Add
RHB to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| RHB > SEC Filings for RHB > Form 10-Q on 5-Nov-2009 | All Recent SEC Filings |
5-Nov-2009
Quarterly Report
This Quarterly Report on Form 10-Q 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 our actual results in future periods to differ
materially from forecasted results. These risks and uncertainties may include
but are not limited to:
· our ability to attract and the additional costs of attracting and retaining
administrative, operational and professional employees;
· shortages of qualified therapists, nurses and other healthcare personnel;
· unionization activities among our employees;
· our ability to effectively respond to fluctuations in our census levels and number of patient visits;
· changes in governmental reimbursement rates and other regulations or policies affecting reimbursement for the services provided by us to clients and/or patients;
· competitive and regulatory effects on pricing and margins;
· our ability to control operating costs and maintain operating margins;
· general and economic conditions impacting us and our clients, including efforts by governmental reimbursement programs, insurers, healthcare providers and others to contain healthcare costs;
· violations of healthcare regulations, including the 60% Rule in inpatient rehabilitation facilities and the 25% Rule and the 25 day average length of stay requirement in long-term acute care hospitals ("LTACHs");
· the operational, administrative and financial effect of our compliance with other governmental regulations and applicable licensing and certification requirements;
· our ability to attract new client relationships or to retain and grow existing client relationships through expansion of our service offerings and the development of alternative product offerings;
· our ability to integrate acquisitions and partnering relationships within the expected timeframes and to achieve the revenue, cost savings and earnings levels from such acquisitions and relationships at or above the levels projected;
· our ability to consummate acquisitions and other partnering relationships at reasonable valuations;
· litigation risks of our past and future business, including our ability to predict the ultimate costs and liabilities or the disruption of our operations;
· significant increases in health, workers compensation and professional and general liability costs and our ability to predict the ultimate liability for such costs;
· uncertainty in the financial markets that limits the availability and impacts the terms and conditions of financing, which could impact our ability to consummate acquisitions and meet obligations to third parties;
· our ability to comply with the terms of our borrowing agreements;
· the adequacy and effectiveness of our information systems;
· natural disasters, pandemics and other unexpected events which could severely damage or interrupt our systems and operations; and
· changes in federal and state income tax laws and regulations, the effectiveness of our tax planning strategies and the sustainability of our tax positions.
Results of Operations
We operate in the following two business segments, which are managed separately based on fundamental differences in operations: program management services and hospitals. Program management services include hospital rehabilitation services (including inpatient acute and subacute rehabilitation and outpatient therapy programs) and skilled nursing rehabilitation services (including contract therapy in skilled nursing facilities, resident-centered management consulting services and staffing services for therapists and nurses). Our hospitals segment owns and operates six inpatient rehabilitation hospitals and seven LTACHs.
REHABCARE GROUP, INC.
Effective June 1, 2009, the Company completed the sale of all the outstanding common stock of Phase 2 Consulting, Inc. ("Phase 2") to Premier, Inc. for approximately $5.5 million. Phase 2 provides management and economic consulting services to the healthcare industry and had been a subsidiary of the Company since it was acquired in 2004. This transaction will allow the Company's management to focus on its core businesses. Phase 2 has been classified as a discontinued operation. Prior year comparative amounts throughout Management's Discussion and Analysis of Financial Condition and Results of Operations have been adjusted to reflect the treatment of Phase 2 as a discontinued operation.
Effective August 30, 2008, the Company completed the sale of equipment, goodwill, other intangible assets and certain related assets associated with an inpatient rehabilitation hospital located in Midland, Texas (the "Midland hospital") to HealthSouth Corporation for approximately $7.2 million. This transaction was the result of a strategic review of the Midland-Odessa market. The Midland hospital has also been classified as a discontinued operation.
