
Section 5.02 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
Section 5.03 Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
Section 5.04 General and Special Bank Accounts. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
Section 6.01 Certificates for Stock.
(a) The shares of the Corporation shall be represented by certificates,
provided that the Board may provide by resolution or resolutions that some or
all of any or all classes or series of its stock shall be uncertificated shares.
Any such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the Corporation. Notwithstanding the adoption
of such a resolution by the Board every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, in such form as the Board shall prescribe,
signed by, or in the name of the Corporation by the Chairman or Vice Chairman of
the Board, or the President or Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary of an Assistant Secretary of the
Corporation representing the number of shares registered in certificate form.
Any of or all of the signatures on the certificates may be a facsimile. In case
any officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any such certificate, shall have ceased to be
such officer, transfer agent to registrar before such certificate is issued,
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, where such officer, transfer agent
or registrar at the date of issue.
(b) A record shall be kept of the respective names of the persons, firms or
corporation owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.04.
Section 6.02 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
Section 6.03 Regulations. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
Section 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper to do so.
ARTICLE VII
Indemnification
Section 7.01 Indemnification of Directors and Officers. The Corporation
shall, to the fullest extent permitted by law, indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including without limitation an action by or in the right of the
Corporation) by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
Section 7.02 Advance of Expenses. Costs and expenses (including attorneys'
fees) incurred by or on behalf of a director, officer, employee or agent in
defending or investigating any action, suit, proceeding or investigation shall
be paid by the Corporation in advance of the final disposition of such matter,
if such director, officer, employee or agent shall undertake in writing to repay
any such advances in the event that it is ultimately determined that he is not
entitled to indemnification. Notwithstanding the foregoing, no advance shall be
made by the Corporation if a determination is reasonably and promptly made by
the Board of Directors by a majority vote of a quorum of disinterested
directors, or (if such a quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs) by independent legal counsel,
that, based upon the facts known to the Board or counsel at the time such
determination is made, (a) the director, officer, employee or agent acted in bad
faith or deliberately breached his duty to the Corporation or its stockholders,
and (b) as a result of such actions by the director, officer, employee or agent,
it is more likely than not that it will ultimately be determined that such
director, officer, employee or agent is not entitled to indemnification.
Section 7.03 Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article or applicable law.
Section 7.04 Non-Exclusivity. The right of indemnity and advancement of
expenses provided herein shall not be exclusive, and the Corporation may provide
indemnification or advancement of expenses to any person, by agreement or
otherwise, on such terms and conditions as the Board of Directors may approve.
Any agreement for indemnification of or advancement of expenses to any director,
officer, employee or other person may provide for rights of indemnification or
advancement of expenses which are broader or otherwise different from those set
forth herein.
ARTICLE VIII
Miscellaneous
Section 8.01 Seal. The Board shall provide a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.
Section 8.02 Waiver of Notices. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice. Attendance
of a person at a meeting (whether in person or by proxy in the case of a meeting
of stockholders) shall constitute a waiver of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of any regular or special meeting of the stockholders, directors, or
members of a committee of directors need be specified in any written waiver of
notice.
Section 8.03 Amendments. These Bylaws, or any of them, may be altered,
amended or repealed, and new Bylaws may be made, (i) by the Board, by vote of a
majority of the number of directors then in office as directors, acting at any
meetings of the Board, or (ii) by the stockholders, at any annual meeting of
stockholders, without previous notice, or any special meeting of stockholders,
provided that notice of such proposed amendment, modification, repeal or
adoption is given in the notice of special meeting. Any Bylaws made or altered
by the stockholders may be altered or repealed by either the Board or the
stockholders.
Section 8.04 Representation of Other Corporations. The President, any Vice
President, or Secretary of the Corporation are authorized to vote, represent and
exercise on behalf of the Corporation all rights incident to any and all shares
of any other corporation or corporations standing in the name of the
Corporation. The authority herein granted to said officers to vote or represent
on behalf of the Corporation any and all shares held by the Corporation in any
other corporation or corporations may be exercised either by such officers in
person or by any person authorized to do so by proxy or power of attorney duly
executed by said officers.
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of RehabCare Group, Inc. (the "Company")
on Form 10-Q for the period ending September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Alan C.
Henderson, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Alan C. Henderson
------------------------------------
Alan C. Henderson
Chief Executive Officer of
RehabCare Group, Inc.
November 12, 2002
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of RehabCare Group, Inc. (the "Company")
on Form 10-Q for the period ending September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, James
M. Douthitt, Senior Vice President of Finance and Chief Accounting Officer of
the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ James M. Douthitt
------------------------------------
James M. Douthitt
Senior Vice President of Finance and
Chief Accounting Officer of
RehabCare Group, Inc.
November 12, 2002