RehabCare Reports Results for Fourth Quarter and Fiscal Year 2009.
* Earnings per diluted share of $0.03 in the 2009 fourth quarter reflects transaction related charges of $7.2 million after tax, or $0.34 per diluted share
* Fourth quarter includes $1.2 million after tax, or $0.06 per diluted share, in increased health insurance claim costs over the third quarter, which is not expected to impact 2010 outlook
* Skilled Nursing and Hospital Rehabilitation Services divisions achieve 2009 outlook for operating earnings margins; legacy Hospital division improves same store operating performance by $4.2 million in 2009 compared to 2008
* 2010 outlook reaffirmed for legacy RehabCare businesses and updated to include Triumph HealthCare
ST. LOUIS -- RehabCare Group, Inc. (NYSE:RHB) today reported financial results for the quarter and year ended December 31, 2009. Comparative results for the quarter and year follow.
"Capping off a successful year of top and bottom line growth was our merger with Triumph HealthCare in November, which has rebalanced our business portfolio between managed and owned operations and given us extensive expertise across the post-acute continuum," said John H. Short, Ph.D, RehabCare President and Chief Executive Officer. "The addition of Triumph has provided a new foundation for our Hospital operations to deliver strong, sustainable returns.
"Our outlook for the Skilled Nursing and Hospital Rehabilitation Services divisions underscores the strength of our contract services management team and effectiveness of our mitigation strategies in the face of challenging economic and regulatory conditions. In addition, our application of new technologies continues to differentiate our products and drive greater clinical and operational results."
Financial Overview of Fourth Quarter
Consolidated operating revenues for the fourth quarter of 2009, including $39.7 million generated by Triumph HealthCare, were $254.7 million, a 32.6% increase compared to $192.1 million in the 2008 fourth quarter.
Consolidated net earnings attributable to RehabCare, including Triumph, were $0.7 million in the fourth quarter of 2009 compared to $5.7 million in the prior year quarter. Diluted earnings per share attributable to RehabCare for the fourth quarter of 2009 was $0.03, which included $7.2 million of certain after-tax charges, substantially all of which related to the Triumph merger (see table on page 11). Diluted earnings per share attributable to RehabCare for the 2008 fourth quarter was $0.32, including $1.7 million of after-tax charges. Excluding these charges, diluted earnings per share attributable to RehabCare was $0.37 in the fourth quarter of 2009 compared to $0.41 in the fourth quarter of 2008.
The 2009 fourth quarter also included $1.2 million after tax, or $0.06 per diluted share, in increased health insurance claim costs over the 2009 third quarter. As a result of being fully self-insured, the Company experiences quarter to quarter volatility in healthcare claim costs, but does not believe the increase in the fourth quarter represents a long-term trend.
Operating revenues in the Skilled Nursing Rehabilitation Services (SRS) division increased 6.7% from $118.1 million in the fourth quarter of 2008 to $126.0 million in the fourth quarter of 2009, driven by an increase in the average number of units operated and a contract therapy same store revenue increase of 4.6%. The division had a net gain of 50 units over year end 2008 and a net gain of 20 from the third quarter of 2009. On December 31, 2009, SRS operated in 1,118 locations compared to 1,068 locations at the end of the fourth quarter of 2008 and 1,098 locations at the end of the third quarter of 2009.
The SRS division's operating earnings were $8.4 million, or 6.6% of revenue, compared to $8.6 million, or 7.3% of revenue, in the fourth quarter of 2008. Quarterly operating earnings margin was lower than the prior year primarily due to higher health insurance claim costs.
The Hospital Rehabilitation Services (HRS) division's fourth quarter 2009 operating revenues increased 3.0% to $45.0 million, compared to $43.7 million in the fourth quarter of 2008. Inpatient operating revenues improved 2.8% and inpatient rehabilitation facility (IRF) same store revenues increased 2.1% compared to fourth quarter 2008. IRF same store discharges declined 0.8% over the prior year quarter, but increased 1.2% for the full year. The average number of inpatient programs declined by 4.2% while revenue per inpatient program increased 7.3% due to an improvement in contract mix compared to the year ago quarter. Outpatient operating revenues increased 3.5% in the 2009 fourth quarter versus the 2008 fourth quarter as same store revenues increased 5.6% and the average number of programs remained flat.
At December 31, 2009, HRS operated 145 programs compared to 157 at the end of the fourth quarter of 2008 and 154 at the end of the third quarter of 2009. The division operated 106 IRF programs at the end of the 2009 fourth quarter compared to 110 at the beginning of the quarter and 113 a year ago. The division had three IRF openings and seven IRF closings during the fourth quarter, including one related to a hospital closing and one contract terminated by RehabCare due to non-payment of services. HRS signed contracts for one subacute unit and one outpatient unit in the fourth quarter. At year end, the number of signed but unopened HRS contracts was seven, two of which were IRFs, compared to a backlog of five IRFs at the end of the third quarter. In response to lower contract signings, the Company is realigning its business development function and broadening its HRS product offerings to better serve the needs of the market.
HRS operating earnings were $7.3 million, or 16.3% of revenue, flat year over year when excluding a bad debt write-down in the 2008 fourth quarter.
Operating revenues in the legacy Hospital division for the fourth quarter of 2009 increased $4.4 million, or 11.1%, sequentially to $44.1 million. On a sequential basis, same store revenues and discharges increased 8.5% and 5.3%, respectively.
