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): October 28, 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
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Item 2.02 Results of Operations and Financial Condition
The information in Exhibit 99.1 is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
The following exhibit is furnished pursuant to Item 2.02 hereof and should
not be deemed to be "filed" under the Securities Exchange Act of 1934:
99.1 Press release dated October 28, 2004, announcing our
third quarter 2004 revenues and results of operations and
guidance for the full year of 2004
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: October 28, 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
99.1 Press release dated October 28, 2004, announcing our third quarter 2004
revenues and results of operations and guidance for the full year 2004.
Exhibit 99.1
CONTACT: RehabCare Group, Inc.
Vincent L. Germanese, Chief Financial Officer
Betty Cammarata, Dir-Investor Relations
Press: David Totaro, Senior Vice
President, Corporate Marketing & Communications
(314) 863-7422 or
Financial Dynamics
Gordon McCoun/Lanie Marcus
Press: Sean Leous
(212) 850-5600
FOR IMMEDIATE RELEASE
Thursday, October 28, 2004
REHABCARE REPORTS THIRD QUARTER 2004 DILUTED EPS OF $0.36,
OPERATING REVENUES OF $93.3 MILLION
ST. LOUIS, MO, October 28, 2004--RehabCare Group, Inc. (NYSE:RHB) today reported
financial results for the quarter and nine months ended September 30, 2004.
Comparative results for the quarter and nine months follow.
Quarter Ended Nine Months Ended
Amounts in millions, Sept 30, Sept 30,
except per share data 2004 2003 2004 2003
- --------------------------------------------------------------------------------
Consolidated Operating Revenues $93.3 $135.0 | $288.7 $409.8
Consolidated Net Earnings 6.1 3.3(c) | 16.9 (a) 11.8 (c)
Consolidated Diluted
Earnings Per Share 0.36 0.20(c)| 1.00(a) 0.72(c)
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HRS Inpatient Operating Revenues 37.2 34.2 | 109.7 102.1
HRS Outpatient Operating Revenues 11.2 12.3 | 34.3 36.9
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HRS Operating Revenues 48.4 46.5 | 144.0 139.0
HRS Operating Earnings 8.3 8.6 | 25.2 23.7
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Contract Therapy Operating Revenues 42.9 33.6 | 124.7 97.4
Contract Therapy Operating Earnings 2.3 0.9 | 6.7 4.5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other Revenues 2.0 - | 3.4 -
Other Operating Earnings 0.1 - | 0.2 -
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- --------------------------------------------------------------------------------
Staffing Operating Revenues - 55.2(b) | 16.7(b) 174.5(b)
Staffing Operating Loss - (2.6) | (0.1) (6.7)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Equity in Net Loss of Affiliate (0.1) - (0.6) -
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<FN>
(a) Includes an after tax restructuring charge of $0.9 million, or $0.06 per
diluted share and an after tax gain on sale of business of $0.3 million, or
$0.02 per diluted share.
(b) Includes intercompany sales of $0.3 million for the three months ended
September 30, 2003 and $0.1 million and $1.1 million for the nine months
ended September 30, 2004 and 2003, respectively, that Staffing sold to
Hospital Rehabilitation Services and Contract Therapy at market rates.
(c) Includes restructuring charge of $0.8 million, or $0.05 per diluted share,
after tax.
</FN>
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REHABCARE REPORTS THIRD QUARTER 2004 RESULTS Page 2
John H. Short, Ph.D., president and chief executive officer, commented, "We
are pleased with the progress in our business development and operating results
both year-over-year and sequentially during the third quarter 2004. Our
divisions continue to see growth through both same store revenue increases as
well as our sales initiatives, which will also positively impact future
quarters."
Dr. Short continued, "We are ahead of plan in signings in both of our
divisions and the number of closed facilities is less than we had originally
anticipated. In addition, our pipeline of potential acquisitions and joint
ventures has grown this quarter. We are particularly pleased with our recent
announcement to develop a strategic partnership with Valley Baptist Health
System, which will address the shortage of acute care rehabilitation services in
the Rio Grande Valley. This partnership is precisely the type of relationship
which illustrates our target market and continuum of care strategy. We look
forward to announcing one or more initiatives by year end. These trends should
bode well for our future business growth."
Financial Overview of Third Quarter
Net revenues for the 2004 third quarter were $93.3 million compared to
$135.0 million from the year ago quarter, a decline of 30.9 percent. The decline
was due to the sale of StarMed, the Company's former staffing division, to
InteliStaf, in February 2004. StarMed contributed $55.2 million of net revenues
in the third quarter of 2003.
