Rehabcare — Merger or Acquisition (March 2011)
28 slides from Rehabcare's merger presentation, Mar 3, 2011
Slide 1: Investor Presentation
Filed pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Filing Person: Kindred Healthcare, Inc. Commission File No.: 001-14057 Subject Company: RehabCare Group, Inc. Commission File No.: 001-14655 Investor Present
Slide 2: Forward-Looking Statements
Forward-Looking Statements Additional Information About this Transaction In connection with the pending transaction with RehabCare Group, Inc. (“RehabCare”), Kindred Healthcare, Inc. (“Kindred”) will file with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 th
Slide 3: Kindred Update
Kindred Update Kindred Healthcare
Slide 4: Kindred Update
Kindred Update Kindred Healthcare, Inc. (“Kindred”) and RehabCare Group, Inc. (“RehabCare”) have announced a transaction whereby Kindred will acquire RehabCare for ~$35/share Both Companies reported strong Q4 and 2010 clinical and financial results and share a high degree of confidence and visibilit
Slide 5: Summary of Q4 and 2010 Results
Summary of Q4 and 2010 Results Both Kindred and RehabCare beat 4Q and 2010 analyst estimates Kindred Q4 2010 2010 ($MM, except EPS Data) (1) (1) Consensus Actual % Surprise Consensus Actual % Surprise Revenues 1,121.0 1,135.5 1.3% 4,345.0 4,359.7 0.3% EBITDA 61.0 66.8 9.5% 211.0 217.3 3.0% EBIT 30.0
Slide 6: Transaction Overview
Transaction Overview Kindred Healthcare
Slide 7: Transaction Overview
Transaction Overview Kindred and RehabCare have announced a transaction whereby Kindred Transaction will acquire RehabCare for ~$35/share ~$35 / share total ($26 / share in cash; ~$9 / share in Kindred stock) (1) Consideration $1.3 billion total consideration, including assumption of net debt Accret
Slide 8: Transaction Overview (Cont'd)
Transaction Overview (Cont’d) J.P. Morgan, Morgan Stanley and Citi have committed $1.85Bn in debt financing Sources and Uses (1) Pro Forma Capitalization (1) ($MM) ($MM) Sources % of Total 2010PF(2) 2011E(2) New Borrowings 1,600 88% New Borrowings 1,600 1,600 Equity Consideration(3) 228 12% Total De
Slide 9: RehabCare Overview
RehabCare Overview Program Management Services Hospital Division Total Skilled Nursing Rehab Services (SRS) Hospital Rehab Services (HRS) 2010A Revenue ($ MM) (1) $516 $180 $633 $1,329 % Total Revenue 39% 13% 48% 100% 2010A EBITDA ($MM) (1) $45 $35 $134 $214 % Margin 9% 19% 21% 16% Description • Man
Slide 10: Combined Company Overview
Combined Company Overview Together Kindred and RehabCare will be the premier leader in the post-acute market Metrics Kindred RehabCare Kindred + RehabCare Scale (1) 40 42 46 • States 322 34 356 • Facilities 34,792 1,788 36,580 • Beds $4,517MM (2) $1,329MM $5,846MM (2) • 2010 Revenue (Pro Forma) $254
Slide 11: Kindred and RehabCare Combined Presence
Kindred and RehabCare Combined Presence Enhances Kindred’s cluster strategy (1) Kindred Hospitals Kindred Nursing and Rehabilitation Centers RehabCare Hospitals Acute Rehabilitation Units Existing Cluster Market Potential New Cluster Market Source: Company website (1) Circles represent cluster strat
Slide 12: Leading Position in Attractive Growing Businesses
Leading Position in Attractive Growing Businesses Multiple earnings streams, multiple avenues for growth #1 Operator of Long-Term Acute Care Hospitals #1 Operator of Hospital Based and Freestanding IRFs Number of Facilities 140 118 140 121 120 111 120 97 100 100 3 80 80 94 60 60 116 40 13 10 40 19 1
Slide 13: Diversified Services Offerings
Diversified Services Offerings Kindred gains significant scale in both the Skilled Nursing and Hospital Rehab businesses and adds to Kindred’s LTAC business 2010 Pro forma Rehabilitation Services $MM Hospitals Nursing Centers Total (1) Nursing Center Hospital Based Total Based (1) Revenue Kindred He
Slide 14: Rapidly Changing Post-Acute Market
Rapidly Changing Post-Acute Market Multiple Patient Discharge Destinations SOURCE: RTI, 2009: Examining Post-Acute Care Relationships in an Integrated Hospital System 14
Slide 15: Well Positioned to Take Advantage of Changing Healthcare Landscape
Well Positioned to Take Advantage of Changing Healthcare Landscape Uniquely Positioned For Bundled Or Episodic Payment Environment “Continue The Care ” Acute Care Hospitals TRANS ICU CARE LTACS Freestanding / HIH In-Patient Rehab SAU TCC Skilled & Nursing TCU Facilities Outpatient Rehab Assisted Liv
