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): February 15, 2005
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
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
Beginning on February 15, 2005, 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 For Our Investors 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 For Our Investors
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, RehabCare's ability 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 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 our hospital rehabilitation and contract
therapy service offerings and the development of alternative product offerings;
the future financial results of InteliStaf Holdings, Inc., RehabCare's
unconsolidated affiliate, and the effect of those results on the financial
condition and results of operations of RehabCare; 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 to 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.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits. See Exhibit Index.
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: February 15, 2005
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 February 15, 2005
Exhibit 99
[pic]
RehabCare(SM)
delivering the post-acute continuum
February 15, 2005
RehabCare(SM)
delivering the post-acute continuum
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, REHABCARE'S ABILITY 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 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 OUR HOSPITAL REHABILITATION AND CONTRACT
THERAPY SERVICE OFFERINGS AND THE DEVELOPMENT OF ALTERNATIVE PRODUCT OFFERINGS;
THE FUTURE FINANCIAL RESULTS OF INTELISTAF HOLDINGS, INC., REHABCARE'S
UNCONSOLIDATED AFFILIATE, AND THE EFFECT OF THOSE RESULTS ON THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF REHABCARE; 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 TO 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
RehabCare(SM)
delivering the post-acute continuum
For Immediate Release
St. Louis, MO., February 9, 2005
o Expects to report full year 2004 operating revenues of $383.8 million and
operating earnings of $41.8 million
o All other numbers in this presentation are 3Q/04
o InteliStaf's independent auditors determined that they were not independent
o KPMG will perform audit procedures on InteliStaf's 2004 financial
statements
o We will release full earnings & 2005 guidance no later than March 10th
2
RehabCare(SM)
delivering the post-acute continuum
ANNUAL TREND
REVENUE (Millions)
[graph]
'01 '02 '03 '04
CT $64.7 $105.3 $130.8
OP $50.0 $49.0 $49.0
IP $123.3 $130.7 $136.9
Combined 383.8
OPERATING EARNINGS (Millions)
[graph]
'01 '02 '03 '04
CT $3.0 $9.1 $5.8
HRS $32.5 $32.3 $33.6
Combined 41.8
<FN>
SOURCE - COMPANY ANNUAL 10-K FOR RESPECTIVE YEARS, EXCEPT 2004 WHICH IS
PER THE COMPANY'S PRESS RELEASE DATED FEBRUARY 9, 2005
Note 1: 2004 also included operating revenues of Phase 2 Consulting, acquired
May, 2004
</FN>
3
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
o RehabCare, in partnership with hospitals and nursing homes, provides
post acute program management, medical direction, physical
rehabilitation, quality assurance, specialty programs and marketing for
the following programs:
o Hospital-Based Rehabilitation Programs
o 113 Acute Rehabilitation Units (ARUs)
o 32 Subacute/Transitional Care Units (TCUs)
o 41 Outpatient Rehabilitation Programs (OP)
o Skilled Nursing Facility-Based Rehabilitation Programs
o 600 Programs
4
RehabCare(SM)
delivering the post-acute continuum
(Graphic omitted)
RHB REVENUES 3Q/04
Total Revenue $93.3 million
Skilled Nursing Facility-Based
Rehabilitation Programs
(Contract Therapy Division) $42.9M 46%
Hospital-Based Rehabilitation Programs
(HRS Division) $48.4M 52%
Healthcare Consulting $ 2.0M 2%
5
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
o The post-acute physical rehabilitation industry provides large
opportunities for new RehabCare clients
o 5,000 Hospitals
o 2,000 meet our screens
o Currently 174 are clients (8.7% of potential clients)
o 15,000 Skilled Nursing Facilities
o 5,000 meet our screens
o Currently 600 are clients (12% of potential clients)
o Competitors include:
- Self-operation - RehabWorks
- HealthSouth - Aegis
- Select Medical Corp
6
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
REHABCARE SERVICES
RehabCare's 8,400 full and part-time clinicians provide physical,
occupational and speech therapy at programs across the country
[map]
More than 780 locations nationwide
7
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
REHABCARE PATIENTS
o RehabCare treats approximately 14,000 patients each day o Typical diagnoses
include:
o Stroke
o Neurological disorders
o Orthopedic conditions
o Musculoskeletal conditions
o Payer sources for our patients are 76% Medicare, 6% Medicaid, 18%
managed care and other
o 99% of RehabCare billings are to hospitals and skilled
nursing facilities
[pic]
8
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
TRADITIONAL SILO DELIVERY CONCEPT
Providers tend to focus on sites of service rather than continuum of care.
