EX-99..1 2 eightk2q09earningsrelease.htm RHB 2Q09 EARNINGS RELEASE eightk2q09earningsrelease.htm
Exhibit 99.1

FOR IMMEDIATE RELEASE
Wednesday, August 5, 2009

REHABCARE REPORTS SECOND QUARTER 2009 RESULTS

· 
Diluted earnings per share attributable to RehabCare from continuing operations increases to $0.43 per share compared to $0.26 per share in the second quarter of 2008
   
· 
Second quarter consolidated operating revenues increase 12.8% compared to the prior year quarter, driven by strong same store revenue growth across all divisions
   
· 
Skilled Nursing Rehabilitation Services and Hospital Rehabilitation Services divisions continue to post healthy operating earnings margins
   
· 
Hospital earnings impacted by soft performance at certain hospitals; division continues to implement operational improvements

ST. LOUIS, MO, August 5, 2009--RehabCare Group, Inc. (NYSE:RHB) today reported financial results for the quarter and six months ended June 30, 2009.  Comparative results for the quarter and six months follow.

 
Second
First
Second
  
Six Months Ended
 
Quarter
Quarter
Quarter
  
June 30,
Amounts in millions, except per share data
2009
2009
2008
    
2009
    
2008
  
                                 
Consolidated Operating Revenues
$
205.2
  
$
201.5
  
$
181.9
     $
406.7
   $
362.0
  
Consolidated Operating Earnings
  
12.8
    
14.3
    
7.8
      
27.1
    
16.3
  
Consolidated Net Earnings from Continuing Operations
  
7.4
    
8.4
    
4.0
      
15.8
    
8.5
  
Gain (Loss) from Discontinued Operations, Net of Tax  (a)
  
(0.9
)
  
—
    
(0.2
)
    
(0.8
)
  
(0.2
)
Consolidated Net Earnings
  
6.5
    
8.4
    
3.8
      
15.0
    
8.3
  
Net Losses Attributable to Noncontrolling Interests
  
0.4
    
0.3
    
0.7
      
0.5
    
0.7
  
Net Earnings Attributable to RehabCare
  
6.9
    
8.7
    
4.5
      
15.5
    
9.0
  
Diluted Earnings per Share Attributable to RehabCare:
                                
Earnings from Continuing Operations, Net of Tax
  
0.43
    
0.48
    
0.26
      
0.91
    
0.52
  
Net Earnings
  
0.38
    
0.48
    
0.25
      
0.87
    
0.51
  
                                 
SRS Operating Revenues
  
123.8
    
123.1
    
114.5
      
246.9
    
226.9
  
SRS Operating Earnings
  
9.1
    
10.5
    
6.2
      
19.6
    
10.3
  
                                 
HRS Inpatient Operating Revenues
  
32.9
    
31.8
    
29.9
      
64.7
    
59.7
  
HRS Outpatient Operating Revenues
  
12.2
    
11.3
    
10.3
      
23.5
    
20.7
  
HRS Operating Revenues
  
45.1
    
43.1
    
40.2
      
88.2
    
80.4
  
HRS Operating Earnings
  
7.7
    
6.3
    
5.3
      
14.0
    
9.9
  
                                 
Hospital Operating Revenues
  
36.3
    
35.3
    
27.2
      
71.6
    
54.7
  
Hospital Operating Loss
  
(3.8
)
  
(2.3
)
  
(3.5
)
    
(6.1
)
  
(3.6
)
                                 

(a)
The $0.9 million after-tax loss from discontinued operations in the second quarter of 2009 includes a $0.7 million loss on the sale of the Company’s Phase 2 Consulting business on June 1, 2009 and a $0.2 million after-tax loss from Phase 2’s discontinued operating activities.


