Attached files
file | filename |
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8-K - 8-K - REHABCARE GROUP INC | d70031e8vk.htm |
EX-3.1 - EX-3.1 - REHABCARE GROUP INC | d70031exv3w1.htm |
EX-23.1 - EX-23.1 - REHABCARE GROUP INC | d70031exv23w1.htm |
EX-99.1 - EX-99.1 - REHABCARE GROUP INC | d70031exv99w1.htm |
EX-99.2 - EX-99.2 - REHABCARE GROUP INC | d70031exv99w2.htm |
EXHIBIT 99.3
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
On November 3, 2009, RehabCare Group, Inc. (the
Company) and certain of its subsidiaries entered
into an Agreement and Plan of Merger (the Merger
Agreement) with Triumph HealthCare Holdings, Inc.
(Triumph HealthCare) and TA Associates, Inc. whereby
RehabCare Merger Sub Corporation, a newly formed, indirect,
wholly owned subsidiary of the Company will merge with and into
Triumph HealthCare (the Merger), with Triumph
HealthCare surviving as a wholly-owned, indirect subsidiary of
the Company. The unaudited pro forma condensed combined
financial statements give effect to the Merger and related
financing transactions, as if they had occurred on the dates
indicated herein and after giving effect to the pro forma
adjustments discussed herein. The accompanying unaudited pro
forma condensed combined balance sheet as of September 30,
2009 and unaudited pro forma condensed combined statements of
earnings for the nine months ended September 30, 2009 and
the year ended December 31, 2008, are based on the
historical consolidated financial statements of the Company and
Triumph HealthCare. The Merger is expected to be consummated on
or about December 1, 2009 and will be accounted for using
the acquisition method of accounting as of and from the date of
the actual closing of the Merger. The unaudited pro forma
condensed combined balance sheet as of September 30, 2009
was prepared assuming the Merger and related financing
transactions were completed on September 30, 2009. The
unaudited pro forma condensed combined statements of earnings
for the nine months ended September 30, 2009 and the year
ended December 31, 2008 were prepared assuming the Merger
and related transactions were completed on January 1, 2008.
The adjustments necessary to fairly present the unaudited pro
forma condensed combined financial statements have been made
based on available information and, in the opinion of
management, are reasonable. Assumptions underlying the pro forma
adjustments are described in the accompanying notes, which
should be read in conjunction with the unaudited pro forma
condensed combined financial statements.
The unaudited pro forma condensed combined financial information
is for comparative purposes only and does not purport to
represent what our financial position or results of operations
would actually have been had the events noted above in fact
occurred on the assumed dates or to project our financial
position or results of operations for any future date or future
period. The unaudited pro forma condensed combined statements of
earnings do not include costs that we expect to incur in
connection with the Merger, which we expect to be approximately
$9.0 million to $10.0 million, or any cost savings
that may result from the combination of the Companys and
Triumph HealthCares operations or the costs necessary to
achieve those cost savings. In addition, the allocation of the
purchase price by the Company to the assets to be acquired and
liabilities to be assumed is preliminary. The final allocation,
which will be made on the basis of the estimated fair values of
such assets and liabilities on the date the Merger is actually
consummated, may differ materially from the amounts reflected
herein.
The unaudited pro forma condensed combined financial information
should be read in conjunction with, and are qualified by
reference to, our consolidated financial statements and related
notes and the section entitled Managements
Discussion and Analysis of Financial Condition and Results of
Operations included in our Current Report on Form
8-K filed
October 9, 2009, our unaudited condensed consolidated
financial statements and related notes and the section entitled
Managements Discussion and Analysis of Financial
Condition and Results of Operations included in our
Quarterly Report on Form
10-Q for the
nine months ended September 30, 2009, filed
November 5, 2009 and Triumph HealthCares historical
financial statements and the accompanying notes thereto included
in this Current Report on Form
8-K as
exhibits 99.1 and 99.2.
1
REHABCARE
GROUP, INC.
