-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MHWqX7mqa+/wqoblSWH5wZmJ8tzWwhtiwUnpo7dDx47NMai+xQHbObcvc5BOUivh KvyFUx7mqNS0ei8og8lPtg== 0000812191-98-000010.txt : 19980817 0000812191-98-000010.hdr.sgml : 19980817 ACCESSION NUMBER: 0000812191-98-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REHABCARE GROUP INC CENTRAL INDEX KEY: 0000812191 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 510265872 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19294 FILM NUMBER: 98689267 BUSINESS ADDRESS: STREET 1: 7733 FORSYTH BLVD 17TH FLR STREET 2: SUITE 1700 CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3148637422 FORMER COMPANY: FORMER CONFORMED NAME: REHABCARE CORP DATE OF NAME CHANGE: 19940218 10-Q 1 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 Commission File Number 0-19294 REHABCARE GROUP, INC. (Exact name of Registrant as specified in its charter) Delaware 51-0265872 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 7733 Forsyth Boulevard, Suite 1700, St. Louis, MO 63105 (Address of principal executive offices and Zip Code) 314-863-7422 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of the Registrant=s common stock, as of the latest practicable date. Class Outstanding at August 13, 1998 - -------------------------------------- ------------------------------ Common Stock, par value $.01 per share 6,349,021 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 of 14 2 REHABCARE GROUP, INC. Index Part I. - Financial Information Item 1. - Condensed Consolidated Financial Statements Condensed consolidated balance sheets, June 30, 1998 (unaudited) and December 31, 1997 3 Condensed consolidated statements of earnings for the three months and six months ended June 30, 1998 and 1997 (unaudited) 4 Condensed consolidated statements of comprehensive earnings for the three months and the six months ended June 30, 1998 and 1997 (unaudited) 5 Condensed consolidated statements of cash flows for the six months ended June 30, 1998 and 1997 (unaudited) 6 Notes to condensed consolidated financial statements (unaudited) 7 Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. - Other Information Item 6. - Exhibits and Reports on Form 8-K 13 Signatures 14 2 of 14 3 PART I - FINANCIAL INFORMATION Item 1. - Condensed Consolidated Financial Statements REHABCARE GROUP, INC. Condensed Consolidated Balance Sheets (Dollar amounts in thousands)
June 30, December 31, 1998 1997 -------- ------------ (unaudited) Assets: Current assets: Cash and cash equivalents $ 4,406 $ 1,975 Marketable securities, available-for-sale 4,314 4,664 Accounts receivable, net of allowance for doubtful accounts of $1,671 and $1,338, respectively 24,872 24,147 Deferred tax assets 1,633 1,773 Prepaid expenses and other current assets 963 720 ------- ------ Total current assets 36,188 33,279 ------- ------ Marketable securities, available-for-sale, noncurrent 1,217 1,812 ------- ------ Equipment and leasehold improvements, net 3,302 3,342 ------- ------ Other assets: Excess of cost over net assets acquired, net 54,605 52,949 Deferred contract costs, net 1,071 1,138 Pre-opening costs, net 3,164 2,908 Deferred tax assets -- 181 Other 1,672 1,632 ------- ------ Total other assets 60,512 58,808 ------- ------ $101,219 $ 97,241 ======= ====== Liabilities and Stockholders' Equity: Current liabilities: Current portion of long-term debt $ 4,660 $ 4,520 Accounts payable 1,851 1,700 Accrued salaries and wages 12,793 9,925 Accrued expenses 4,069 3,570 Income taxes payable -- 771 ------- ------ Total current liabilities 23,373 20,486 ------- ------ Deferred tax liabilities 257 -- ------- ------ Deferred compensation 1,715 2,501 ------- ------ Long-term debt, less current portion 26,351 34,494 ------- ------ Stockholders' equity: Preferred stock, $.10 par value; authorized 10,000,000 shares, none issued and outstanding -- -- Common stock, $.01 par value; authorized 20,000,000 shares, issued 7,308,723 and 7,152,191 shares, respectively 73 72 Additional paid-in capital 25,748 23,972 Retained earnings 40,911 35,192 Less common stock held in treasury at cost, 1,166,234 and 1,311,307 shares, respectively (17,975) (20,212) Accumulated other comprehensive earnings - unrealized gain on marketable securities, net of tax 766 736 ------- ------ Total stockholders' equity 49,523 39,760 ------- ------ $101,219 $ 97,241 ======= ====== See notes to condensed consolidated financial statements.