Net earnings increased 82.8 percent to $6.1 million compared to $3.3
million in last year's third quarter. Earnings per share on a fully diluted
basis were $0.36 compared to $0.20 for the same period last year. Included in
2003 third quarter results was an after-tax charge of $0.8 million (equivalent
to $0.05 per diluted share after tax) in connection with the Company's
restructuring. In addition to the absence of the aforementioned charge, the
earnings gain resulted from higher profit contribution at the division level and
strong management of expenses more than offsetting corporate overhead remaining
after the sale of our staffing business.
o The Hospital Rehabilitation Services division (HRS) increased its
third quarter net revenues 4.1 percent to $48.4 million compared to
$46.5 million in last year's third quarter. Operating earnings for the
quarter decreased 3.4 percent to $8.3 million from $8.6 million in the
prior year quarter. At the end of the quarter, HRS had 186 programs
compared to 176 programs at the same time last year.
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REHABCARE REPORTS THIRD QUARTER 2004 RESULTS Page 3
The increase in operating revenues is the result of same store growth
in discharges and the first quarter acquisition of VitalCare,
partially offset by a net decline in programs. The division's
operating earnings remain strong, despite the negative impact of the
decreased volumes and operating earnings in the outpatient business.
o The Contract Therapy division's net revenues for the third quarter of
2004 increased 27.6 percent to $42.9 million, compared to $33.6
million in the same quarter a year ago. Operating earnings for the
quarter more than doubled to $2.3 million from $0.9 million in the
prior year quarter. At the end of the quarter, the division had 600
programs compared to 473 programs at the same time last year.
The year-over-year third quarter revenue and operating earnings
performance reflects the significant growth in the number of programs
due to aggressive sales initiatives during the first nine months of
the year, and the acquisition of CPR Therapies, LLC in the first
quarter of 2004. The division continues to benefit from its target
market strategy and improved therapists' productivity. Results from
the 2003 third quarter were negatively impacted by lower productivity
experienced during the division's complex computer conversion.
The Company's balance sheet at September 30, 2004 remains strong with
almost $47.0 million in cash, cash equivalents and restricted cash, minimal
long-term debt and an unused credit facility in excess of $80 million to support
strategic initiatives. Days sales outstanding at September 30, 2004 declined to
67.7 days from 72.0 days at December 31, 2003 (adjusted for receivables related
to the staffing division). Cash flow from operations was $9.4 million during the
third quarter.
Dr. Short added, "Our nine-month results demonstrate that the sale of the
staffing division removed a significant negative effect on the Company's
consolidated operating earnings. However, the Company's investment in InteliStaf
has yet to yield the equity share of earnings that was expected. Market
conditions in the healthcare staffing industry continue to be challenging. These
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REHABCARE REPORTS THIRD QUARTER 2004 RESULTS Page 4
market conditions and the distractions associated with aggressive integration of
the businesses depressed InteliStaf's operating revenues and earnings. As a
result, we now expect to realize an after-tax loss of approximately $0.6 million
from our equity ownership in InteliStaf in 2004. The strength of RehabCare's
operating performance in its core businesses is expected to offset the shortfall
by InteliStaf."
Dr. Short concluded, "We have a confident outlook for the performance of
our businesses over the balance of 2004. We are encouraged by the signing of 13
new programs in HRS year-to-date, in addition to the continued strong sales
efforts in Contract Therapy. And, as we announced yesterday, our strategic
partnership with Valley Baptist Health System in Harlingen, Texas, is a superb
example of the type of relationship with major healthcare institutions across
the country that we expect to replicate. We are making significant progress in
developing the continuum of care model in several major markets and continuing
to structure joint venture transactions where we can use our clinical and
management expertise and financial capital to create true longstanding
relationships."
RehabCare Group, Inc., headquartered in St. Louis, Missouri, is a leading
provider of program management services for hospital inpatient rehabilitation
units and skilled nursing units, outpatient therapy programs, and contract
therapy services in conjunction with more than 775 hospitals and skilled nursing
facilities in 39 states, the District of Columbia, and Puerto Rico. RehabCare is
pleased to be included in the Russell 2000 and Standard and Poor's Small Cap 600
Indices.
A listen-only simulcast of RehabCare's third quarter conference call will
be available on the Company's web site at www.rehabcare.com and online at
www.companyboardroom.com, beginning at 10:00 Eastern time. An online replay will
be available for at least 21 days after the call. A telephonic replay of the
call will be available beginning at 1:30 P.M. Eastern time today and ending at
midnight on November 18, 2004. The dial-in number for the replay is (320)
365-3844 and the access code is 750419.
This release 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 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
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REHABCARE REPORTS THIRD QUARTER 2004 RESULTS Page 5
acquisitions and relationships at or above the levels projected; the timing and
financial effect of restructuring efforts with respect to RehabCare's continuing
businesses; changes in and compliance with governmental reimbursement rates and
other regulations or policies affecting RehabCare's continuing businesses;
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.