Pro Forma Condensed Combined Balance Sheet (Unaudited)
September 30, 2009
(amounts in thousands)
Pro Forma Condensed Combined Balance Sheet (Unaudited)
September 30, 2009
(amounts in thousands)
Triumph |
Allocation of |
|||||||||||||||||||||||
Triumph |
HealthCare |
Transaction |
Purchase |
Combined |
||||||||||||||||||||
RehabCare | HealthCare | Excludable | Funding | Price | Pro Forma | |||||||||||||||||||
(a) | (b) | (c) | ||||||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||
Current assets:
|
||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 34,541 | $ | 54,392 | $ | (54,392 | ) | $ | (14,019 | ) | $ | | $ | 20,522 | ||||||||||
Accounts receivables, net
|
137,681 | 55,360 | | | | 193,041 | ||||||||||||||||||
Deferred tax assets
|
14,750 | 6,311 | | | | 21,061 | ||||||||||||||||||
Other current assets
|
8,016 | 6,977 | (907 | ) | | | 14,086 | |||||||||||||||||
Total current assets
|
194,988 | 123,040 | (55,299 | ) | (14,019 | ) | | 248,710 | ||||||||||||||||
Property and equipment, net
|
42,141 | 58,286 | | | 13,611 | 114,038 | ||||||||||||||||||
Goodwill
|
173,462 | 171,561 | (171,561 | ) | | 409,970 | 583,432 | |||||||||||||||||
Intangible assets, net
|
25,571 | 35,601 | | | 74,099 | 135,271 | ||||||||||||||||||
Investment in Triumph HealthCare
|
| | | 556,043 | (556,043 | ) | | |||||||||||||||||
Investment in unconsolidated affiliate
|
4,725 | | | | | 4,725 | ||||||||||||||||||
Other
|
6,132 | 7,367 | (5,514 | ) | 19,538 | | 27,523 | |||||||||||||||||
Net assets transferred by seller
|
| | (92,570 | ) | | 92,570 | | |||||||||||||||||
Total assets
|
$ | 447,019 | $ | 395,855 | $ | (324,944 | ) | $ | 561,562 | $ | 34,207 | $ | 1,113,699 | |||||||||||
LIABILITIES AND EQUITY
|
||||||||||||||||||||||||
Current liabilities:
|
||||||||||||||||||||||||
Current portion of long-term debt
|
$ | 444 | $ | 6,403 | $ | (3,060 | ) | $ | 5,000 | $ | | $ | 8,787 | |||||||||||
Accounts payable
|
6,027 | 14,730 | | | | 20,757 | ||||||||||||||||||
Accrued salaries and wages
|
58,852 | 14,717 | | | | 73,569 | ||||||||||||||||||
Accrued interest
|
40 | 2,064 | (2,064 | ) | | | 40 | |||||||||||||||||
Income taxes payable
|
2,634 | 2,508 | | | | 5,142 | ||||||||||||||||||
Other current liabilities
|
31,019 | 10,936 | (1,862 | ) | | | 40,093 | |||||||||||||||||
Total current liabilities
|
99,016 | 51,358 | (6,986 | ) | 5,000 | | 148,388 | |||||||||||||||||
Long-term debt, less current portion
|
26,273 | 394,754 | (384,140 | ) | 461,200 | | 498,087 | |||||||||||||||||
Deferred tax liabilities
|
9,762 | 7,743 | | | 34,207 | 51,712 | ||||||||||||||||||
Other
|
4,375 | 6,910 | | | | 11,285 | ||||||||||||||||||
Total liabilities
|
139,426 | 460,765 | (391,126 | ) | 466,200 | 34,207 | 709,472 | |||||||||||||||||
Stockholders equity:
|
||||||||||||||||||||||||
Preferred stock
|
| | | | | | ||||||||||||||||||
Common stock
|
218 | 79 | (79 | ) | 44 | | 262 | |||||||||||||||||
Additional paid-in capital
|
149,662 | 478 | (478 | ) | 102,068 | | 251,730 | |||||||||||||||||
Retained earnings
|
199,336 | (65,622 | ) | 65,622 | (6,750 | ) | | 192,586 | ||||||||||||||||
Treasury stock
|
(54,704 | ) | | | | | (54,704 | ) | ||||||||||||||||
Accumulated other comprehensive earnings
|
(143 | ) | (1,117 | ) | 1,117 | | | (143 | ) | |||||||||||||||
Total stockholders equity
|
294,369 | (66,182 | ) | 66,182 | 95,362 | | 389,731 | |||||||||||||||||
Noncontrolling interests
|
13,224 | 1,272 | | | | 14,496 | ||||||||||||||||||
Total equity
|
307,593 | (64,910 | ) | 66,182 | 95,362 | | 404,227 | |||||||||||||||||
Total liabilities and equity
|
$ | 447,019 | $ | 395,855 | $ | (324,944 | ) | $ | 561,562 | $ | 34,207 | $ | 1,113,699 | |||||||||||
See accompanying notes to unaudited pro forma condensed combined
financial statements.