3 of 14 4 REHABCARE GROUP, INC. Condensed Consolidated Statements of Earnings (Amounts in thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 ---- ---- ---- ---- Operating revenues $42,967 $39,496 $86,531 $75,901 Costs and expenses: Operating expenses 29,004 27,328 58,621 52,549 General and administrative 7,533 6,777 15,131 12,773 Depreciation and amortization 1,013 927 2,021 1,805 ------ ------ ------ ------ Total costs and expenses 37,550 35,032 75,773 67,127 ------ ------ ------ ------ Operating earnings 5,417 4,464 10,758 8,774 Interest income 70 58 124 93 Interest expense (659) (781) (1,352) (1,231) Other income 52 -- 94 -- Gain on sale of marketable securities -- -- -- 1,448 ------ ------ ------ ------ Earnings before income taxes 4,880 3,741 9,624 9,084 Income taxes 1,954 1,576 3,905 3,652 ------ ------ ------ ----- Net earnings $ 2,926 $ 2,165 $5,719 $5,432 ====== ====== ====== ====== Net earnings per common share: Basic $ .49 $ .38 $ .96 $. 87 ====== ====== ====== ====== Diluted $ .41 $ .31 $ .81 $ .74 ====== ====== ====== ====== Weighted average number of common shares outstanding: Basic 6,005 5,687 5,902 6,229 ====== ====== ===== ===== Diluted 7,212 7,099 7,172 7,507 ====== ====== ====== ===== See notes to condensed consolidated financial statements.
4 of 14 5 REHABCARE GROUP, INC. Condensed Consolidated Statements of Comprehensive Earnings (Amounts in thousands) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 ---- ---- ---- ---- Net earnings $2,926 $2,165 $5,719 $5,432 Other comprehensive earnings, net of tax - Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during period (30) 130 30 (590) Less: reclassification adjustment for realized gains included in net earnings -- -- -- (869) ------ ----- ------ ------ Comprehensive earnings $ 2,896 $ 2,295 $ 5,749 $ 3,973 ====== ====== ====== ====== See notes to condensed consolidated financial statements.
5 of 14 6 REHABCARE GROUP, INC. Condensed Consolidated Statements of Cash Flows (Amounts in thousands) (Unaudited)
Six Months Ended June 30, 1998 1997 ---- ---- Cash flows from operating activities: Net earnings $ 5,719 $ 5,432 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 2,021 1,805 Provision for losses on accounts receivable 380 211 Equity in earnings of affiliate (82) -- Gain on sale of marketable securities -- (1,448) Increase (decrease) in deferred compensation (786) 418 Increase in accounts receivable, net (1,105) (5,494) Increase in prepaid expenses and other current assets (243) (212) Decrease in other assets 42 57 Increase in accounts payable and accrued expenses 650 1,890 Increase in accrued salaries and wages 2,868 1,174 Increase (decrease) in income taxes payable and deferred (213) 1,049 ------ ------ Net cash provided by operating activities 9,251 4,882 ------ ------ Cash flows from investing activities: Additions to equipment and leasehold improvements, net (499) (584) Deferred contract costs (150) -- Proceeds from sale/maturities of marketable securities 995 1,092 Payments related to pre-opening costs (773) (692) Cash paid in acquisition of businesses, net of cash received (2,404) (7,253) ------ ------ Net cash used in investing activities (2,831) (7,437) ------ ------ Cash flows from financing activities: Proceeds from revolving credit facility, net 35 1,000 Payments on long-term debt (8,038) (1,420) Proceeds on issuance of note payable -- 1,825 Proceeds on issuance of long-term debt -- 24,000 Purchase of treasury stock -- (23,131) Exercise of stock options (including tax benefit) 4,014 1,303 Other -- 204 ------ ------ Net cash provided by (used in) financing activities (3,989) 3,781 ------ ------ Net increase in cash and cash equivalents 2,431 1,226 Cash and cash equivalents at beginning of period 1,975 772 ------ ------ Cash and cash equivalents at end of period $ 4,406 $ 1,998 ====== ====== See notes to condensed consolidated financial statements.