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REHABCARE REPORTS SECOND QUARTER 2009 RESULTS                    Page 2

“We were pleased to again deliver a solid quarter of top and bottom line improvement over the prior year.  Our Skilled Nursing Rehabilitation Services (SRS) and Hospital Rehabilitation Services (HRS) divisions continued to generate healthy revenue growth and operating cash flow and achieved profit margins in line with our 2009 outlook,” said John H. Short, Ph.D, RehabCare President and Chief Executive Officer.
“The momentum of our Hospital operations was disrupted in the second quarter by softer performance at certain hospitals. However, we remain focused on implementing strategies for success in each of our hospital markets and anticipate the division will continue to respond with improved results in areas not meeting our expectations,” said Dr. Short.  “At the same time, we continue to evaluate opportunities to grow the division.  On June 30, we announced our joint venture ownership of Dallas LTAC Hospital, which moves us one step closer to achieving greater efficiencies and economies of scale within our hospital operations.”

Financial Overview of Second Quarter
 
Consolidated operating revenues for the second quarter of 2009 were $205.2 million, a 12.8% increase compared to $181.9 million in the 2008 second quarter.
Net earnings from continuing operations for the second quarter of 2009 were $7.4 million compared to $4.0 million in the 2008 second quarter.  Diluted earnings per share attributable to RehabCare from continuing operations for the second quarter of 2009 were $0.43 compared to $0.26 in the second quarter of 2008.
Consolidated net earnings attributable to RehabCare were $6.9 million, or $0.38 per diluted share, in the second quarter of 2009 compared to $4.5 million, or $0.25 per diluted share, in the prior year quarter. The $0.9 million after-tax loss from discontinued operations in the second quarter of 2009 includes a $0.7 million loss on the sale of the Company’s Phase 2 Consulting business on June 1, 2009 and a $0.2 million after-tax loss from Phase 2’s discontinued operating activities.
Operating revenues in the Skilled Nursing Rehabilitation Services division increased 8.1% from $114.5 million in the second quarter of 2008 to $123.8 million in the second quarter of 2009, primarily the result of a contract therapy same store revenue increase of 9.1%.  On June 30, 2009, SRS operated in 1,065 contract therapy locations compared to 1,053 locations at the end of the second quarter of 2008 and 1,063 locations at the end of the first quarter of 2009.  The Company signed 44 new contracts in the second quarter of 2009 compared to 46 in the second quarter of 2008.
The SRS division’s operating earnings were $9.1 million, or 7.4% of revenue, compared to $6.2 million, or 5.4% of revenue, in the second quarter of 2008.  The year-over-year gain is a result of improved operating performance and better leveraging of selling, general and administrative costs.
The Hospital Rehabilitation Services division’s second quarter 2009 operating revenues increased 12.1% to $45.1 million, compared to $40.2 million in the second quarter of 2008.  Inpatient operating revenues improved 10.2% and inpatient rehabilitation facility (IRF) same store discharges increased 5.9% compared to second quarter 2008.  The average number of inpatient programs increased by 1.3% and the average revenue per program increased 8.8% due to an improvement in IRF-subacute contract mix.  Outpatient operating revenues increased 17.7% as the average number of programs increased by 9.1% and same store revenues increased 12.4%.

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REHABCARE REPORTS SECOND QUARTER 2009 RESULTS                    Page 3
 
At June 30, 2009, HRS operated 156 programs compared to 154 at the end of the second quarter of 2008 and 158 programs at the end of the first quarter of 2009.  The division operated 111 IRF programs at the end of the 2009 second quarter compared to 113 at the beginning of the quarter and 107 a year ago. The division had two IRF openings and four closings during the second quarter and two signed but unopened IRF contracts at June 30.
HRS operating earnings increased by $2.3 million to $7.7 million, or 17.0% of revenue, in the second quarter of 2009 compared to $5.3 million, or 13.2% of revenue, in the 2008 second quarter.  The higher average number of IRF programs, increased revenue per program and strong same store growth contributed to year-over-year revenue and earnings improvement in the second quarter of 2009.
Operating revenues in the Hospital division for the second quarter of 2009 increased 2.7% sequentially to $36.3 million and same store discharges increased 10.3%.  The division incurred an operating loss of $3.8 million in the second quarter of 2009 compared to an operating loss of $2.3 million in the first quarter of 2009.  The $1.5 million sequential increase in operating losses was primarily due to lower revenue per patient day, a result of decreased case-mix index and higher unfunded days at certain hospitals and limiting admissions to achieve compliance with the 60% Rule in two of the Company’s IRFs.
With the acquisition of Dallas LTAC Hospital on June 30 and the opening of Greater Peoria Specialty Hospital on August 4, the division currently operates a total of 13 hospitals, including six IRFs and seven long-term acute care hospitals (LTACHs).

