Attached files
| file | filename |
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| 8-K - REHABCARE 3Q09 RELEASE - REHABCARE GROUP INC | eightk3q09earnings.htm |
| EX-99.1 - REHABCARE 3Q09 EARNINGS - REHABCARE GROUP INC | eightk3q09earningsrelease.htm |
Exhibit
99.2
REHABCARE
CONFERENCE CALL SCRIPT
November
3, 2009
INTRODUCTION
BY CONFERENCE OPERATOR
Thank you
for joining us today for RehabCare’s third quarter earnings conference
call. Speaking on the call today will be Dr. John Short, RehabCare
President and CEO. At this time, all participants are in a
listen-only mode. We will have a question-and-answer session toward
the end of the conference call. Please note this call is being
recorded. I would now like to turn the call over to Patti Williams,
RehabCare General Counsel.
INTRODUCTION
OF MANAGEMENT BY GENERAL COUNSEL
Thanks. This
conference call contains forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. In
particular, the description of the Company’s proposed merger with Triumph
HealthCare and the anticipated benefits of that transaction are forward-looking
statements. 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. 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. I
will now hand it over to Dr. Short.
JOHN
SHORT
INTRODUCTION
AND WELCOME
Thank
you, Patti. Good afternoon and thank you for joining us
today. I’m John Short, President and CEO of the
Company. With me are the members of my executive management team, all
of whom will be available to answer your questions at the conclusion of our
remarks.
This is a
very exciting day for RehabCare. Along with our strong third
quarter earnings, we have announced our definitive agreement to merge with
Triumph HealthCare, one of the country’s largest and most successful operators
of long-term acute care hospitals (LTACHs). Our organizations share a
common commitment to growth, financial strength and setting the standard of
excellence in patient care. Pending customary closing conditions, including
regulatory approvals, we expect to complete the transaction on or about December
1, 2009.
This
transaction, our largest to date, will strengthen our expertise in a critical
component of the post-acute continuum and give us greater scale, expanding our
hospital portfolio from 13 to 35. After careful consideration of
several options, Triumph clearly stood out as the best opportunity to enhance
shareholder value. Consistent execution by our contract businesses, who once
again delivered an exceptional earnings performance in the third quarter, has
given us the financial flexibility to execute on this strategy.
Post
transaction, managed services will represent 53 percent of our revenue stream
and owned operations will represent 47 percent, immediately transforming our
Hospital division to a major earnings and cash flow
contributor. Additionally, the merger is expected to be meaningfully
accretive to diluted earnings per share attributable to RehabCare in
2010.
Greater
depth in our LTACH segment also creates a balanced portfolio of post-acute
services in combination with our 116 owned or managed inpatient rehabilitation
facilities, 35 managed outpatient therapy programs covering nearly 100 sites and
contract therapy services at about 1,100 skilled nursing
facilities.
Before I
discuss the transaction in more detail, let me share some of the highlights from
the quarter as they pertain to our core operating divisions.
Operating
earnings in our Skilled Nursing
Rehabilitation Services division were 9.8 million dollars, or 8.0 percent
of revenue, compared to 6.7 million dollars, or 5.9 percent of revenue, in the
third quarter of 2008. Year-over-year operating revenues improved 9.9 percent to
123.4 million dollars, driven by a 10.0 percent increase in contract therapy
same store revenues. Net unit count increased by 33 sequentially,
with 47 openings and 14 closures. We signed 65 new client contracts
compared to 44 in the second quarter. At the end of the quarter, the
number of signed but unopened contracts stood at 40.
Operating
earnings in our Hospital
Rehabilitation Services division increased to 8.2 million dollars, or
18.2 percent of revenue, compared to 6.2 million dollars, or 15.0 percent of
revenue, in the third quarter of 2008. Operating revenues improved
8.3 percent to 45.0 million dollars over the prior year quarter. Inpatient
rehabilitation facility same store discharges increased 0.5 percent compared to
third quarter 2008. The pipeline of new business is improving and at
quarter end the number of signed but unopened contracts was eight, five of which
were inpatient rehabilitation facilities.
The Hospital division reported an
operating loss of 7.6 million dollars compared to a loss of 3.8 million dollars
in the second quarter. The 3.8 million dollar sequential increase in
operating losses was primarily due to a 1.6 million dollar increase in external
merger and acquisition related expenses and a 1.2 million dollar increase in
start-up losses for Greater Peoria Specialty Hospital, which opened on August
4. We also incurred a 1.8 million dollar operating loss at Dallas
LTAC Hospital, which we acquired on June 30 of this year. We expect
this hospital to be accretive by the first half of 2010. The
division’s same store operating performance improved by 500,000 dollars
sequentially. Revenues in the third
quarter increased 9.3 percent sequentially. Same store discharges
decreased 3.5 percent as two of our inpatient rehabilitation facilities limited
admissions in July and August to achieve compliance with the 60%
Rule. Both hospitals’ compliance periods ended on August
31.
Turning
to Triumph, headquartered in Houston, Texas, the company was founded in 1999 and
currently operates 20 hospitals in seven states, including 11 freestanding and
nine co-located LTACHs. Two additional freestanding hospitals are
expected to come on-line by mid-2010.
With this
merger, we further our strategic vision of developing post-acute continuums of
care in 11 markets, where there is significant overlap with our existing
services. Triumph delivers innovative treatment and effective case management
that produces superior patient outcomes. Patients, clients and
clinicians will benefit from an expanded network of post-acute settings and
enhanced clinical synergies. Expanding our LTACH segment also positions us and
our healthcare partners to better respond to healthcare reform initiatives that
may lead to an episodic or bundled payment system.
When this transaction closes, Brock Hardaway, Triumph President and Chief Operating Officer, will oversee the operations of our entire LTACH business under the direction of Kevin Gross, our Senior Vice President of Hospital Operations. Brock, who joins us on the call today, has over 21 years in healthcare, more than 16 in the LTACH sector. Prior to joining Triumph in 2005, he was responsible for the performance of over 30 hospitals for Select Medical. By applying Triumph’s efficient and profitable business model, we expect to significantly improve the performance of our LTACHs.
Financial
details of the Triumph merger and our third quarter results are included in our
press releases.
Moving
into 2010, we are focused on building on our successes in our contract service
businesses while integrating the largest merger in company history. As we proved
with our successful acquisition and integration of Symphony Health Services in
2006, we believe our merger with Triumph will create a stronger, more
diversified company that delivers greater value for each of our
stakeholders.
With our
broad array of services across the post-acute continuum and soon-to-be over
16,000 employees, we are well positioned to compete in a continually changing
and challenging industry…and to reach more patients in need of rehabilitative
care.
With
that, I would like to have our operator open the call for
questions.
To be read following Questions and
Answers –
As a
reminder, this conference call is being webcast live on our web site,
www.rehabcare.com, and will be available for replay beginning at 7 pm Eastern
time today.