2
REHABCARE
GROUP, INC.
Pro Forma Condensed Combined Statement of Earnings (Unaudited)
Nine Months Ended September 30, 2009
(amounts in thousands, except per share data)
Pro Forma Condensed Combined Statement of Earnings (Unaudited)
Nine Months Ended September 30, 2009
(amounts in thousands, except per share data)
Triumph |
||||||||||||||||||||
Triumph |
HealthCare |
Pro Forma |
Combined |
|||||||||||||||||
RehabCare | HealthCare | Excludable | Adjustments | Pro Forma | ||||||||||||||||
(d) | (e) | (f) | ||||||||||||||||||
Operating revenues
|
$ | 614,735 | $ | 328,455 | $ | | $ | | $ | 943,190 | ||||||||||
Costs and expenses:
|
||||||||||||||||||||
Operating
|
565,754 | 260,157 | | (414 | )(g) | 825,497 | ||||||||||||||
Depreciation and amortization
|
11,379 | 10,759 | (10,759 | ) | 8,604 | (h) | 21,891 | |||||||||||||
1,908 | (i) | |||||||||||||||||||
Total costs and expenses
|
577,133 | 270,916 | (10,759 | ) | 10,098 | 847,388 | ||||||||||||||
Operating earnings
|
37,602 | 57,539 | 10,759 | (10,098 | ) | 95,802 | ||||||||||||||
Interest income
|
19 | | | | 19 | |||||||||||||||
Interest expense
|
(1,619 | ) | (22,693 | ) | 21,578 | (25,721 | )(j) | (28,455 | ) | |||||||||||
Other income (expense)
|
4 | | | | 4 | |||||||||||||||
Equity in net income of affiliates
|
326 | | | | 326 | |||||||||||||||
Earnings from continuing operations, before income taxes
|
36,332 | 34,846 | 32,337 | (35,819 | ) | 67,696 | ||||||||||||||
Income taxes
|
14,799 | 12,832 | | (1,358 | )(k) | 26,273 | ||||||||||||||
Earnings from continuing operations, net of tax
|
21,533 | 22,014 | 32,337 | (34,461 | ) | 41,423 | ||||||||||||||
Net loss (income) attributable to noncontrolling interests
|
1,614 | (1,814 | ) | | | (200 | ) | |||||||||||||
Net earnings from continuing operations attributable to RehabCare
|
$ | 23,147 | $ | 20,200 | $ | 32,337 | $ | (34,461 | ) | $ | 41,223 | |||||||||
Net earnings from continuing operations attributable to
RehabCare per common share:
|
||||||||||||||||||||
Basic
|
$ | 1.31 | $ | 1.87 | ||||||||||||||||
Diluted
|
$ | 1.28 | $ | 1.84 | ||||||||||||||||
Weighted-average number of common shares outstanding:
|
||||||||||||||||||||
Basic
|
17,733 | 4,350 | (l) | 22,083 | ||||||||||||||||
Diluted
|
18,050 | 4,350 | (l) | 22,400 | ||||||||||||||||
See accompanying notes to unaudited pro forma condensed combined
financial statements.
3
REHABCARE
GROUP, INC.