In 2009, the legacy Hospital division's same store operating performance improved by $4.2 million, primarily a result of improved performance by the legacy long-term acute care hospitals (LTACHs). The legacy hospitals incurred a fourth quarter operating loss of $12.5 million, which included $8.4 million in transaction and severance expenses primarily related to the Triumph merger, $1.2 million in start-up losses for Greater Peoria Specialty Hospital and a $1.8 million operating loss at Dallas LTAC Hospital, where the operational turnaround has been slower than expected. The Company expects Dallas to be accretive by the end of the 2010 second quarter. Total year operating losses were $26.2 million for the legacy Hospital division, which included $11.8 million in transaction and severance related expenses and $4.8 million in start-up and ramp-up losses.
Triumph HealthCare, which was acquired on November 24, 2009, generated revenues of $39.7 million, operating earnings of $3.7 million and EBITDA (earnings before interest, taxes, depreciation and amortization) of $5.1 million during the first 37 days it was part of the Hospital division. November and December operating results for Triumph were impacted by softer acute care volumes, six hospitals achieving compliance with the 25-day length of stay requirement for LTACHs, the assimilation of the seven legacy RehabCare LTACHs into Triumph operations and the acquisition of St. Agnes Long-Term Care Hospital in Philadelphia, which was completed on December 16. The Company expects some continued impact from these issues through at least the first quarter of 2010.
With the acquisition of Triumph's 20 LTACHs in November and St. Agnes in December, the combined division currently operates a total of 34 hospitals, including 28 LTACHs and six IRFs.
Balance Sheet and Liquidity
At December 31, 2009, the Company had $24.7 million in cash and cash equivalents and $464.2 million in outstanding debt excluding the impact of original issue discounts. Excluding Triumph, days sales outstanding decreased to 59.8 days at December 31, 2009 from 66.0 days at December 31, 2008.
For the year ended December 31, 2009, the Company generated cash from operations of $48.1 million and expended $13.2 million for capital expenditures, principally related to companywide information systems, equipment for the start-up of Greater Peoria Specialty Hospital, hospital facility maintenance capital and Triumph-related projects.
With healthcare reform stalled in Congress, the Company is focused on securing extensions for both the Medicare Part B therapy cap exceptions process, which expired December 31, 2009, and the LTACH provisions contained in the 2007 Medicare, Medicaid and SCHIP Extension Act that are set to expire at the end of this year. The Company also is seeking resolution to a 21% cut in the Medicare physician fee schedule that occurred on March 1, 2010, and is optimistic that Congress will act on these issues in the near term. The Company remains engaged in the legislative process on these immediate concerns and other impending measures that could have adverse effects on Medicare beneficiaries, such as RUGs IV reimbursement and concurrent therapy rules slated to take effect October 1, 2010.
The Company does not provide revenue and earnings per share guidance, but provides the following outlook for the total year 2010:
* The Company anticipates strong consolidated revenue and net earnings growth for the full year, with progressively improving operating results throughout the year following softer performance in the first quarter.
* The Skilled Nursing Rehabilitation Services division expects 6.5% to 7.5% operating earnings margins for the full year 2010, which will be driven by mid-single digit year-over-year same store revenue growth and which reflects an estimated impact of RUGs IV and concurrent therapy rules that go into effect October 1, 2010. First quarter 2010 results are expected to be impacted by Part B therapy caps, for which the Company has implemented an aggressive mitigation plan. The division also expects 50 to 75 net new units in 2010.
* The Hospital Rehabilitation Services division expects 15% to 17% operating earnings margins and 2% to 4% year-over-year growth in IRF same store discharges for the full year 2010. Unit count is anticipated to decrease in the first half of the year and recover in the second half, resulting in flat unit growth for the total year 2010.
* The Hospital division expects total year revenue of $650.0 to $675.0 million and EBITDA of $90.0 to $100.0 million. As previously stated, the Company expects a breakeven operating earnings run rate for its 13 legacy hospitals by the end of the second quarter of 2010 and to achieve breakeven operating earnings for the full year 2010.
* The effective tax rate is anticipated to approximate 39% for 2010 after consideration of noncontrolling interests.
* The Company expects continued strong operating cash flow with DSO in the range of 60 to 65 days.
* Capital expenditures are anticipated to be $32.0 million in 2010, consisting of $12.5 million of information systems investments, $12.5 million in expansion projects and $7.0 million related to maintenance.
Dr. Short concluded, "While we expect implementation of the Part B therapy caps, lower HRS unit count and integration efforts to impact our performance in the first quarter, we are optimistic about the full year 2010 as we look to build on our strengths, fully integrate Triumph operations and continue to explore opportunities to expand our continuum of care."
Conference Call Information
RehabCare will host a conference call on March 3, 2010, beginning at 10:00 AM Eastern time. Listeners may access the call by dialing (800) 640-9765, confirmation number 26277547, or in a listen-only mode through the Company's website at http://www.rehabcare.com/about/investors/webcast.html. A replay of the call will be available beginning at approximately 2:00 PM Eastern Time on March 3 by dialing (877) 213-9653, confirmation number 26277547. An online archive of the conference call will remain on the Company's website through April 2, 2010.
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 1,260 hospitals and skilled nursing facilities in 41 states. The Company also operates 34 freestanding long-term acute care and rehabilitation hospitals across the country. RehabCare is included in the Russell 2000 and Standard and Poor's Small Cap 600 Indices.
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 because of changes in underlying factors, new information, future events or otherwise.
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|Article Type:||Financial report|
|Date:||Mar 2, 2010|
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