Balance Sheet and Liquidity
 
At June 30, 2009, the Company had approximately $23.6 million in cash and cash equivalents and $32.7 million in outstanding debt.  Net debt (outstanding debt less cash and cash equivalents) stood at $9.1 million at June 30, 2009 compared to $18.8 million at the end of the first quarter of 2009.  Days sales outstanding decreased to 60.9 days at June 30, 2009 from 63.9 days at March 31, 2009.
For the six months ended June 30, 2009, the Company generated cash from operations of $27.1 million and expended approximately $5.9 million for capital expenditures, principally related to information systems and equipment for the start-up of Greater Peoria Specialty Hospital.
 
Legislative Update
 
While post-acute bundling generated considerable debate during the first quarter, the focus today is on whether Congress will reach agreement on a health reform package.  The Company remains actively engaged in the healthcare debate and cautiously optimistic that a bill will surface before year end that would include both a physician fee schedule fix and an extension of the Part B Therapy Cap exception process, which expires December 31.
On July 31, the Centers for Medicare and Medicaid Services released final rules for FY2010 Medicare reimbursement.  The Company estimates a net 2.8% rate increase for its freestanding IRFs and a 1.4% net increase for its LTACHs.  The net 1.1% decrease for Skilled Nursing Facilities (SNFs) will likely result in some downward pricing pressure in the Company’s SRS division.

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REHABCARE REPORTS SECOND QUARTER 2009 RESULTS                    Page 4
 
Outlook
 
The Company will not be providing revenue and earnings per share guidance for 2009, but provides the following outlook, which takes into consideration the July 31 final Medicare rules:

· 
The Company anticipates strong consolidated revenue and net earnings growth for the full year 2009.
· 
The Skilled Nursing Rehabilitation Services division expects 6.5% - 7.5% operating earnings margins for the remainder of 2009, driven by 6% - 8% year-over-year same store revenue growth. The division also expects flat to modest unit growth in 2009.
· 
The Hospital Rehabilitation Services division expects 15% - 17% operating earnings margin and flat unit growth for the remainder of 2009.  The division also anticipates 3% - 5% year-over-year growth in IRF same store discharges in 2009.
· 
The Hospital division expects total year operating losses of $12.5 - $14.0 million, which includes approximately $3.0 million in merger and acquisition related costs.  For full year 2009, revenue is expected to be $155 - $165 million, driven by strong growth in mature and de novo hospitals, including the new LTACH in Dallas.  The Company continues to expect breakeven operating earnings run rate by the end of the first half of 2010.
· 
The effective tax rate is anticipated to approximate 39% for 2009 after consideration of noncontrolling interests and equity income.
· 
The Company expects continued strong operating cash flow with DSO in the range of 60 to 65 days.
· 
Capital expenditures are anticipated to be approximately $6.0 million for the remainder of 2009, principally related to information systems investments.

Conclusion
 
“Our SRS and HRS colleagues are to be commended for an exceptional first half of the year.  We are well positioned to deliver on our revenue and earnings outlook for 2009 in both divisions.  I also want to recognize our Hospital division colleagues for their efforts to improve performance and for the progress we have made so far,” said Dr. Short.
“We are focused on providing greater value to each of our stakeholders during tough economic times and uncertainty surrounding healthcare reform.”

