Rehabcare — Merger or Acquisition (March 2011)
35 slides from Rehabcare's merger presentation, Mar 16, 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 tha
Slide 3: Largest Diversified Post-Acute Provider in the United States
Largest Diversified Post-Acute Provider in the United States (1) $4.4 billion (2) 696(3) 33,800(3) 56,800(3) consolidated sites of service, patients and dedicated revenues 315 facilities residents employees, in 40 states per day making Kindred a top-200 private employer in (1) Ranking based on reven
Slide 4: Kindred's Market Leading Businesses
Kindred’s Market Leading Businesses HOSPITAL NURSING CENTER REHABILITATION Long-term Acute Care Hospitals Nursing and Rehabilitation Centers Peoplefirst Rehabilitation Services (1) $2.0 billion revenues (1) $2.2 billion revenues $505 million revenues (1) • Largest operator in U.S. (2) • Third larges
Slide 5: 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 6: Healthcare Companies in the World, Fortune Magazine
Healthcare Companies in the World, Fortune Magazine 2009, 2010 and 2011 | Decade 4 tp, Haig md a ——
Slide 7: Investment Rationale
Investment Rationale Each year, nearly 9 million people – 23,000 a day – are discharged from short-term acute care hospitals that require some form of post-acute care As the largest diversified post-acute provider, Kindred is uniquely positioned to grow and succeed in what will be an increasingly in
Slide 8: Kindred Update
Kindred Update Healthc
Slide 9: Kindred Update
Kindred Update Kindred Healthcare, Inc. (“Kindred”) and RehabCare Group, Inc. (“RehabCare”) have announced a transaction whereby Kindred will acquire RehabCare for ~$35/share Both Companies reported strong Q4 and 2010 clinical and financial results and share a high degree of confidence and visibilit
Slide 10: Summary of Q4 and 2010 Results
Summary of Q4 and 2010 Results Both Kindred and RehabCare beat 4Q and 2010 analyst estimates Kindred Q4 2010 2010 ($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 11: Transaction Overview
Transaction Overview Healthc
Slide 12: 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 13: Transaction Overview: Sources and Uses, Pro-Forma Capitalization
Transaction Overview 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) $600MM ABL Revolving Credit Facility $350 19% New Borrowings 1,600 1,600 Term Loan B 700 38% Total
Slide 14: Agency Ratings
Agency Ratings Corporate Family Term Loan B Moody’s Investors B1 Ba3 Service (1) Standard and B+ B+ Poor’s (2) (1) Release dated March 14, 2011 (2)Release dated March 11, 2011 14
Slide 15: Kindred and RehabCare will be the Premier Rehabilitation and Post-Acute Provider
Kindred and RehabCare will be the Premier Rehabilitation and Post-Acute Provider in the United States 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) $1,349MM $5,866MM (2) • 2010 Revenue (Pro Forma) $254MM (2)
Slide 16: Kindred and RehabCare Combined Presence
Kindred and RehabCare Combined Presence Transaction enhances Kindred’s Cluster Market Strategy Kindred Hospitals Kindred Nursing and Rehabilitation Centers RehabCare Hospitals Acute Rehabilitation Units Existing Cluster Market Potential New Cluster Market 16
Slide 17: Leading Position in Attractive Growing Businesses
Leading Position in Attractive Growing Businesses Multiple earnings streams, multiple avenues for growth #1 Operator of Long-Term Acute Care Hospitals #1 Operator of Hospital Based and Freestanding IRFs Number of Facilities 140 118 140 121 111 120 120 97 100 100 3 80 80 94 60 60 116 40 13 10 40 19 1
Slide 18: Strategic Rationale
Strategic Rationale Healthc
Slide 19: Rapidly Changing Post-Acute Market
Rapidly Changing Post-Acute Market Multiple Patient Discharge Destinations SOURCE: RTI, 2009: Examining Post-Acute Care Relationships in an Integrated Hospital System 19