NOTE: More information on RehabCare can be found on the World Wide Web at
http://www.rehabcare.com.
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REHABCARE REPORTS THIRD QUARTER 2004 RESULTS Page 6
I. Condensed Consolidated Statements of Earnings
------------------------------------------------
(Unaudited amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
------------------------ ------------------------
2004 2003 % Change 2004 2003 % Change
---- ---- -------- ---- ---- --------
Operating revenues $93,277 $134,962 (30.9) $288,718 $409,847 (29.6)
Costs & expenses
Operating 66,638 103,581 (35.7) 207,348 310,486 (33.2)
Selling, general
& administrative
Divisions 7,596 15,786 (51.9) 25,132 51,213 (50.9)
Corporate 6,193 6,553 (5.5) 18,786 20,288 (7.4)
Restructuring
charge - 1,286 N/M 1,615 1,286 25.6
Gain on sale of business - - N/M (485) - N/M
Depreciation
& amortization 2,125 2,084 2.0 5,903 6,429 (8.2)
------ ------ ------- -------
Total costs
& expenses 82,552 129,290 (36.1) 258,299 389,702 (33.7)
------ ------- ------- -------
Operating earnings,
net 10,725 5,672 89.1 30,419 20,145 51.0
Other income
(expense), net (4) 10 (140.0) (54) (63) 14.3
Interest expense, net 172 144 19.4 544 449 21.2
------ ------ ------ -----
Earnings before income
taxes and equity in net loss
of affiliate 10,549 5,538 90.5 29,821 19,633 51.9
Income taxes 4,378 2,215 97.7 12,378 7,809 58.5
Equity in net loss
of affiliate (96) - N/M (559) - N/M
------ ------ ------ ------
Net earnings $6,075 $ 3,323 82.8 $16,884 $11,824 42.8
====== ======= ======= =======
Diluted earnings
per share $ 0.36 $ 0.20 80.0 $ 1.00 $ 0.72 38.9
Weighted average
shares outstanding 16,867 16,540 2.0 16,819 16,507 1.9
II. Condensed Consolidated Balance Sheets
-----------------------------------------
(Amounts in thousands)
Unaudited
Sept 30, December 31,
2004 2003
-------- -------------
Assets
Cash and restricted cash $ 46,980 $ 38,385
Accounts receivable, net 69,269 62,744
Deferred tax assets 8,231 14,706
Other current assets 2,208 1,912
-------- --------
Total current assets 126,688 117,747
Equipment, net 13,652 14,063
Excess cost of net assets acquired, net 62,368 48,729
Intangible assets 9,867 48
Investment in unconsolidated affiliate 39,441 -
Assets held for sale - 46,171
Other assets 7,608 6,868
-------- --------
$259,624 $233,626
======== ========
Liabilities & Stockholders' Equity
Current portion of long-term debt $ 3,773 $ -
Payables & accruals 47,189 40,795
-------- --------
Total current liabilities 50,962 $ 40,795
Liabilities held for sale - 9,771
Long-term debt, less current portion 466 -
Other non-current liabilities 9,543 5,105
Stockholders' equity 198,653 177,955
-------- --------
$259,624 $233,626
======== ========
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REHABCARE REPORTS THIRD QUARTER 2004 RESULTS Page 7
III. Operating Statistics
(Revenues and Operating Earnings in 000's)
Three Months Ended
Sept 30, Sept 30,
2004 2003
------- -------
Hospital Rehabilitation Services
- --------------------------------
Revenues
Inpatient $37,253 $34,161
Outpatient 11,174 12,342
------- -------
Total $48,427 $46,503
Division Operating Earnings(a)(b) $ 8,340 $ 8,634
Average Number of Programs
Inpatient 147 133
Outpatient 41 48
--- ---
Total 188 181
End of Quarter Number of Programs 186 176
Contract Therapy
- ----------------
Operating Revenues $42,895 $33,607
Division Operating Earnings(a)(b) $ 2,301 $ 913
Average Number of Locations 592 473
End of Quarter Number of Programs 600 473
Other
- -----
Revenues $ 1,955 -
Operating Earnings(a)(b) $ 84 -
<FN>
(a) Division Operating Earnings are earnings attributable to the division
before interest, income taxes and other income (expense).
(b) The third quarter 2003 restructuring charge was not allocated to the
operating segments.
</FN>
WE INVITE YOU TO VISIT OUR WEB SITE AFTER NOON TODAY TO VIEW KEY STATISTICS IN
GREATER DETAIL @ www.rehabcare.com.
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