Selected Operating Statistics:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Program Management:
Skilled Nursing Rehabilitation
Services:
Total operating revenues (in
thousands) $ 123,350 $ 112,246 $ 370,285 $ 339,174
Contract therapy revenues (in
thousands) $ 117,610 $ 105,572 $ 350,515 $ 316,156
Average number of contract
therapy locations 1,089 1,071 1,077 1,062
Average revenue per contract
therapy location $ 107,979 $ 98,548 $ 325,372 $ 297,600
Hospital Rehabilitation
Services:
Operating revenues (in
thousands)
Inpatient $ 32,926 $ 30,800 $ 97,588 $ 90,439
Outpatient 12,113 10,791 35,614 31,557
Total $ 45,039 $ 41,591 $ 133,202 $ 121,996
Average number of programs
Inpatient 120 123 121 121
Outpatient 36 33 36 33
Total 156 156 157 154
Average revenue per program
Inpatient $ 274,387 $ 251,437 $ 804,736 $ 745,881
Outpatient $ 339,549 $ 329,810 $ 994,137 $ 959,022
Hospitals:
Operating revenues (in
thousands) $ 39,651 $ 27,513 $ 111,248 $ 82,183
Number of facilities at end of
period 13 10 13 10
|
REHABCARE GROUP, INC.
Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
Operating Revenues
Consolidated operating revenues during the third quarter of 2009 increased by approximately $26.6 million, or 14.7%, to $208.0 million compared to $181.4 million in the third quarter of 2008. The revenue increase was due to growth in each of our business segments.
Skilled nursing rehabilitation services ("SRS") operating revenues increased $11.1 million or 9.9% in the third quarter of 2009 compared to the third quarter of 2008. Same store contract therapy revenues grew 10.0% reflecting a 6.5% increase in same store minutes of service. Higher average daily census, improved therapist productivity and a market basket adjustment for skilled nursing facilities which became effective October 1, 2008 contributed to the growth in same store revenues. The average number of contract therapy locations operated during the third quarter of 2009 grew 1.7%.
Hospital rehabilitation services ("HRS") operating revenues increased 8.3% in the third quarter of 2009 compared to the third quarter of 2008 as inpatient revenue increased 6.9% and outpatient revenue increased 12.3%. Inpatient average revenue per program increased 9.1% in the third quarter of 2009 reflecting favorable changes in the division's contract portfolio as compared to the prior year quarter. Same store discharges for inpatient rehabilitation facilities grew 0.5% compared to the third quarter of 2008. HRS operated 110 inpatient rehabilitation facility programs as of both September 30, 2009 and 2008. The increase in outpatient revenue in the third quarter of 2009 reflects a 9.0% increase in the average number of units operated and a 7.8% increase in same store revenues. Same store outpatient units of service increased 8.2% in the third quarter of 2009.
Hospital segment revenues were $39.7 million in the third quarter of 2009 compared to $27.5 million in the third quarter of 2008. The increase in revenues in 2009 reflects the June 2009 acquisition of an LTACH in Dallas, the November 2008 opening of a rehabilitation hospital in St. Louis, Missouri and the January 2009 certification of an LTACH in Kansas City, Missouri. The hospital segment also opened an LTACH in Peoria, Illinois in August 2009. This hospital began its LTACH demonstration period on November 1, 2009. It will be reimbursed at Medicare's lower inpatient prospective payment system rates for six full months from the date the hospital began its LTACH demonstration period. After it maintains an average length-of-stay of 25 days for six full months, the hospital will apply to the Centers for Medicare and Medicaid Services ("CMS") for an LTACH provider number. Same store revenues increased by $3.5 million or 12.9% in the third quarter of 2009 as compared to the third quarter of 2008. One hospital contributed $1.9 million to the same store revenue growth as a result of an increase in patient census.
Costs and Expenses
Three Months Ended September 30,
2009 2008
% of % of
Amount Revenue Amount Revenue
(dollars in thousands)
Consolidated costs and expenses:
Operating expenses $ 170,020 81.7 % $ 148,955 82.1 %
Selling, general and administrative 23,813 11.5 21,735 12.0
Depreciation and amortization 3,727 1.8 3,580 2.0
Total costs and expenses $ 197,560 95.0 % $ 174,270 96.1 %
|
REHABCARE GROUP, INC.
Operating expenses as a percentage of revenues decreased in all of our businesses. The decrease in selling, general and administrative expenses as a percentage of revenues reflects the increase in revenues combined with the cost savings achieved by eliminating approximately 60 corporate and division support positions in the second half of 2008. These cost savings were more than offset by an increase in stock-based compensation expense and management incentives, which reflects the improved overall performance of the Company, and an increase in selling, general and administrative expenses incurred by our hospital segment.
