UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 02, 2003
REHABCARE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19294 51-0265872
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
7733 Forsyth Boulevard
17th Floor
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 863-7422
Item 7. Financial Statements and Exhibits.
(c) Exhibits. See Exhibit Index.
Item 9. Regulation FD Disclosure.
Beginning on December 2, 2003, RehabCare executives will make
presentations at investor conferences to analysts and in other forums using the
slides as included in this Form 8-K as Exhibit 99. Presentations will be made
using these slides, or modifications thereof, in connection with other
presentations in the foreseeable future.
The current slides incorporated into the investor relations presentation
are included in this Form 8-K as Exhibit 99. The full slide presentation is
available in the Investor Info section on our website at www. rehabcare.com.
Information contained in this presentation is an overview and intended to
be considered in the context of RehabCare's SEC filings and all other publicly
disclosed information. We undertake no duty or obligation to update or revise
this information. However, we may update the presentation periodically in a Form
8-K filing.
The presentation included in this report does not include images included
in the actual slides. In order that all investors be provided with substantially
the same information, RehabCare is making these slides available on its website.
The presentation in its entirety will be made available in the Investor Info
section of the RehabCare website, www.rehabcare.com, although this availability
may be discontinued at any time.
Forward-looking statements have been provided pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. They 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 cost, effect
and timing of restructuring activities that have been commenced, including our
ability to achieve and sustain the annual expense reductions anticipated; the
timing and rate of the resumed growth in the staffing division; changes in and
compliance with governmental reimbursement rates; regulations or policies
affecting the hospital rehabilitation services and contract therapy divisions,
including our estimates with respect to the effect of newly promulgated
regulations on the Company's business; our ability to attract new client
relationships or to retain and grow existing client relationships through the
integration of our new information system with those of our clients and the
development of alternative product offerings; our ability to identify and
consummate, within the expected timeframes, strategic acquisitions to accelerate
growth in our divisions; our ability, and the additional costs, to attract
operational and professional employees; significant increases in health,
worker's compensation and professional and general liability insurance premiums;
the adequacy and effectiveness of operating and administrative systems;
litigation risks, including our ability to predict the ultimate costs and
liabilities or the disruption of RehabCare Group's operations; competitive and
regulatory effects on pricing and margins; and general economic conditions,
including efforts by governmental reimbursement programs, insurers, healthcare
providers and others to contain healthcare costs.
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 hereunto duly authorized.
Dated: December 02, 2003
REHABCARE GROUP, INC.
By: /s/ Vincent L. Germanese
-----------------------------------------
Vincent L. Germanese
Senior Vice President, Chief Financial
Officer and Secretary
EXHIBIT INDEX
Exhibit No. Description
99 Text of Investor Relations Presentation in Use
Beginning December 02, 2003
Exhibit 99
Safe Harbor
Forward-looking statements have been provided pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. They 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 cost, effect
and timing of restructuring activities that have been commenced, including our
ability to achieve and sustain the annual expense reductions anticipated; the
timing and rate of the resumed growth in the staffing division; changes in and
compliance with governmental reimbursement rates; regulations or policies
affecting the hospital rehabilitation services and contract therapy divisions,
including our estimates with respect to the effect of newly promulgated
regulations on the Company's business; our ability to attract new client
relationships or to retain and grow existing client relationships through the
integration of our new information system with those of our clients and the
development of alternative product offerings; our ability to identify and
consummate, within the expected timeframes, strategic acquisitions to accelerate
growth in our divisions; our ability, and the additional costs, to attract
operational and professional employees; significant increases in health,
worker's compensation and professional and general liability insurance premiums;
the adequacy and effectiveness of operating and administrative systems;
litigation risks, including our ability to predict the ultimate costs and
liabilities or the disruption of RehabCare Group's operations; competitive and
regulatory effects on pricing and margins; and general economic conditions,
including efforts by governmental reimbursement programs, insurers, healthcare
providers and others to contain healthcare costs.