About RehabCare Group
 
Established in 1982 and headquartered in St. Louis, MO, RehabCare (www.rehabcare.com) is a leading provider of rehabilitation program management services in partnership with over 1,200 hospitals and skilled nursing facilities in 41 states.  The Company also operates freestanding rehabilitation hospitals and long-term acute care hospitals across the country.  RehabCare is included in the Russell 2000 and Standard and Poor’s Small Cap 600 Indices.

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REHABCARE REPORTS SECOND QUARTER 2009 RESULTS                    Page 5
 
RehabCare will host a conference call on August 6, 2009, beginning at 10:00 AM Eastern time.  Listeners may access the call by dialing (800) 640-9765, confirmation number 24844748, or in a listen-only mode through the Company’s website at http://www.rehabcare.com/investors/webcasts.htm.  A replay of the call will be available beginning at approximately noon Eastern Time tomorrow by dialing (877) 213-9653, confirmation number 24844748.  An online archive of the conference call will remain on the Company’s website for at least 21 days after the call.
This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on the Company’s current expectations and could be affected by numerous factors, risks and uncertainties discussed in the Company’s filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. Do not rely on forward-looking statements as the Company cannot predict or control many factors that affect its ability to achieve the results estimated.  The Company makes no promise to update any forward- looking statements as a result of changes in underlying factors, new information, future events or otherwise.


CONTACT: RehabCare Group, Inc.
Financial: Jay W. Shreiner, Chief Financial Officer
Press: Donna Lee, Office of the CEO
(314) 863-7422


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REHABCARE REPORTS SECOND QUARTER 2009 RESULTS                    Page 6



I. Condensed Consolidated Statements of Earnings
        
(Unaudited; amounts in thousands, except per share data)
        
                                 
 
Three Months Ended
  
Six Months Ended
 
June 30,
March 31,
June 30,
  
June 30,
June 30,
   
2009
    
2009
    
2008
      
2009
    
2008
  
                                 
Operating revenues
$
205,164
  
$
201,531
  
$
181,899
    
$
406,695
  
$
362,003
  
Costs and expenses:
                                
Operating
  
164,290
    
160,522
    
147,874
      
324,812
    
293,370
  
Selling, general and administrative
  
24,259
    
22,850
    
22,616
      
47,109
    
45,037
  
Depreciation and amortization
  
3,783
    
3,869
    
3,623
      
7,652
    
7,280
  
Total costs and expenses
  
192,332
    
187,241
    
174,113
      
379,573
    
345,687
  
                                 
Operating earnings
  
12,832
    
14,290
    
7,786
      
27,122
    
16,316
  
                                 
Interest income
  
4
    
15
    
38
      
19
    
75
  
Interest expense
  
(549
)
  
(572
)
  
(1,006
)
    
(1,121
)
  
(2,305
)
Other income (expense), net
  
—
    
1
    
25
      
1
    
28
  
Equity in net income of affiliates
  
108
    
166
    
140
      
274
    
298
  
                                 
Earnings from continuing operations before income taxes
  
12,395
    
13,900
    
6,983
      
26,295
    
14,412
  
Income tax expense
  
4,965
    
5,503
    
2,975
      
10,468
    
5,904
  
Earnings from continuing operations
  
7,430
    
8,397
    
4,008
      
15,827
    
8,508
  
Gain (loss) from discontinued operations
  
(882
)
  
51
    
(159
)
    
(831
)
  
(231
)
Net earnings
  
6,548
    
8,448
    
3,849
      
14,996
    
8,277
  
Net loss attributable to noncontrolling interests
  
335
    
212
    
647
      
547
    
727
  
Net earnings attributable to RehabCare
$
6,883
  
$
8,660
  
$
4,496
    
$
15,543
  
$
9,004
  
                                 
Amounts attributable to RehabCare:
                                
Earnings from continuing operations
$
7,765
  
$
8,609
  
$
4,655
    
$
16,374
  
$
9,235
  
Gain (loss) from discontinued operations
  
(882
)
  