The Company's provision for doubtful accounts is included in operating expenses. On a consolidated basis, the provision for doubtful accounts decreased by approximately $0.3 million from $1.4 million in the third quarter of 2008 to $1.1 million in the third quarter of 2009.
Three Months Ended September 30,
2009 2008
% of Unit % of Unit
Amount Revenue Amount Revenue
(dollars in thousands)
Skilled Nursing Rehabilitation Services:
Operating expenses $ 99,631 80.8 % $ 91,558 81.6 %
Selling, general and administrative 12,321 10.0 12,376 11.0
Depreciation and amortization 1,564 1.2 1,651 1.5
Total costs and expenses $ 113,516 92.0 % $ 105,585 94.1 %
Hospital Rehabilitation Services:
Operating expenses $ 31,451 69.8 % $ 29,302 70.5 %
Selling, general and administrative 4,831 10.7 5,448 13.1
Depreciation and amortization 561 1.3 612 1.4
Total costs and expenses $ 36,843 81.8 % $ 35,362 85.0 %
Hospitals:
Operating expenses $ 38,938 98.2 % $ 28,095 102.1 %
Selling, general and administrative 6,661 16.8 3,618 13.2
Depreciation and amortization 1,602 4.0 1,317 4.8
Total costs and expenses $ 47,201 119.0 % $ 33,030 120.1 %
|
Total skilled nursing rehabilitation services ("SRS") costs and expenses declined as a percentage of unit revenue in the third quarter of 2009 compared to the third quarter of 2008 primarily due to improved operating performance and better leveraging of selling, general and administrative expenses. Direct operating expenses declined as a percentage of unit revenue primarily due to a reduction in labor and benefit costs as a percentage of revenue. This was driven by therapist productivity improvements during the current quarter which more than offset the impact of wage rate and benefit cost increases. The decrease in selling, general and administrative expenses as a percentage of unit revenue reflects the increase in revenues combined with the cost savings achieved from the division and corporate realignment activities that were completed in the second half of 2008. Depreciation and amortization expense decreased primarily due to lower amortization associated with capitalized software which became fully amortized in 2008. As a result of these factors, SRS's operating earnings increased from $6.7 million in the third quarter of 2008 to $9.8 million in the third quarter of 2009.
Total hospital rehabilitation services ("HRS") costs and expenses declined as a percentage of unit revenue in the third quarter of 2009 compared to the third quarter of 2008 primarily due to improved operating performance and a decrease in selling, general and administrative expenses. Direct operating expenses decreased as a percentage of unit revenue in the current quarter reflecting a favorable change in the division's contract mix, which included an additional 2.4 inpatient rehabilitation facility programs on average in the third quarter of 2009 as compared to the third quarter of 2008. Selling, general and administrative expenses decreased primarily as a result of the corporate realignment activities that were completed in the second half of 2008 and divisional realignment which was completed in the first half of 2009. Depreciation and amortization expense decreased primarily due to lower amortization associated with capitalized software which became fully amortized in 2008. HRS's operating earnings increased by $2.0 million from $6.2 million in the third quarter of 2008 to $8.2 million in the third quarter of 2009.
REHABCARE GROUP, INC.
Total hospital segment costs and expenses as a percentage of unit revenue decreased from the third quarter of 2008 to the third quarter of 2009. Operating expenses decreased as a percentage of unit revenue in the third quarter of 2009 primarily due to an increase in earnings from our mature hospitals, including our Clear Lake, Texas hospital which was negatively impacted by Hurricane Ike in 2008. We estimate Hurricanes Ike and Gustav had a combined negative impact on the third quarter 2008 operating earnings of the hospital segment of $0.6 million. Combined start-up and ramp-up losses declined from $1.9 million in the third quarter of 2008 to $1.5 million in the third quarter of 2009. The 2008 losses primarily relate to the start-up of our LTACH in Kansas City while the 2009 losses primarily relate to the start-up of our LTACH in Peoria, Illinois which accepted its first patient in August 2009. The hospital in Kansas City became certified as an LTACH in January 2009. Additionally, Dallas LTAC Hospital, which was acquired on June 30, 2009, incurred an operating loss of approximately $1.8 million during the third quarter of 2009. Selling, general and administrative expenses increased from the prior year quarter as costs incurred for merger, acquisition and joint venture development activities increased by $2.3 million in the third quarter of 2009. The hospital segment has also continued to invest in back office resources to support the recent and expected future growth of the business. Depreciation and amortization expense increased from the third quarter of 2008 to the third quarter of 2009 primarily due to depreciation and amortization associated with our newest facilities. As a result of these factors, the hospital segment incurred operating losses of $7.6 million in the third quarter of 2009 and $5.5 million in the third quarter of 2008.