RHB Financial Performance
Q2/03 Q3/03 % Change
Revenue $136.0 million $135.0 million (0.7%)
EBITDA* $9.8 million $7.8 million** (20.4%)
Net Earnings $4.5 million $3.3 million** (26.7%)
EPS $0.27 $0.20** (26.0%)
* Earnings before interest, taxes, depreciation and amortization
**Includes restructuring charge of $0.8 million, or $0.05 per diluted share,
after tax.
RHB Financial Position
Strong Balance Sheet
o Current cash and marketable securities - $27 million
o Cash generated per month - $2 million
o No Debt
o Unused $110 million/5 year revolver - 2 years remaining
o Current Ratio - 3.1:1
o DSO - 62 days
RHB Financial Performance - Trend
Adjusted EPS Growth
(Graphic Omitted)
GAAP Pro Forma
Fiscal Year Ended February 28 Fiscal Year Ended February 28
1992 - $0.20 1992 - $0.20
1993 - $0.24 1993 - $0.24
1994 - $0.29 1994 - $0.29
1995 - $0.35 1995 - $0.35
1996 - $0.42 1996 - $0.42
Fiscal Year Ended December 31 Fiscal Year Ended December 31
1996 - $0.47** 1996 - $0.47**
1997 - $0.73* 1997 - $0.68*
1998 - $0.86* 1998 - $0.85*
1999 - $1.03* 1999 - $1.08*
2000 - $1.45 2000 - $1.45
2001 - $1.16* 2001 - $1.48*
2002 - $1.38 2002 - $1.38
2003 - $0.99*
2003 - $0.95-$1.10 Guidance
*Consensus estimate of EPS including $0.05 restructuring charge is $0.99:
excluding restructuring charge is $1.04. Pro forma results for 2001 do not
include a one-time charge related to a DOL settlement of $0.30. Pro forma
results for 2001 and 1999 do not reflect non-operating losses associated with
write-down of investments of $0.02 per share and $0.05 per share, respectively.
Pro forma results for 1998 do not include a $0.06 per share gain on sale of
securities or a $0.05 per share charge for the cumulative effect of change in
accounting for start-up costs. The pro forma results for 1997 do not reflect a
$0.06 per share gain on sale of securities.
**Annualized
RHB Revenues Q3/03
Total Revenue $135 million
(Graphic Omitted)
Program Management $80.1 million
Hospital Rehabilitation Services $46.5 million 34%
Contract Therapy $33.6 million 25%
Healthcare Staffing $54.9 million
Supplemental $29.3 million 22%
Travel $25.6 million 19%
RHB Business Profile
Hospital Rehabilitation Services
(Graphic Omitted)
Management of inpatient and outpatient rehabilitation programs, skilled
nursing units and the delivery of therapy to medical/surgical patients.
Inpatient $34.2 million
Outpatient $12.3 million
158 Hospital Clients as of September 30, 2003
4 ARU, SNU & OP
12 ARU & SNU
23 ARU & OP
87 ARU only
29 OP only
Acute Rehabilitation Units / Skilled Nursing Units
Elderly - orthopedic, stroke, circulatory, respiratory
Outpatient
Middle-aged - most musculoskeletal
Competitors - self operation, 3 small competitors (combined market share less
than RHB)
RHB Business Profile
Hospital Rehabilitation Services
(Graphic Omitted)
Annual Revenue (in millions)
ARU OP SNU
1992 $ 44.5
1993 48.4
1994 61.7
1995 75.5 $ 7.2 $ 0.5
1996 76.7 10.5 4.4
1997 86.6 9.4 10.8
1998 96.5 16.5 15.2
1999 106.2 30.7 10.3
2000 109.3 42.3 10.7
2001 112.5 50.0 10.8
2002 120.7 49.0 10.0
2003* 129.3 48.4 7.1
* 2003 Estimate
Admissions and Visits
ARU OP Visits SNU
Admissions Admissions
1992 11,696
1993 13,147
1994 17,027
1995 21,329 135,064 628
1996 23,135 223,904 3,732
1997 27,019 231,256 8,381
1998 32,537 378,108 12,856
1999 37,320 785,943 11,375
2000 39,313 1,173,324 11,345
2001 42,278 1,439,169 11,804
2002 44,986 1,366,439 10,302
2003* 48,678 1,247,229 7,070
* 2003 Estimate
"RehabCare manages the complete continuum of rehabilitation care, from acute
therapy through outpatient services. It's a large commitment."