Slide 16: Kindred's Value Proposition and Our "Continue The Care" Campaign
Kindred’s Value Proposition and Our “Continue The Care” Campaign Provide superior clinical outcomes and quality care with an approach which is patient-centered, disciplined and transparent Lower cost by reducing lengths of stay in acute care hospitals and transition patients home at the highest poss
Slide 17: Enhances Growth Profile
Enhances Growth Profile Enhances Kindred’s margin and operating profit growth profiles EBITDAR Growth (1) EBITDA Growth (1) 2010 – 2011 2010 – 2011 (%) (%) 6.0 9.0 7.9 5.1 7.0 6.1 3.5 4.0 5.0 2.0 3.0 Standalone Kindred Pro Forma Kindred Standalone Kindred Pro Forma Kindred EBITDA Margin (1) Net Inco
Slide 18: Declining Rent and Fixed Charge Burden
Declining Rent and Fixed Charge Burden RehabCare operates an asset-light business model Pro forma capital intensity of business drives higher return on assets 2011 Operating Leverage ($MM) Kindred (1) Pro Forma (2) Revenue $4,800 $6,200 EBITDAR 640 899 % Margin 13.3% 14.5% Rent 370 423 % Margin 7.7%
Slide 19: Strong Asset Base Including Owned Real Estate
Strong Asset Base Including Owned Real Estate Kindred has been focused on adding high 50 quality real estate to balance sheet 43 Facilities – Acquisitions 40 – Development of state-of-the-art LTACHs and TCCs – Exercise of in-the-money purchase 30 options Own 16 Hospitals; 25 Nursing Centers and 20 2
Slide 20: Strong Free Cash Flows and Ability to Delever
Strong Free Cash Flows and Ability to Delever Kindred has operated comfortably with a levered balance sheet Routine CapEx declines as a % of revenue, improving free cash flow profile (x) Historical Adjusted Debt / EBITDAR (1) Cash Flow Profile 6.0 2011 Kindred Guidance 4.3 4.4 Stand Alone (2) Pro Fo
Slide 21: Strong Free Cash Flows (cont'd)
Strong Free Cash Flows (cont’d) Cash Flow From Operations ($MM) 400 325 357 373 277 298 300 200 100 0 2010A 2011E 2012E 2013E 2014E ($MM) 400 Routine CapEx 300 200 124 131 121 110 108 100 0 2010A 2011E 2012E 2013E 2014E ($MM) Cash Flow Available for Discretionary CapEx and Debt Paydown 400 247 265 3
Slide 22: Significant EPS Accretion
Significant EPS Accretion Acquisition is significantly accretive at the contemplated transaction value and financing structure on both an EPS and cash flow basis 2011 EPS Guidance 2011 EPS Impact Prev (1) New (2) $ % Low End of $1.45 $1.95 $0.50 34% Guidance Pro-Forma $1.53 $2.05 $0.52 34% Mid Point
Slide 23: Transaction Enhances Growth Prospects, is EPS & FCF Accretive and Strengthens Credit Profile
Transaction Enhances Growth Prospects, is EPS & FCF Accretive and Strengthens Credit Profile Largest provider of post-acute services in US with broadest service offering across post-acute continuum Leading position in Multiple avenues for growth, multiple earnings streams attractive growing Long-ter
Slide 24: Appendix
Appendix Kindred Healthcare
Slide 25: Kindred Q4 '10 Highlights
Kindred Q4 ’10 Highlights Continuing operations income of $0.50 per diluted share tops guidance of $0.43 Q4 2010 continuing operations EPS up 19% over same period last year Fourth quarter consolidated revenues grew 6% to $1.1 billion Full-year operating cash flows exceed $200 million for second cons
Slide 26: Kindred Q4 '10 Highlights (cont'd)
Kindred Q4 ’10 Highlights (cont’d) Hospitals report growth from last year’s Q4 – Recent acquisitions drove hospital revenues up 5% to $508 million – Operating income grew 3% to $96 million Nursing and rehabilitation centers successfully transitioned to new Medicare payment system in Q4 – Division re
Slide 27: RehabCare Q4 '10 Financial Results
RehabCare Q4 ’10 Financial Results Excluding transaction related expenses in the 2009 fourth quarter, net earnings per diluted share increased 86.5% year over year to $0.69 Hospital division improved EBITDA margin to 15.2% in the fourth quarter from 12.9% in the third quarter Impacted by regulatory
Slide 28: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Year ended December 31, Fourth Fourth Quarter Quarter 2006 2007 2008 2009 2010 2009 2010 Operating income (loss): Hospital division $383 $365 $346 $364 $357 $93 $96 Nursing center division 239 295 322 305 303 77 87 Rehabilitation division 30 34 38 51 52 11 9 Pharm