Non-Operating Items
Interest expense decreased from $0.8 million in the third quarter of 2008 to $0.5 million in the third quarter of 2009 primarily due to a reduction in borrowings against our revolving credit facility. The balance outstanding on the revolving credit facility was $25.0 million and $52.0 million at September 30, 2009 and 2008, respectively. Interest expense also includes interest on capital lease obligations, commitment fees paid on the unused portion of our line of credit and fees paid on outstanding letters of credit.
Earnings from continuing operations before income taxes increased to $10.0 million in the third quarter of 2009 from $6.4 million in the third quarter of 2008. The provision for income taxes was $4.3 million in the third quarter of 2009 compared to $2.7 million in the third quarter of 2008, reflecting effective income tax rates of 43.2% and 42.7%, respectively. The increase in the effective tax rate reflects the increase in net losses attributable to noncontrolling interests from which we do not derive a related tax benefit.
The Company incurred a loss from discontinued operations, net of tax, of $0.3 million during the three months ended September 30, 2008. This loss relates to the operations of Phase 2, which was sold in the second quarter of 2009, and the Midland hospital, which was sold in the third quarter of 2008. See Note 8 to the condensed consolidated financial statements for additional information.
Net losses attributable to noncontrolling interests in consolidated subsidiaries increased from $0.6 million in the third quarter of 2008 to $1.1 million in the third quarter of 2009. This increase is primarily due to the recognition of the noncontrolling interests' share of the losses incurred by our hospitals in Peoria and Dallas.
REHABCARE GROUP, INC.
Net earnings attributable to RehabCare were $6.8 million in the third quarter of 2009 compared to $4.0 million in the third quarter of 2008. Diluted earnings per share attributable to RehabCare were $0.37 in the third quarter of 2009 and $0.22 in the third quarter of 2008.
Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
Operating Revenues
Consolidated operating revenues during the first nine months of 2009 increased by approximately $71.3 million, or 13.1%, to $614.7 million compared to $543.4 million in the first nine months of 2008. The revenue increase was due to growth in each of our business segments.
Skilled nursing rehabilitation services ("SRS") operating revenues increased $31.1 million or 9.2% in the first nine months of 2009 compared to the first nine months of 2008. Same store contract therapy revenues grew 10.3% reflecting a 6.8% increase in same store minutes of service. Higher average daily census, improved therapist productivity and a market basket adjustment for skilled nursing facilities which became effective October 1, 2008 contributed to the growth in same store revenues. The average number of contract therapy locations operated during the first nine months of 2009 grew 1.4%.
Hospital rehabilitation services ("HRS") operating revenues increased $11.2 million or 9.2% in the first nine months of 2009 compared to the first nine months of 2008 as inpatient revenue increased 7.9% and outpatient revenue increased 12.9%. Inpatient average revenue per program increased 7.9% in the first nine months of 2009 reflecting favorable changes in the division's contract portfolio as compared to the prior year. In addition, same store revenues for inpatient rehabilitation facilities ("IRFs") grew 1.3% and same store IRF discharges increased 2.2% compared to the first nine months of 2008. The increase in outpatient revenue in the first nine months of 2009 reflects an 8.8% increase in the average number of units operated and an 8.4% increase in same store revenues.