Eileen Malo
Executive VP, Continuing Care Services
Bon Secours Hampton Roads Health System
Norfolk, VA
RHB Business Profile
Hospital Rehabilitation Services Locations
(Graphic Omitted)
Map omitted showing HRS Acute Rehab Unit locations, HRS Outpatient locations,
HRS Skilled Nursing Unit locations, Corporate Headquarters location and three
examples where RehabCare has all three HRS product lines (Southeast Pennsylvania
and New Jersey, Norfolk and Oklahoma City).
RHB Business Profile
Contract Therapy
(Graphic Omitted)
Management of post-acute rehabilitation services for patients in skilled nursing
and continuing care facilities
200 Clients
473 Locations
Elderly; stroke, orthopedic, neurological, complex medical
Competitors: RehabWorks, Aegis (Beverly), Sundance Rehabilitation,
Kindred, Rehab Advantage
Contract therapy revenues Q3/03 $33.6M
"We were looking for a partner that could not only provide high-quality
services, but also help us grow our business."
Mr. Dean Eliason
Vice President
Fountains Retirement Communities, Inc.
Tucson, AZ
RHB Business Profile
Contract Therapy
(Graphic Omitted)
Annual Revenue (in millions) Average Revenue Per Location
1997 $ 8.4 $234,921
1998 13.9 281,547
1999 14.1 154,899
2000 30.0 192,130
2001 64.7 258,902
2002 105.3 278,427
2003* 129.5 280,557
*2003 Estimate
RHB Business Profile
Contract Therapy Locations
(Graphic Omitted)
Map omitted showing Contract Therapy locations and Corporate Office location
Two examples where RehabCare has a large number of locations (Missouri and
Minnesota)
RHB Business Profile
StarMed
(Graphic Omitted)
Supplemental Travel
------------ -------
Clients 1,620, 75% Hospitals 449, 79% Hospitals
Professional Mix 90% Nursing, 10% Allied 76% Nursing, 17% Radiology
Client Base Any healthcare provider Hospitals or other
healthcare facilities
Professionals on
Assignment 3,490 1,010
Competitors InteliStaf, MSN, Maxim, Cross Country, Maxim,
Nursefinders, Favorite American Mobile, MSN,
Nurses, "Moms & Pops" InteliStaf
Branches 65 n/a
Revenues Q3/03 $29.3M $25.6M
"StarMed has the assignments that I want, when I want them. That's why StarMed's
my company."
Valerie Sanders
Registered Nurse
StarMed Ambassador
RHB Business Profile
StarMed
(Graphic Omitted)
Annual Revenue (in millions) Weeks Worked
Supplemental Travel Supplemental Travel
1996 $ 28.9 21,908
1997 46.4 29,652
1998 $ 28.4 38.2 27,673 24,592
1999 112.9 35.4 106,447 24,663
2000 205.9 54.2 190,806 33,145
2001 225.6 79.0 188,368 45,530
2002 172.1 105.5 128,396 54,156
2003 Q1* 141.7 106.7 100,536 54,428
2003 Q2* 129.8 98.9 93,544 50,356
2003 Q3* 118.4 102.3 85,736 52,560
2003 Q4* 116.6 87.5 84,500 45,224
* Quarterly numbers annualized - Q4 numbers are estimates
RHB Business Profile
StarMed Branch Locations
(Graphic Omitted)
Map omitted showing StarMed locations and Corporate Office location
RHB Business Description
Market Drivers
(Graphics Omitted)
Aging of Baby Boomers
U. S. Population Over 65 (in millions)
2000 34.4
2005 36.3
2010 39.7
2015 45.9
2020 53.7
2025 62.6
Source: U.S. Census Bureau, Population Projections Bureau, January 13, 2000
Shortage of Healthcare Professionals
RN Demand Vs. Supply (in millions)
Demand Supply
2000 1.999 1.889
2005 2.161 2.012
2010 2.344 2.069
2015 2.562 2.055
2020 2.810 2.001
Source: National Center for Health Workforce Analysis, U.S.D.H.H.S., July 2002
RHB Regulatory Drivers
Part B Therapy Caps (Contract Therapy)
- --------------------------------------
- - Limits Part B Therapy
$1,590 - Occupational Therapy
$1,590 - Physical & Speech Therapy (Combined)
- - Implemented 9/1/03
- - Prescription Drug Bill contains moratorium through 12/31/2005
65 Percent Rule (ARU)
- ---------------------