Pro Forma Condensed Combined Statement of Earnings (Unaudited)
Year Ended December 31, 2008
(amounts in thousands, except per share data)
Pro Forma Condensed Combined Statement of Earnings (Unaudited)
Year Ended December 31, 2008
(amounts in thousands, except per share data)
Triumph |
||||||||||||||||||||
Triumph |
HealthCare |
Pro Forma |
Combined |
|||||||||||||||||
RehabCare | HealthCare | Excludables | Adjustments | Pro Forma | ||||||||||||||||
(d) | (e) | (f) | ||||||||||||||||||
Operating revenues
|
$ | 735,412 | $ | 423,726 | $ | | $ | | $ | 1,159,138 | ||||||||||
Costs and expenses:
|
||||||||||||||||||||
Operating
|
687,935 | 346,960 | | | (g) | 1,034,895 | ||||||||||||||
Loss on disposal of assets
|
| 1,806 | | | 1,806 | |||||||||||||||
Depreciation and amortization
|
14,570 | 12,929 | (12,929 | ) | 11,470 | (h) | 28,584 | |||||||||||||
2,544 | (i) | |||||||||||||||||||
Total costs and expenses
|
702,505 | 361,695 | (12,929 | ) | 14,014 | 1,065,285 | ||||||||||||||
Operating earnings
|
32,907 | 62,031 | 12,929 | (14,014 | ) | 93,853 | ||||||||||||||
Interest income
|
143 | | | | 143 | |||||||||||||||
Interest expense
|
(3,897 | ) | (34,854 | ) | 32,579 | (34,306 | )(j) | (40,478 | ) | |||||||||||
Other income (expense)
|
21 | | | | 21 | |||||||||||||||
Equity in net income of affiliates
|
471 | | | | 471 | |||||||||||||||
Earnings from continuing operations, before income taxes
|
29,645 | 27,177 | 45,508 | (48,320 | ) | 54,010 | ||||||||||||||
Income taxes
|
12,063 | 9,898 | | (1,097 | )(k) | 20,864 | ||||||||||||||
Earnings from continuing operations, net of tax
|
17,582 | 17,279 | 45,508 | (47,223 | ) | 33,146 | ||||||||||||||
Net loss (income) attributable to noncontrolling interests
|
1,986 | (2,115 | ) | | | (129 | ) | |||||||||||||
Net earnings from continuing operations attributable to RehabCare
|
$ | 19,568 | $ | 15,164 | $ | 45,508 | $ | (47,223 | ) | $ | 33,017 | |||||||||
Net earnings from continuing operations, attributable to
RehabCare per common share:
|
||||||||||||||||||||
Basic
|
$ | 1.11 | $ | 1.51 | ||||||||||||||||
Diluted
|
$ | 1.10 | $ | 1.49 | ||||||||||||||||
Weighted-average number of common shares outstanding:
|
||||||||||||||||||||
Basic
|
17,583 | 4,350 | (l) | 21,933 | ||||||||||||||||
Diluted
|
17,798 | 4,350 | (l) | 22,148 | ||||||||||||||||
See accompanying notes to unaudited pro forma condensed combined
financial statements.
4
REHABCARE
GROUP, INC.
Notes to
Unaudited Pro Forma Condensed Combined Financial
Statements
1. | Preliminary Allocation of Acquisition Cost |
On November 3, 2009, the Company entered into a definitive
agreement to acquire all of the outstanding common stock of
Triumph HealthCare for a purchase price of $570.0 million
in cash, subject to certain working capital and other purchase
price adjustments. The initial purchase price payable in
connection with the Merger is expected to be financed primarily
by a new $500.0 million term loan with a six-year maturity
and the net proceeds of the Companys proposed equity
offering, which for purposes of this pro forma presentation are
estimated to be $102.1 million. The term loan will require
principal payments of approximately $5.0 million annually
with the remaining principal balance due at maturity. The
Company expects to enter into senior secured credit facilities
(the Senior Credit Facilities) with a total
availability of $625.0 million, including the
$500.0 million term loan and a $125.0 million
revolving credit facility with a five-year term. The Company
expects to borrow $1.2 million against the new revolving
credit facility and has classified this amount as long-term debt
on the pro forma balance sheet. The Company anticipates paying
total debt issuance costs, including original issue discount,
underwriting fees and other out of pocket costs, of
approximately $29.5 million upon completion of the Senior
Credit Facilities. A portion of these costs have been included
in the pro forma balance sheet as an increase to other assets
and a reduction of cash with the portion representing original
issue discount netted against long term debt.
The Merger will be accounted for under the acquisition method of
accounting. An estimate of the consideration to be transferred
at closing and a preliminary allocation of the purchase price to
the assets to be acquired and the liabilities to be assumed are
outlined below. Amounts are in thousands of dollars.