Hospital segment revenues were $111.2 million in the first nine months of 2009 compared to $82.2 million in the first nine months of 2008. The increase in revenues in 2009 reflects the June 2009 acquisition of an LTACH in Dallas, the June 2008 acquisition of The Specialty Hospital in Rome, Georgia, the November 2008 opening of a rehabilitation hospital in St. Louis, Missouri and the January 2009 certification of an LTACH in Kansas City, Missouri. Same store revenues increased by $5.8 million or 7.5% in the first nine months of 2009 as compared to the first nine months of 2008. One hospital contributed $3.9 million to the same store revenue growth as a result of an increase in patient census.
Costs and Expenses
Nine Months Ended September 30,
2009 2008
% of % of
Amount Revenue Amount Revenue
(dollars in thousands)
Consolidated costs and expenses:
Operating expenses $ 494,832 80.5 % $ 442,325 81.4 %
Selling, general and administrative 70,922 11.5 66,772 12.3
Depreciation and amortization 11,379 1.9 10,860 2.0
Total costs and expenses $ 577,133 93.9 % $ 519,957 95.7 %
|
REHABCARE GROUP, INC.
Operating expenses as a percentage of revenues decreased in all of our businesses. The decrease in selling, general and administrative expenses as a percentage of revenues reflects the increase in revenues combined with the cost savings achieved by eliminating approximately 60 corporate and division support positions in the second half of 2008. These cost savings were more than offset by an increase in stock-based compensation expense and management incentives, which reflects the improved overall performance of the Company, and an increase in selling, general and administrative expenses incurred by our hospital segment.
The Company's provision for doubtful accounts is included in operating expenses. On a consolidated basis, the provision for doubtful accounts decreased by $0.7 million from $5.7 million in the first nine months of 2008 to $5.0 million in the first nine months of 2009. This decrease is primarily attributable to both our skilled nursing rehabilitation services and hospital rehabilitation services businesses and reflects the results of a concerted focus on collection activities and our on-going efforts to improve the quality of our portfolio of accounts receivable.
Nine Months Ended September 30,
2009 2008
% of Unit % of Unit
Amount Revenue Amount Revenue
(dollars in thousands)
Skilled Nursing Rehabilitation Services:
Operating expenses $ 298,763 80.7 % $ 278,496 82.1 %
Selling, general and administrative 37,305 10.1 38,589 11.4
Depreciation and amortization 4,820 1.3 5,158 1.5
Total costs and expenses $ 340,888 92.1 % $ 322,243 95.0 %
Hospital Rehabilitation Services:
Operating expenses $ 93,092 69.9 % $ 86,797 71.1 %
Selling, general and administrative 16,127 12.1 17,013 13.9
Depreciation and amortization 1,831 1.4 2,008 1.7
Total costs and expenses $ 111,050 83.4 % $ 105,818 86.7 %
Hospitals:
Operating expenses $ 102,977 92.6 % $ 77,032 93.7 %
Selling, general and administrative 17,236 15.5 10,587 12.9
Depreciation and amortization 4,728 4.2 3,694 4.5
Total costs and expenses $ 124,941 112.3 % $ 91,313 111.1 %
|
Total skilled nursing rehabilitation services ("SRS") costs and expenses as a percentage of unit revenue decreased in the first nine months of 2009 compared to the first nine months of 2008 primarily due to an increase in therapist productivity and a decrease in selling, general and administrative expenses. Direct operating expenses declined as a percentage of unit revenue primarily due to a reduction in labor and benefit costs as a percentage of revenue. This was driven by therapist productivity improvements and lower contract labor usage during the current period which more than offset the impact of wage rate and benefit cost increases. Improved therapist retention and a reduction in the time to fill permanent positions may have contributed to the decreased use of contract labor. Selling, general and administrative expenses decreased primarily due to the cost savings achieved from the division and corporate realignment activities that were completed in the second half of 2008. Depreciation and amortization expense decreased primarily due to lower amortization associated with capitalized software which became fully amortized in 2008. As a result of these factors, SRS's operating earnings increased by $12.5 million from $16.9 million in the first nine months of 2008 to $29.4 million in the first nine months of 2009.
REHABCARE GROUP, INC.
Total hospital rehabilitation services ("HRS") costs and expenses as a percentage of unit revenue decreased in the first nine months of 2009 compared to the first nine months of 2008 primarily due to improved operating performance and a decrease in selling, general and administrative expenses. Direct operating . . .
|
|