Slide 20: Positioned to Take Advantage of Changing Healthcare Landscape
Positioned to Take Advantage of Changing Healthcare Landscape Uniquely Positioned For Bundled Or Episodic Payment Environment “Continue The Care” ACUTE CARE HOSPITALS TRANS LTACs FREESTANDING/ HIH CARE ICU IN-PATIENT REHAB SAU SKILLED TCC & OUTPATIENT NURSING TCU REHAB FACILITIES ASSISTED HOME LIVIN
Slide 21: Transaction Enhances Financial Profile
Transaction Enhances Financial Profile Enhances Kindred’s growth and operating margin profiles EBITDAR Growth (1) EBITDA Growth (1) 2010 – 2011 2010 – 2011 (%) (%) 6.0 9.0 7.9 5.1 7.0 6.1 4.0 3.5 5.0 2.0 3.0 Standalone Kindred Pro Forma Kindred Standalone Kindred Pro Forma Kindred EBITDA Margin (1)
Slide 22: Transaction Reduces Rent and Fixed Charge Burden
Transaction Reduces Rent and Fixed Charge Burden RehabCare operates a less capital-intensive business model, driving higher pro forma returns on assets 2011 Operating Leverage ($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% 6.8% D
Slide 23: Growing Portfolio of Owned Real Estate
Growing Portfolio of Owned Real Estate Kindred has been focused on adding high quality real estate to balance sheet 50 43 Facilities – Acquisitions – Development of state-of-the-art LTACHs 40 and TCCs – Exercise of in-the-money purchase 30 options Own 16 hospitals; 25 nursing centers and 2 16 20 Fac
Slide 24: Transaction Provides Significant EPS and Cash Flow Accretion
Transaction Provides Significant EPS and Cash Flow Accretion 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 Impact High End of $1.60 $2.15 $0.55 34% Guidance (1) Previous guidance shown is Kindred standalone
Slide 25: 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 26: Strategic and Financial Rationale
Strategic and Financial Rationale Pro Forma Kindred will be the post-acute leader with an enhanced financial profile Unparalleled combined service offering Leading position in No. 1 IRFs, LTACs and SNF Rehab management contracts; No. 4 standalone SNFs attractive growing Expands relationships with ac
Slide 27: Kindred Has a History of Successfully Integrating Acquisitions
Kindred Has a History of Successfully Integrating Acquisitions February 2006: July 2007: (Spin-off) November 2010: Commonwealth Communities Kindred and AmerisourceBergen Five LTACHs Holdings (6 Hospitals, 11 NCs combine their institutional pharmacy from Vista and 4 ALFs) businesses to form Pharmeric
Slide 28: Investment Considerations
Investment Considerations Track record for operational success based on commitment to quality, service excellence and a disciplined approach to the business Experienced management team, robust technology platform, processes and systems, and a demonstrated ability to adapt to change Growing businesse
Slide 29: Investor Presentation
Investor Presentation Kindred Healthcare, Inc. (NYSE: KND) March 16, 2011 29
Slide 30: Appendix
Appendix Kindred | Decenel be He, Hag a all —
Slide 31: Kindred Q4 '10 Highlights
Kindred Q4 ’10 Highlights • Fourth quarter consolidated revenues grew 6% to $1.1 billion • Diluted EPS of $0.50 grew 19% from Q4 ‘09 • Full year operating cash flows exceed $200 million for second consecutive year • Routine and development capital expenditures were fully funded through internal reso
Slide 32: RehabCare Q4 '10 Highlights
RehabCare Q4 ’10 Highlights Excluding transaction related expenses in Q4 ’09, diluted EPS increased 86% 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 changes, Skilled Nursing Rehabilitation Servi
Slide 33: Business Segment Buildup
Business Segment Buildup RehabCare acquisition significantly enhances 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) Reven
Slide 34: 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
Slide 35: Investor Presentation
Investor Presentation Kindred Healthcare, Inc. (NYSE: KND) March 16, 2011 35