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): March 9, 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
23rd 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 March 9, 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 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.
Forward-looking statements involve known and unknown risks and uncertainties
that may cause RehabCare'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 to integrate acquisitions and to implement
client partnering relationships within the expected timeframes and to achieve
the revenue and earnings levels from such acquisitions and relationships 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; the future
operating performance of InteliStaf Holdings, Inc., and the rate of return that
RehabCare will be able to achieve from its equity interest in InteliStaf; 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: March 9, 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 March 9, 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.
Forward-looking statements involve known and unknown risks and uncertainties
that may cause RehabCare'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 to integrate acquisitions and to implement
client partnering relationships within the expected timeframes and to achieve
the revenue and earnings levels from such acquisitions and relationships 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; the future
operating performance of InteliStaf Holdings, Inc., and the rate of return that
RehabCare will be able to achieve from its equity interest in InteliStaf; 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)
Q3/03 Q4/03
Revenue $135.0 million $129.5 million
Operating Earnings $ 5.7 million* ($34.5 million)**
Net Earnings $ 3.3 million* ($25.5 million)**
EPS $ 0.20* ($ 1.58)**
* Includes restructuring charge of $0.8 million, or $0.05 per diluted share,
after tax.
**Includes a loss on net assets held for sale of $43.6 million pretax, or $30.6
million or $1.90 per diluted share, after tax.
-2-
RHB Financial Position
Strong Balance Sheet
o Current cash and marketable securities - $38 million
o Operating cash generated per month - $2.5 million
o No debt
o Unused $110 million/5 year revolver - 1.5 years remaining
o Current Ratio - 3.3:1
o DSO - 64 days
-3-
RHB Financial Performance - Trend in EPS
(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 - ($0.86) 2003 - $1.07
2004 - $1.22-$1.32 Guidance
2004 Analyst mean $1.34
-4-
RHB Financial Performance - Trend in EPS
(continued)
Footnote Explanations for Chart on Page 4
Year Explanation
- ---- -----------
1996 Annualized
1997 Pro forma results do not reflect a $0.06 per share gain on sale of
securities.
1998 Pro forma results 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.
1999 Pro forma results do not reflect a non-operating loss associated with
write-down of investment of $0.05.
2001 Pro forma results do not include a one-time charge related to a DOL
settlement of $0.30. Pro forma results do not reflect a non-operating
loss associated with a write-down of investment of $0.02 per share.
2003 GAAP results include a loss on net assets held for sale of $30.6
million, or $1.90 per diluted share, after tax and a restructuring
charge of $0.8 million, or $0.05 per diluted share after tax.
2004 GAAP estimates include a $1.2 million charge, net of tax ($0.07 per
share) in Q1/04. Pro forma estimates do not include the charge.
Analyst mean estimate $1.34.
-5-
RHB Revenues Q4/03
Total Revenue $129.5 million
(Graphic Omitted)
Program Management $80.3 million
Hospital Rehabilitation Services $46.9 million 36%
Contract Therapy $33.4 million 26%
Healthcare Staffing $49.2 million
Supplemental $28.2 million 22%
Travel $21.0 million 16%
-6-
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 $34.8 million
Outpatient $12.1 million
146 Hospital Clients as of December 31, 2003
4 ARU, SNU & OP
11 ARU & SNU
19 ARU & OP
87 ARU only
24 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)
-7-
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 129.7 49.0 7.2
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 49,107 1,247,534 7,047
"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
-8-
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).