6 of 14 7 REHABCARE GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. - Basis of Presentation The condensed consolidated balance sheets and related condensed consolidated statements of earnings, comprehensive earnings and cash flows contained in this Form 10-Q, which are unaudited, include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and activity have been eliminated in consolidation. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Adjustments consisted only of normal recurring items. The results of operations for the three months and six months ended June 30, 1998, are not necessarily indicative of the results to be expected for the fiscal year. Certain prior years' amounts have been reclassified to conform with the current year presentation. The condensed consolidated financial statements do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Reference is made to the Company's audited consolidated financial statements and the related notes as of December 31, 1997 and 1996 and for the year ended December 31, 1997, for the ten months ended December 31, 1996 and for the year ended February 29, 1996, included in the Annual Report on Form 10-K on file with the Securities and Exchange Commission, which provide additional disclosures and a further description of accounting policies. Note 2. - Comprehensive Earnings The Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income, on January 1, 1998, which requires reporting of comprehensive income (earnings) and its components, in the statement of operations and statement of equity, including net income as a component. Comprehensive income is the change in equity of a business from transactions and other events and circumstances from non-owner sources. 7 of 14 8 Note 3. - Earnings per Share
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 ---- ---- ---- ---- Numerator: Numerator for basic earnings per share - earnings available to common stockholders (net earnings) $2,926,000 2,165,000 5,719,000 5,432,000 Effect of dilutive securities - after tax interest on convertible subordinated promissory notes 57,000 57,000 112,000 112,000 --------- --------- --------- --------- Numerator for diluted earnings per share - earnings available to common stockholders after assumed conversions $2,983,000 2,222,000 5,831,000 5,544,000 ========= ========= ========= ========= Denominator: Denominator for basic earnings per share - weighted-average shares outstanding 6,005,000 5,687,000 5,962,000 6,229,000 Effect of dilutive securities: Stock options 665,000 845,000 668,000 711,000 Convertible subordinated promissory notes 423,000 423,000 423,000 423,000 Contingently issuable shares 119,000 144,000 119,000 144,000 --------- --------- --------- --------- Denominator for diluted earnings per share - adjusted weighted-average shares and assumed conversions 7,212,000 7,099,000 7,172,000 7,507,000 ========= ========= ========= ========= Basic earnings per share $.49 .38 .96 .87 === === === === Diluted earnings per share $.41 .31 .81 .74 === === === ===
Note 4. - Subsequent Event On July 31, 1998, the Company purchased 100% of the capital stock of Rehabilitative Care Systems of America, Inc. ("RCSA"). The aggregate purchase price of $1,850,000 was paid at closing. Additional consideration of up to $350,000 will be paid to the former RCSA stockholders over two years contingent upon retention of clients. The acquisition has been accounted for by the purchase method of accounting, whereby the operating results of RCSA will be included in the Company's results of operations commencing on the date of acquisition. Goodwill related to the acquisition will be amortized over 40 years. On July 10, 1998, the Company entered into a definitive agreement to acquire StarMed Staffing, Inc., ("StarMed"), and certain related entities for cash from Medical Resources, Inc. On August 6, 1998, the Company entered into a definitive agreement to acquire Therapeutic Systems, Ltd. of Chicago, Illinois for consideration consisting of cash, stock and notes. The aggregate purchase prices for both transactions at their respective closings will consist of $42.2 million in cash, $3.5 million in stock and $1.5 million in subordinated notes. 