Patients are treated at the sites in an uncoordinated manner.
[graph omitted]
9
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
REHABCARE'S PATIENT-FOCUSED APPROACH
RehabCare's patient-focused approach builds integrated continuums of care,
rather than service silos, in markets that offer sufficient demand and
appropriate therapy resources for these services
[graph omitted]
Acute Skilled Outpatient
Rehabilitation Nursing Rehabilitation
Units Facilities Programs
Hospital
Medical/Surgical
CARE MANAGEMENT
Acute
Therapies
Transitional Long Term Home
Care Acute Care Health
Units Hospitals* Programs
*RehabCare partners with providers of LTACH care
10
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
TARGET MARKET STRATEGY
RehabCare has developed joint venture and other relationships with
market-leading health delivery partners o Provides access to referral networks
and market share o Develops long-term relationships: deploys capital, provides
joint ownership and
program management
o Adds key components to continuums of care
o Deliver RehabCare resources more efficiently
[pic] [pic]
Kokomo, IN Brownsville, TX
Population 301,000 Population 1.0 million
[pic] [pic] [pic]
Norfolk, VA Philadelphia, PA St. Louis, MO
Population 1.4 million Population 5.1 million Population 2.6 million
11
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
ACQUISITIONS
RehabCare's acquisition strategy supports our target market strategy
o Revenue size approximately $10-$25 million o EBITDA multiple 4-6 times
o Continuing management
o 2004 acquisitions have added $40 million in annualized operating
revenues, with more in the pipeline
o Strong balance sheet enables aggressive acquisition strategy
CPR REHAB PHASE 2 CONSULTING VitalCare Cornerstone
THERAPY A Division of AMERICA Rehabilitation
A Part of RehabCare RehabCare A RehabCare
Company
12
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
JOINT OWNERSHIP ARRANGEMENTS
JV relationships signed in 2004
o Valley Baptist Health System
o 50% local hospital market share
o Howard Regional Health System
o 57% local hospital market share
o Signature Healthcare Foundation
o Sponsored by 43 orthopedic surgeons
[pic]
Valley Baptist Howard Signature
Health System Regional Health System HEALTHCARE FOUNDATION
13
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
HOSPITAL-BASED REHABILITATION PROGRAMS
STABILIZATION & GROWTH STRATEGY
RehabCare has successfully stabilized the loss of hospital-based programs
experienced in 2003
o Expected net loss of 4 programs in 2004 versus a net loss of 21 in
2003 (excluding acquisitions)
o Nine-month YOY same-store growth - 5.5%
o How to accomplish growth strategy
o Retaining business
o Convert existing clients to longer-term relationships using
capital o Integrate acute rehabilitation units, outpatient
programs and skilled nursing facility-based programs
electronically
o New business
o Deploy capital
o Investment in sales processes, strategies and training
o Add-on products - Center of Orthopedic Rehabilitation
Excellence, LifeSpine, Brain Injury Program
* Projected
Number of Programs
97 98 99 00 01 02 03 04*
135 167 179 201 190 187 166 180
Revenue (Millions)
92 93 94 95 96 97 98 99 00 01 02 03
47 48.4 61.7 83.2 91.6 106.8 128.1 147.2 162.3 173.3 179.7 185.9
Contribution Margin Percentage
92 93 94 95 96 97 98 99 00 01 02 03
25.5 24.4 22.7 24.9 27.6 30.6 32.2 33.8 35.8 35.2 34.4 34.1
14
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
SKILLED NURSING FACILITY-BASED REHABILITATION
PROGRAMS PROFITABILITY/GROWTH
Contract therapy operating margins are returning to pre-3Q/03 levels; but
more can be accomplished
o Focused market sales approach is paying off
o Technology platform conversion is complete
o Improving SG&A leverage
o Solid same store revenue growth of 8.5%, nine-month YOY
o Increase of more than 130 programs, (YOY -3Q)
NUMBER OF PROGRAMS
[graph]
0 44 67 112 195 305 412 468 600
'96 '97 '98 '99 '00 '01 '02 '03 '04*
REVENUE (MILLIONS)
[graph]
0 8.4 13.9 14.1 30 64.7 105.3 130.8
'96 '97 '98 '99 '00 '01 '02 '03
OPERATING MARGIN
[graph]
Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04
5.5% 2.7% 4.1% 6.0% 4.8% 5.4%
*Projected
15
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
CLINICAL RESEARCH & DEVELOPMENT
RehabCare must ensure its 8,400 full and part-time clinicians provide the
highest quality therapy to 14,000 patients daily