-9-
RHB Business Profile
Contract Therapy
(Graphic Omitted)
Management of post-acute rehabilitation services for patients in skilled nursing
and continuing care facilities
200+ Clients
508 Locations
Elderly; stroke, orthopedic, neurological, complex medical
Competitors: RehabWorks, Aegis (Beverly), Sundance Rehabilitation,
Kindred, Rehab Advantage
Contract therapy revenues Q4/03 $33.4M
"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
-10-
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 130.9 284,544
-11-
RHB Business Profile
Contract Therapy Locations
(Graphic Omitted)
Map omitted showing Contract Therapy locations and Corporate Office location
and two examples where RehabCare has a large number of locations (Missouri and
Minnesota)
-12-
RHB Business Profile
StarMed
RehabCare has finalized the sale of StarMed to InteliStaf, effective February 2,
2004
o Stock for stock transaction
o RehabCare is a key investor with
- The Carlyle Group
- Members of InteliStaf management team
o RehabCare holds two seats on board of directors
- Chair audit committee
- Member of compensation committee
o Immediately accretive to earnings
-13-
RHB Business Profile
StarMed
The combined company
o Operates under the InteliStaf brand
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 InteliStaf expects 2004 revenue between $425 and $465 million
-14-
RHB Business Description
Market Drivers
(Graphic Omitted)
o Shortages of healthcare professionals
o Aging of baby boomers
o Cost effective solutions for patients
o Quest for better clinical outcomes
-15-
RHB Regulatory Drivers
o 65 Percent Rule (ARU)
- Rule is not final, effective date not yet known
- Limited access to ARU for certain diagnoses
- Patients denied access to ARU will seek rehab in other venues
- Estimated impact included in Q3 and Q4/04 guidance
o Part B Therapy Caps (Contract Therapy)
- Medicare Prescription Drug Bill contains moratorium through 12/31/05
o Part B Fee Schedule 1.5% increase in 2004 and 2005 (Contract Therapy)
o MEDPAC study due January 2005 allowing fee-for-service patients access to
outpatient therapy and rehab facility services without physician's order
(Outpatient)
-16-
RHB Strategic Initiatives
Core Strategic Principles
(Graphic omitted)
New initiatives for RehabCare follow 4 core strategic principles
- - Organizational Re-design
- - Service Offerings
- - Stronger Relationships
- - Acquisitions
-17-
RHB Strategic Initiatives
Division Operations Re-design
(Graphic omitted)
Hospital Rehabilitation Services
- - Stabilize erosion of programs
- - Improve margins
- - Hire senior business development executive
- - Invest additional $600,000 improving sales process
- - Focus on add-on products
- - Provide capital opportunities to existing relationships
Contract Therapy
- - Concentrate resources on selected markets
- - Implement more disciplined pricing policies
- - Improve margins through productivity
- - Increase targeted marketing and advertising campaign
- - Create awareness of continuum product; reinforce industry-wide reputation
- - Improve profit margins with monitoring tool PROMOS
-18-
RHB Strategic Initiatives
Support Services Redesign
(Graphic omitted)
StarMed transaction leaves RHB with $11.6 million of stranded corporate costs
o $4.0 M to support growth or cost will be eliminated
o $6.0 M transitional service costs eliminated by May 31, 2004
o $1.6 M eliminated in 2H/04
-19-
RHB Strategic Initiatives
Service Offering
(Graphic omitted)
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
(Graphic omitted)
Signature agreement 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
Building Stronger Relationships
Build partnerships instead of transactional relationships
- - Develop joint venture and capital infusion models
- - Create flexible service offerings
- - Develop partnership models for long-term care chains
- - Prove employee competencies with Simulis
- - Target markets and clients
-23-
RHB Strategic Initiatives
Building Stronger Relationships
RehabCare will develop a freestanding rehabilitation hospital in Los Angeles
- - 56 beds, leased and operated by joint venture of RehabCare
- - Develop clinical research network with UCLA and RHB inpatient and
outpatient programs
- - Expect $19 million in revenues, 22% EBITDA, total capital requirement of
$12 million, when fully developed
- - Expect implementation in 2005
-24-
RHB Strategic Initiatives
Building Stronger Relationships
3 year IT plan to enhance partnerships
- - Enables continuum strategy
- - Simplifies integration of acquisitions
- - Use internet internally for process improvement
o Recruiting
o Training
o Employee portal
- - Develop web-based external tools to enhance relationships with
o Clients
o Referral Sources
o Patients
-25-
RHB Strategic Initiatives
Acquisitions
(Graphic omitted)
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
American VitalCare, Inc. - IP
Contract Therapy
----------------
TeamRehab
Moore Rehabilitation Services, Inc.
Rehab Unlimited, Inc.
Therapeutic Systems, Ltd
CPR Therapies, LLC
o Pipeline
o Capital - negotiating new credit facility to fund acquisitions and strategic
partnership transactions
o Key executive focus
o Acquisition experience
-26-
RHB Strategic Initiatives
Acquisition of CPR Therapies
(Graphic omitted)
o Leading provider of contract rehabilitation services to SNFs and ALFs in
Colorado and California
o Entry into Colorado
o Critical mass added in California
o Foundation to build continuum in Colorado
o 60 contracts
-27-
RHB Strategic Initiatives
Acquisition of VitalCare
(Graphic omitted)
o Dominant provider of hospital-based specialty care units in California
o Cross-selling opportunity to new clients
o Strengthen position in target market
o Expansion of post-acute continuum in Southern California
o Approximately 24 contracts
-28-
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
$38 Million Cash and
Marketable Securities,
Solid Cash Flow
-29-