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): January 13, 2004
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 January 13, 2004, 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 ability of
RehabCare and the Foundation to implement the planned programs within the
expected timeframes and the ability of RehabCare to otherwise achieve the
revenue and earnings levels from the relationship at or above the levels
projected; the timing and financial effect of the Company's continuing
restructuring efforts with respect to the Company's current businesses; changes
in and compliance with governmental reimbursement rates and other regulations or
policies affecting RehabCare's hospital rehabilitation and contract therapy
lines of business; RehabCare's ability to attract new client relationships or to
retain and grow existing client relationships through expansion of RehabCare's
hospital rehabilitation and contract therapy service offerings and the
development of alternative product offerings that build stronger partnering
relationships between RehabCare and its clients; RehabCare's ability to identify
and consummate, within the expected timeframes, strategic acquisitions to
accelerate growth in RehabCare's hospital rehabilitation and contract therapy
divisions; the consummation of the pending transaction pursuant to which
RehabCare's existing staffing business will be acquired by InteliStaf Holdings,
Inc. and the operating performance of InteliStaf, and the rate of return that
RehabCare will be able to achieve from its equity interest in InteliStaf after
the consummation of the transaction; the adequacy and effectiveness of
RehabCare's operating and administrative systems; RehabCare's ability and the
additional costs of attracting administrative, operational and professional
employees; significant increases in health, workers' compensation and
professional and general liability costs; litigation risks of RehabCare's past
and future business, including RehabCare's ability to predict the ultimate costs
and liabilities or the disruption of its 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: January 13, 2004
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 January 13, 2004
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 ability of
RehabCare and the Foundation to implement the planned programs within the
expected timeframes and the ability of RehabCare to otherwise achieve the
revenue and earnings levels from the relationship at or above the levels
projected; the timing and financial effect of the Company's continuing
restructuring efforts with respect to the Company's current businesses; changes
in and compliance with governmental reimbursement rates and other regulations or
policies affecting RehabCare's hospital rehabilitation and contract therapy
lines of business; RehabCare's ability to attract new client relationships or to
retain and grow existing client relationships through expansion of RehabCare's
hospital rehabilitation and contract therapy service offerings and the
development of alternative product offerings that build stronger partnering
relationships between RehabCare and its clients; RehabCare's ability to identify
and consummate, within the expected timeframes, strategic acquisitions to
accelerate growth in RehabCare's hospital rehabilitation and contract therapy
divisions; the consummation of the pending transaction pursuant to which
RehabCare's existing staffing business will be acquired by InteliStaf Holdings,
Inc. and the operating performance of InteliStaf, and the rate of return that
RehabCare will be able to achieve from its equity interest in InteliStaf after
the consummation of the transaction; the adequacy and effectiveness of
RehabCare's operating and administrative systems; RehabCare's ability and the
additional costs of attracting administrative, operational and professional
employees; significant increases in health, workers' compensation and
professional and general liability costs; litigation risks of RehabCare's past
and future business, including RehabCare's ability to predict the ultimate costs
and liabilities or the disruption of its 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.
-1-
RHB Financial Performance
(Graphic omitted)
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.
-2-
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
-3-
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
-4-
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%
-5-
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)
-6-
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
-7-
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).
-8-
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
-9-
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
-10-
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)
-11-
RHB Business Profile
StarMed
RehabCare has agreed to sell StarMed to InteliStaf
o Combining StarMed and InteliStaf offers a unique opportunity
- Similar size
- Commitment to Travel and Per Diem
- Complementary geography
- Similar core business philosophy
o Creates a stronger healthcare staffing competitor
o Continues commitment to staffing, while fulfilling objective to return the
staffing business to profitability
-12-
RHB Business Profile
StarMed
The combined company
o Will operate under the InteliStaf name
o Largest integrated privately held healthcare staffing company
o 2nd largest per diem staffing company
- more than 85 markets
- more than 23,000 professionals at local offices
o 3rd largest travel staffing company
- more than 1,700 on assignment
o Will be led by InteliStaf CEO Ralph Friedmann
-13-
RHB Business Profile
StarMed
Transaction Summary
o Stock for stock transaction
o RehabCare becomes a key investor with
- The Carlyle Group
- Members of InteliStaf management team
o RehabCare will hold two seats on board of directors
- Chair audit committee
- Member of compensation committee
-14-
RHB Business Profile
Combined Branch Locations
(Graphic Omitted)
Map omitted showing StarMed locations and InteliStaf locations
-15-
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
-16-
RHB Regulatory Drivers
Part B Therapy Caps (Contract Therapy)
- --------------------------------------
- - Limits Part B Therapy
$1,590 - Occupational Therapy
$1,590 - Physical & Speech Therapy (Combined)
- - Effective 9/1/03 through 12/8/03
- - Prescription Drug Bill contains moratorium through 12/31/2005
65 Percent Rule (ARU)
- ---------------------
- - Rule is not final, effective date not yet known
- - Limits access to ARU for certain diagnoses
- - Patients denied access to ARU will seek rehab in other venues
- - As currently written, 0% to 3% decline in RHB discharges in first year
-17-
RHB Strategic Initiatives
(Graphic omitted)
RHB has developed new strategies to respond to changing markets, regulations and
customer needs:
- - Disciplined 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
-18-
RHB Strategic Initiatives
Restructuring
(Graphic omitted)
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
* Will be reduced as a result of the StarMed transaction
-19-
RHB Strategic Initiatives
Service Offering
(Graphic omitted)
Re-design Service Offering
Post-Acute Continuum
-20-
RHB Strategic Initiatives
Service Offering
RehabCare signed an agreement with Signature Health Care Foundation, December 31
to provide outpatient and home health rehabilitation in the St. Louis area
o Foundation's mission is to improve quality, efficiency and affordability of
health care by
- Increasing physician leadership
- Developing effective business practices
o Foundation was formed by Signature Health Systems Inc
- 41 physician orthopedic group
- 6 offices in greater St. Louis
- More than 140,000 office visits
-21-
RHB Strategic Initiatives
Service Offering
Signature agreement supports 2 strategies
o Partnership relationship with physicians delivering both cost-effective and
high quality rehabilitation services
o Enables development of market-based continuum of care
- 49 bed acute rehab unit
- 26 rehabilitation programs in SNFs
- New Outpatient and Home Health Offices
- 3 hub offices
- 11-14 satellites
-22-
RHB Strategic Initiatives
Build Relationships
(Graphic Omitted)
The St. Louis Area Continuum of Care (map omitted showing St. Louis locations)
-23-
RHB Strategic Initiatives
Build Relationships
Build partnerships instead of transactional relationships
- - Develop joint venture and capital infusion models
- - Create a la carte service offerings
- - Develop partnerships models for long-term care chains
- - Simulis - proving competencies
- - Target markets and clients
-24-
RHB Strategic Initiatives
Build Relationships
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)
-25-
RHB Strategic Initiatives
(Graphic omitted)
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
-26-
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 Position Experienced
Demographic Factors No Debt Management Team
$27 Million Cash,
Solid Cash Flow
-27-