8 of 14 9 Additional consideration of up to $7.8 million will be paid to the former stockholder of Therapeutic Systems contingent upon the attainment of certain financial goals over three years. The cash will be funded through borrowings made available by an increase in the Company's bank credit facility to $90 million. The Acquisitions are expected to be completed in August, and will be treated by the Company as purchases for accounting purposes. Note 5. - Current Developments in Accounting and Reporting In April 1998, Statement of Position 98-5, Reporting on the Costs of Start-up Activities ("SOP"), was issued which is effective for fiscal years beginning after December 15, 1998, and requires that costs of start-up activities be expensed as incurred. Start-up activities are defined in the SOP as those one-time activities related to opening a new facility, introducing a new territory, conducting business with a new class of customer or beneficiary, initiating a new process in an existing facility, or commencing a new operation. Initial application of the SOP should be as of the beginning of the fiscal year in which the SOP is adopted and should be reported as the cumulative effect of a change in accounting principle. At June 30, 1998, the Company has $3.2 million of costs related to start-up activities capitalized. Approximately 50% of these costs will be subject to write-off under the SOP. At the present time, management anticipates writing-off previously capitalized costs of start-up activities on January 1, 1999 as a cumulative effect of a change in accounting principle. In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"), which establishes standards for the way public enterprises are to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997. SFAS 131 is a disclosure item, and as a result, the adoption will not have a material impact on the Company's financial position or results of operations. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities. SFAS 133 establishes standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 133 is effective for all fiscal years beginning after June 15, 1999. Earlier application of SFAS 133 is encouraged but should not be applied retroactively to financial statements of prior periods. The Company is currently evaluating the requirements and impact of SFAS 133. 9 of 14 10 Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company provides physical medicine, rehabilitation and chronic care services in a variety of settings under multi-year contracts. These settings include distinct-part acute rehabilitation units that may or may not be exempt from the Medicare Prospective Payment System ("PPS"), depending on their stage of development; subacute units that are operated within licensed skilled nursing units; and outpatient clinics, both on and off campus of the host hospital. The Company also is a contract provider of therapists and nurses on a continuing and temporary basis to hospitals and long-term care and rehabilitation facilities.
Three Months Ended Six Months Ended Operating Statistics June 30, June 30, -------------------- ------------------- ------------ 1998 1997 1998 1997 ---- ---- ---- ---- Inpatient Units (Acute and Subacute) Average bed capacity 2,510 2,057 2,401 2,030 Average billable length of stay (days) 14.2 15.1 14.4 15.2 Billable patient days served 160,068 129,412 313,421 255,128 Admissions 11,260 8,593 21,799 16,792 Average daily billable census 1,759 1,422 1,732 1,410 Average occupied beds per unit 13.9 13.3 14.1 13.4 Total units in operation at end of period 132 110 132 110 Outpatient Clinics Patient visits 76,533 60,197 139,405 120,907 Units of service 233,562 191,306 429,746 382,756 Total clinics in operation at end of period 22 17 22 17 Staffing Weeks worked 6,061 7,425 13,256 14,217 Contract Therapy Number of locations at end of period 40 44 40 44
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997 Operating revenues during the second quarter of 1998 increased by $3,471,000, or 8.8%, to $42,967,000. An 18.7% increase in the average number of inpatient units from 107.0 to 127.0 units and an increase in the average daily billable census per inpatient unit of 4.5% from 13.3 to 13.9, generated a 23.7% increase in billable patient days to 160,068 and a 13.6% increase in revenue from inpatient units. The increase in billable census per unit for inpatient units is primarily attributable to a 10.4% increase in admissions per unit offset by a 6.0% decline in average billable length of stay. The decline in average length of stay reflects both the continued trend of reduced rehabilitation lengths of stay and the increase in subacute units operational in 1998, which carry a shorter length of stay than acute rehabilitation units. The increase in billable patient days was offset by a 8.2% decrease in average per diem billing rates, reflecting a greater mix of subacute units which carry lower average per diem