51
    
(159
)
    
(831
)
  
(231
)
Net earnings
$
6,883
  
$
8,660
  
$
4,496
    
$
15,543
  
$
9,004
  
                                 
Diluted EPS attributable to RehabCare:
                                
Earnings from continuing operations
$
0.43
  
$
0.48
  
$
0.26
    
$
0.91
  
$
0.52
  
Gain (loss) from discontinued operations
  
(0.05
)
  
—
    
(0.01
)
    
(0.04
)
  
(0.01
)
Net earnings
$
0.38
  
$
0.48
  
$
0.25
    
$
0.87
  
$
0.51
  
                                 
Weighted average diluted shares
  
18,097
    
17,899
    
17,737
      
17,955
    
17,723
  




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REHABCARE REPORTS SECOND QUARTER 2009 RESULTS                    Page 7


II. Condensed Consolidated Balance Sheets
(Amounts in thousands)
         
   
Unaudited
    
   
June 30,
  
December 31,
   
2009
  
2008
Assets
                
Cash and cash equivalents
  
$
23,585
    
$
27,373
  
Accounts receivable, net
    
141,153
      
139,197
  
Deferred tax assets
    
13,803
      
14,876
  
Other current assets
    
10,726
      
7,165
  
Total current assets
    
189,267
      
188,611
  
                 
Property and equipment, net
    
41,656
      
37,851
  
Goodwill
    
173,462
      
171,365
  
Intangible assets
    
26,555
      
28,944
  
Investment in unconsolidated affiliate
    
4,751
      
4,772
  
Other assets
    
6,087
      
6,863
  
   
$
441,778
    
$
438,406
  
Liabilities & Equity
                
Current portion of long-term debt
  
$
5,615
    
$
—
  
Payables & accruals
    
95,823
      
91,327
  
Total current liabilities
    
101,438
      
91,327
  
                 
Long-term debt, less current portion
    
27,040
      
57,000
  
Other non-current liabilities
    
13,122
      
12,279
  
Stockholders’ equity
    
286,278
      
267,772
  
Noncontrolling interests
    
13,900
      
10,028
  
   
$
441,778
    
$
438,406
  
                 


III. Condensed Consolidated Statements of Cash Flows
(Unaudited; amounts in thousands)
 
Six Months Ended
 
June 30,
 
2009
  
2008
               
Net cash provided by operating activities
$
27,077
    
$
18,623
  
Net cash used in investing activities
  
(6,866
)
    
(14,388
)
Net cash used in financing activities
  
(23,999
)
    
(155
)
               
Net increase (decrease) in cash and cash equivalents
  
(3,788
)
    
4,080
  
Cash and cash equivalents at beginning of period
  
27,373
      
10,265
  
Cash and cash equivalents at end of period
$
23,585
    
$
14,345
  
               
               
Supplemental information:
              
Additions to property and equipment
$
(5,881
)
  
$
(7,485
)
               

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REHABCARE REPORTS SECOND QUARTER 2009 RESULTS                    Page 8
IV. Operating Statistics (Unaudited; dollars in thousands)
  
                                 
   
Second
    
First
    
Second
    
Six Months Ended
   
Quarter
    
Quarter
    
Quarter
    
June 30,
   
2009
    
2009
    
2008
      
2009
    
2008
  
Skilled Nursing Rehabilitation Services
                                
Operating revenues
$
123,787
  
$
123,148
  
$
114,478
    
$
246,935
  
$
226,928
  
Operating expenses
  
100,134
    
98,998
    
93,867
      
199,132
    
186,938
  
Selling, general and administrative
  
12,967
    
12,017
    
12,730
      
24,984
    
26,213
  
Depreciation and amortization
  
1,578
    
1,678
    
1,720
      
3,256
    
3,507
  
Operating earnings
$
9,108
  
$
10,455
  
$
6,161
    
$
19,563
  
$
10,270
  
Operating earnings margin
  
7.4
%
  
8.5
%
  
5.4
%
    
7.9
%
  
4.5
%
                                 
Average number of contract therapy locations
  
1,068
    
1,074
    
1,061
      
1,071
    
1,058
  
End of period number of contract therapy locations
  
1,065
    
1,063
    
1,053
      
1,065
    
1,053
  
                                 
Patient visits (in thousands)
  