o Develop clinical research programs in
partnership with academic medical centers
o Utilize our clinical database (408,000 patient records)
to improve the quality of post-acute physical
rehabilitation outcomes
o Create systems to integrate the continuum
[pic] of care
Brain Injury Program CORE LifeSpine
Empowering Lives, Centers for Spine Care
Independence for Orthopedic for a Lifetime
the Future Rehabilitation
Excellence
16
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
INFORMATION TECHNOLOGY & MANAGEMENT
To support the continuum of care, RehabCare has developed a
single-technology platform
o RehabCare's PDA-based clinical system
o Enhanced forecasting tools for management
o Billing turnaround of 3 to 4 days
o Allows billing in any format for client
o Wireless connectivity will allow 2-way real time communication at point
of service
o Clinical pathways
o Patient protocols
o Clinical expertise immediately available [pic]
17
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
ACCESS TO CAPITAL
o $47 million in cash, 9/30/04
o $35 million cash flow from operations (nine-months ended 9/30/04)
o Limited subordinated debt related to acquisitions
o New credit facility of $90 million; expandable to $125 million
18
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
SHORTAGE OF THERAPISTS
Recruiting and retaining therapists are key to our success
o Increased web presence
o Utilize large database of therapists
o Increase integration with schools through clinical R&D function
o Utilize staffing coordinators in select markets
o Introduced Professional Choice Account
o No wait period 401(k)
o Competitive benefits package [pic]
19
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
REGULATORY IMPACT
O 75 PERCENT RULE (Acute Rehabilitation Units)
o Rule was effective July 1, 2004
o 3 year transition (50%, 60%, 65%, 75%)
o Estimated impact to be included in 2005 guidance
o Consolidated Appropriations Act (CAA) for FY 2005 prohibits
implementation of Rule until 60 days after GAO study
o Best guess is GAO report issued first part of April 2005, effective
July 2005
O PART B THERAPY CAPS (SKILLED NURSING FACILITY-BASED REHABILITATION)
o Medicare Prescription Drug Bill contains moratorium through
12/31/05
O FEE SCHEDULE INCREASES
20
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
INTELISTAF HOLDINGS
StarMed, our former staffing division, sold to InteliStaf on 2/3/04 in
exchange for 25% of combined equity
o Cumulative equity share of InteliStaf's net loss was $0.6 million for
nine-months ended 9/30/04
o Healthcare staffing industry appears to be leveling out from most recent
contraction cycle
o Anticipate healthcare staffing cycle to reverse within 2 to 3 years
o Partner is in a strong position when the industry does return to
growth phase
o InteliStaf has strong industry differentiators
o One-stop shop
o Management system to manage variable labor
InteliStaf
HEALTHCARE
21
RehabCare(SM)
delivering the post-acute continuum
QUARTERLY UPDATE
- -----------------------------------------------------------------------
GAAP Q4/03 Q1/04 Q2/04 Q3/04 Q4/04
- -----------------------------------------------------------------------
REVENUE
(MILLIONS) $129.5 $104.5 $90.9 $93.3 $95.1
- -----------------------------------------------------------------------
OPERATING EARNINGS
(MILLIONS) $(34.5) $9.5 $10.2 $10.7 $11.4
- -----------------------------------------------------------------------
EPS $(1.58) $0.31 $ 0.34 $ 0.36 N/R (3)
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
PROFORMA Q4/03 Q1/04 Q2/04 Q3/04 Q4/04
- -----------------------------------------------------------------------
REVENUE(1)
(MILLIONS) $80.0 $87.7 $90.9 $93.3 $95.1
- -----------------------------------------------------------------------
OPERATING EARNINGS
(MILLIONS) $9.0(2) $9.5 $10.2 $10.7 $11.4
- -----------------------------------------------------------------------
EPS $0.31(2) $0.31 $0.34 $0.36 N/R (3)
- -----------------------------------------------------------------------
<FN>
(1) EXCLUDES STARMED OPERATING REVENUES (2) EXCLUDES THE EFFECT OF LOSS ON SALE
OF STARMED
(3) N/R - NOT YET REPORTED
</FN>
22
RehabCare(SM)
delivering the post-acute continuum
REHABCARE - PRIMED FOR GROWTH
o Increasing demand
o Significant growth strategies
o Coordinated and efficient
delivery strategy
o Strong financial position
o Solid results - both top line
and bottom line [pic]
23