- - Rule is not final, effective date as early as 1/1/04
- - Limits access to ARU for certain diagnoses
- - Patients denied access to ARU will seek rehab in other venues
- - Assuming 1/1/04 effective date as written, 0% to 3% decline in RHB
discharges in first year
RHB Strategic Initiatives
(Graphic omitted)
RHB has developed new strategies to respond to changing markets, regulations and
customer needs:
- - Desciplined growth and only profitable growth
- - Focus on target markets and develop local market concentration
Provides better opportunities for product differentiation
Enhances ability to recruit
Enhances and protects margins
- - Develop higher quality professionals through training improvements
- - Create better outcomes
RHB Strategic Initiatives
Restructuring
(Graphic omitted)
1. Restructure Selling, General & Administrative Expenses
- $3.5 million estimated cost improvement in 4Q/03 compared to 2Q/03
- $12 million estimated cost improvement in 2004 compared to 2003
48% Personnel Related
31% Vendor Relationships
21% Discretionary Expenditures
RHB Strategic Initiatives
Restructuring
1. StarMed operations - break-even plan for staffing business in 2004
- Supplemental
Core Branches (20) - consistently above profit targets
Opportunity Branches (20) - strong market potential, adequate volume
to support a branch, four key areas to improve profitability
1. Volume
2. Bill rates
3. Pay rates
4. Selling expenses
Consolidated/Trade Branches (15) - lack market conditions and volume,
investigating options to trade with competitors or consolidate into
other branches
- Travel
Improve margins through more disciplined pricing
Improve contract compliance
RHB Strategic Initiatives
Service Offering
2. Re-design Service Offering
Post-Acute Continuum (Graphic omitted)
StarMed - integrate Travel and Supplemental into single source staffing
provider (Graphic omitted)
RHB Strategic Initiatives
Build Relationships
3. Build partnerships instead of transactional relationships
- Develop joint venture and capital infusion models
- Create a la carte service offering for HRS
- Develop partnerships models for long-term care chains
- Simulis - proving competencies
- Target markets and clients
RHB Strategic Initiatives
Build Relationships
3. Create and utilize technology to enhance partnerships
- Integrate inpatient, outpatient and CT technology platforms to
support the continuum of care
- Develop website as strategic business tool
Develop cost-saving business practices
Recruiting
Training
Employee portal
Enhance ability to recruit
Attract employees with proven competencies (through Simulis)
- Consolidate StarMed Travel & Supplemental technology
RHB Strategic Initiatives
(Graphic omitted)
4. Acquisitions
- Capital available
- Key Executive focus
- Acquisition experience
- Pipeline in development
Hospital Rehabilitation Services
--------------------------------
Advanced Rehabilitation Resources, Inc. - IP
Physical Therapy Resources, Inc. - OP
Rehabilitative Care Systems of America - OP
Salt Lake Physical Therapy - OP
DiversiCare Rehab Services, Inc. - OP
Contract Therapy
----------------
TeamRehab
Moore Rehabilitation Services, Inc.
Rehab Unlimited, Inc.
Therapeutic Systems, Ltd
Healthcare Staffing*
-------------------
Healthcare Staffing Solutions, Inc.
StarMed
All Staff, Inc.
eai Healthcare Staffing Solutions, Inc.
* Long term strategy for staffing segment
RHB Key Investment Points
(Graphic omitted)
Long Record of
Successful Growth and Profitability
Disciplined Strategy Long Standing Diversified
for Growth and Relationships Revenue Mix
Profitability with Clients
Favorable Strong Financial Experienced
Demographic Factors Position Management Team
No Debt
$27 Million Cash,
Solid Cash Flow