2,017
    
2,005
    
1,914
      
4,022
    
3,808
  
                                 
Hospital Rehabilitation Services
                                
Operating revenues
                                
Inpatient Rehabilitation Facility (IRF)
$
31,257
  
$
30,018
  
$
27,482
    
$
61,275
  
$
54,802
  
Subacute
 
1,662
    
1,725
    
2,398
    
 
3,387
  
 
4,837
  
Total Inpatient
$
32,919
  
$
31,743
  
$
29,880
    
$
64,662
  
$
59,639
  
Outpatient
  
12,178
    
11,323
    
10,344
      
23,501
    
20,766
  
Total HRS
$
45,097
  
$
43,066
  
$
40,224
    
$
88,163
  
$
80,405
  
Operating expenses
  
31,007
    
30,634
    
28,306
      
61,641
    
57,495
  
Selling, general and administrative
  
5,806
    
5,490
    
5,931
      
11,296
    
11,565
  
Depreciation and amortization
  
624
    
646
    
676
      
1,270
    
1,396
  
Operating earnings
$
7,660
  
$
6,296
  
$
5,311
    
$
13,956
  
$
9,949
  
Operating earnings margin
  
17.0
%
  
14.6
%
  
13.2
%
    
15.8
%
  
12.4
%
                                 
Average number of programs
                                
IRF
  
113
    
113
    
107
      
113
    
107
  
Subacute
  
9
    
9
    
13
      
9
    
14
  
Total Inpatient
  
122
    
122
    
120
      
122
    
121
  
Outpatient
  
36
    
36
    
33
      
36
    
33
  
Total HRS
  
158
    
158
    
153
      
158
    
154
  
                                 
End of period number of programs
                                
IRF
  
111
    
113
    
107
      
111
    
107
  
Subacute
  
9
    
9
    
14
      
9
    
14
  
Total Inpatient
  
120
    
122
    
121
      
120
    
121
  
Outpatient
  
36
    
36
    
33
      
36
    
33
  
Total HRS
  
156
    
158
    
154
      
156
    
154
  
                                 
IRF discharges
  
11,359
    
10,999
    
10,309
      
22,358
    
20,585
  
Subacute discharges
  
792
    
857
    
734
      
1,649
    
1,529
  
   Total Inpatient discharges
  
12,151
    
11,856
    
11,043
      
24,007
    
22,114
  
                                 
Outpatient visits (in thousands)
  
328
    
311
    
241
      
639
    
481
  
                                 
Hospitals
                                
Operating revenues
$
36,280
  
$
35,317
  
$
27,197
    
$
71,597
  
$
54,670
  
Operating expenses
  
33,149
    
30,890
    
25,701
      
64,039
    
48,937
  
Selling, general and administrative
  
5,351
    
5,224
    
3,796
      
10,575
    
6,969
  
Depreciation and amortization
  
1,581
    
1,545
    
1,227
      
3,126
    
2,377
  
Operating earnings (loss)
$
(3,801
)
$
(2,342
)
$
(3,527
)
  
$
(6,143
)
$
(3,613
)
Operating earnings margin
  
-10.5
%
  
-6.6
%
  
-13.0
%
    
-8.6
%
  
-6.6
%
                                 
End of period number of facilities
  
12
    
11
    
10
      
12
    
10
  
Patient days
  
30,233
    
28,791
    
23,766
      
59,024
    
47,397
  
Discharges
  
1,817
    
1,647
    
1,467
      
3,464
    
2,959
  
-END-