rates than acute units. Inpatient unit revenue increased by $3,263,000 while outpatient revenue increased 47.0% to $3,648,000. Contract therapy revenue increased 56.2% to $2,854,000, reflecting the June 1997 acquisition of Rehab Unlimited. Staffing revenue decreased $1,746,000 as a result of an 18.4% decrease in weeks worked to 6,061 weeks. Operating expenses for the three-month periods compared increased by $1,676,000, or 6.1% to $29,004,000. The increase was attributable to the increase in patient days and units of service, offset by the decrease in staffing weeks worked. The excess of operating expenses over operating revenues associated with non-exempt acute units decreased from $217,000 to $102,000, on a decrease in the average number of non-exempt units from 8.0 to 3.3. The per unit average excess of operating expenses over operating revenues increased from $27,000 to $30,000. The average excess of operating expenses over operating revenues for units during their non-exempt year can range to as high as $150,000 to $200,000. 10 of 14 11 General and administrative expenses increased $756,000, or 11.2%, to $7,533,000, reflecting increases in administration, business development, operations and professional services in support of the increase in units, compared to the previous year. Interest expense decreased $122,000 reflecting a reduction in long-term debt. Earnings before income taxes increased by $1,139,000, or 30.4%, to $4,880,000. The provision for income taxes for the second quarter of 1998 was $1,954,000, compared to $1,576,000 for 1997, reflecting effective income tax rates of 40.0% and 42.1% for the respective quarters. Net earnings increased by $761,000, or 35.2% to $2,926,000. Diluted earnings per share increased 32.3% to 41 cents from 31 cents on a 1.6% increase in the weighted average shares outstanding. The increase in shares outstanding is attributable primarily to an increase in the dilutive effect of outstanding stock options resulting from an increase in the average market price of the Company's stock relative to the underlying exercise prices of outstanding stock options. Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997 Operating revenues during the first six months of 1998 increased by $10,630,000, or 14.0%, to $86,531,000. A 17.1% increase in the average number of inpatient units from 104.9 to 122.8 units and an increase in the average daily billable census per inpatient unit of 5.2% from 13.4 to 14.1, generated a 22.8% increase in billable patient days to 313,421 and a 14.0% increase in revenue from inpatient units. The increase in billable census per unit for inpatient units is primarily attributable to a 10.9% increase in admissions per unit offset by a 5.3% decline in average billable length of stay. The decline in average length of stay reflects both the continued trend of reduced rehabilitation lengths of stay and the increase in subacute units operational in 1998, which carry a shorter length of stay than acute rehabilitation units. The increase in billable patient days was offset by a 7.2% decrease in average per diem billing rates, reflecting a greater mix of subacute units which carry lower average per diem rates than acute units. Inpatient unit revenue increased by $6,659,000 while outpatient revenue increased 23.7% to $6,332,000. Contract therapy revenue increased 98.2% to $5,554,000, reflecting the acquisitions of Team Rehab, Inc. and Moore Rehabilitation Services, Inc. in January 1997 and Rehab Unlimited in June 1997. Staffing revenue increased $422,000, reflecting an increase in the percentage of weeks worked that included the costs of payroll, offset by a 6.8% decrease in weeks worked to 13,256 weeks. Operating expenses for the six-month periods compared increased by $6,072,000, or 11.6% to $58,621,000. The increase was attributable to the increase in patient days and units of service, plus an increase in weeks worked that included the costs of payroll. The excess of operating expenses over operating revenues associated with non-exempt units decreased from $367,000 to $231,000, on a decrease in the average number of non-exempt units from 7.5 to 3.2. The per unit average excess of operating expenses over operating revenues increased from $49,000 to $72,000 reflecting a 3% decrease in billable patients per unit to 3.0. The first quarter of 1997 also had a greater percentage of units where the Company was not obligated to provide therapy staff. The average excess of operating expenses over operating revenues for units during their non-exempt year can range to as high as $150,000 to $200,000. General and administrative expenses increased $2,358,000, or 18.5%, to $15,131,000, reflecting increases in corporate office expenses as well as administration, business development, operations and professional services in support of the increase in units. 11 of 14 12 Interest expense increased $121,000 reflecting interest on net new debt issued in acquisitions consummated in 1997 and the repurchase of Company common stock during 1997. Gain on sale of marketable securities reflects the sale of approximately 50% of the Company's investment in Intensiva Healthcare Corporation in the first quarter of 1997, with no comparable gain in the first six months of 1998. Earnings before income taxes increased by $540,000, or 5.9%, to $9,624,000. Excluding the gain on sale of marketable securities, earnings before income taxes would have increased $1,988,000 or 26.0%. The provision for income taxes for the first six months of 1998 was $3,905,000, compared to $3,652,000 for 1997, reflecting effective income tax rates of 40.6% and 40.2% for the respective periods. Net earnings increased by $287,000, or 5.3% to $5,719,000. Diluted earnings per share increased 9.5% to 81 cents from 74 cents on a 4.5% decrease in the weighted average shares outstanding. The gain on sale of marketable securities represented 12 cents of the earnings per share in 1997. Excluding this gain, diluted earnings per share increased 30.6% from 62 cents in the first six months of 1997. The decrease in shares outstanding is attributable primarily to shares repurchased offset by an increase in the dilutive effect of outstanding stock options, resulting from an increase in the average market prices of the Company's stock relative to the underlying exercise prices of outstanding stock options. Liquidity and Capital Resources As of June 30, 1998, the Company had $8,720,000 in cash and current marketable securities and a current ratio of 1.5:1. Working capital as of June 30, 1998 was virtually unchanged as compared to December 31, 1997. Net accounts receivable were $24,872,000 at June 30, 1998, compared to $24,147,000 at December 31, 1997. The number of days average net revenue in net receivables was 52.7 at June 30, 1998 compared to 52.0 at December 31, 1997. The Company's operating cash flows constitute its primary source of liquidity and historically have been sufficient to fund its working capital and capital expansion requirements. The Company expects to meet its future working capital, capital expenditure, business expansion and debt service requirements from a combination of internal sources and outside financing. The Company had a $20,000,000 revolving line of credit and a balance outstanding as of June 30, 1998, of $3,000,000. In conjunction with the acquisitions as discussed in Note 4, the Company has a commitment to increase its bank credit facility to $60 million of term debt and $30 million revolving credit facility. Year 2000 Compliance The Company has developed and presented to the Board of Directors its action plan for Year 2000 compliance. The Company does not expect that the cost of the year 2000 compliance will be material to its business, financial condition, or results of operations, nor does management anticipate any material disruption in operations as the result of any failure by the Company or its subsidiaries. 12 of 14 13 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Report on Form 8-K A report on Form 8-K dated July 10, 1998 was filed by the Company to report, pursuant to Item 5 of the Form 8-K, that the Company has entered into a definitive agreement to acquire StarMed Staffing, Inc. from Medical Resources, Inc. A report on Form 8-K dated August 6, 1998 was filed by the Company to report, pursuant to Item 5 of the Form 8-K, that the Company has entered into a definitive agreement to acquire Therapeutic Systems, Ltd. 13 of 14 14 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 thereunto duly authorized. REHABCARE GROUP, INC. August 13, 1998 By /s/ John R. Finkenkeller --------------------------- John R. Finkenkeller Senior Vice President and Chief Financial Officer (Chief Financial Officer) 14 of 14 15 EXHIBIT INDEX Page Number 27 Financial Data Schedule 16 EX-27 2 FDS --
5 6-MOS DEC-31-1998 JUN-30-1998 4,406,000 4,314,000 26,543,000 1,671,000 0 36,188,000 3,302,000 0 101,219,000 23,373,000 26,351,000 0 0 73,000 49,450,000 101,219,000 86,531,000 86,531,000 58,621,000 75,773,000 0 0 1,228,000 9,624,000 3,905,000 5,719,000 0 0 0 5,719,000 .96 .81
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