Estimate of Consideration to Be Transferred:
|
||||
Base purchase price
|
$ | 570,000 | ||
Estimated debt to be assumed by RehabCare
|
(13,957 | ) | ||
Estimated working capital adjustment
|
| |||
Total estimated purchase price
|
$ | 556,043 | ||
Allocation of Estimated Purchase Price:
|
||||
Accounts receivable
|
$ | 55,360 | ||
Deferred income taxes
|
6,311 | |||
Other current assets
|
6,070 | |||
Property and equipment
|
71,897 | |||
Identifiable intangibles, principally Medicare licenses, trade
name and certificates of need
|
109,700 | |||
Other assets
|
1,853 | |||
Current portion of long-term debt
|
(3,343 | ) | ||
Accounts payable and other current liabilities
|
(41,029 | ) | ||
Noncurrent portion of long-term debt
|
(10,614 | ) | ||
Deferred tax liabilities
|
(41,950 | ) | ||
Other liabilities
|
(6,910 | ) | ||
Total identifiable net assets
|
147,345 | |||
Noncontrolling interests in Triumph HealthCare
|
(1,272 | ) | ||
Goodwill
|
409,970 | |||
Fair value of total consideration to be transferred
|
$ | 556,043 | ||
The above preliminary purchase price allocation has been
prepared on the basis of a preliminary valuation study. Upon
consummation of the Merger, the valuation study will be
finalized to establish the fair values of both the identifiable
intangible assets to be acquired and the noncontrolling
interests to be assumed.
5
REHABCARE
GROUP, INC.
Notes to
Unaudited Pro Forma Condensed Combined Financial
Statements (Continued)
For the preliminary purchase price allocation, we have not made
an adjustment to Triumph HealthCares carrying value for
noncontrolling interests. Due to control, transferability and
other restrictive terms of the partnership agreements, the fair
value adjustments, if any, to the balance of noncontrolling
interests are not expected to be material. Any such adjustments
would result in an increase or decrease to noncontrolling
interests and a corresponding change to goodwill.
2. | Explanation of Pro Forma Adjustments |
a) To remove the goodwill on Triumph
HealthCares balance sheet and exclude Triumph HealthCare
assets, liabilities and equity included in the Triumph
HealthCare balance sheet at September 30, 2009 that are not
included in the assets to be acquired and the liabilities to be
assumed by the Company. To balance the assets to be acquired and
liabilities to be assumed as reflected in this adjustment
column, the net assets to be acquired by the Company are
recorded as net assets transferred by seller.
b) To record the funding of the estimated purchase
price by the Company in accordance with the financial terms
outlined in Note 1 above. Total acquisition-related
transaction costs which are not yet reflected in the historical
balance sheets are estimated to be approximately
$6.8 million (which does not include the expenses of the
Companys proposed equity offering, which are netted
against additional paid-in capital) and are reflected in the pro
forma balance sheet as a reduction to cash and retained
earnings. No adjustment has been made for any restructuring and
integration charges expected to be incurred in connection with
the Merger. These costs will be expensed as incurred. The
Company expects to incur total incremental costs of
approximately $9.0 million to $10.0 million in
connection with the Merger (which includes acquisition-related
transaction costs, restructuring charges and integration
charges).
c) To adjust the assets to be acquired and
liabilities to be assumed to reflect the preliminary allocation
of the estimated purchase price as summarized in Note 1
above. The fair values of the identifiable intangible assets and
their useful lives have been estimated as follows. Dollar
amounts are in thousands.
Estimated |
Estimated |
|||||
Fair Value | Useful Life | |||||
Medicare licensesindefinite lived
|
$ | 65,000 | indefinite | |||
Certificates of needindefinite lived
|
10,000 | indefinite | ||||
Trade name
|
32,500 | 17.5 years | ||||
Non-compete agreements
|
2,200 | 2 to 10 years | ||||
Total
|
$ | 109,700 | ||||
d) To report RehabCares historical results of
continuing operations for the period indicated.
e) To report Triumph HealthCares historical
results of operations for the period indicated.
f) To eliminate Triumph HealthCares historical
depreciation and amortization expense and eliminate Triumph
HealthCares interest expense related to long-term debt
that will not be assumed by RehabCare.
g) To eliminate the direct incremental costs of the
transaction that are reflected in the historical income
statements of both RehabCare and Triumph HealthCare.
h) To record depreciation expense based on the
depreciation of the estimated fair market value of the property
and equipment to be acquired over each assets estimated
useful life.
i) To record amortization expense for estimated
amortizable intangible assets to be acquired over each
assets estimated useful life.
j) To record interest expense based on the
$501.2 million of new gross indebtedness expected to be
incurred by the Company to finance the Merger together with the
amortization of the estimated $29.5 million
6
REHABCARE
GROUP, INC.
Notes to
Unaudited Pro Forma Condensed Combined Financial
Statements (Continued)
of debt issuance costs, inclusive of original issue discount,
associated with the Merger, less interest expense recorded on
the Companys historical financial statements for
$25.0 million of debt that is expected to be replaced by
new indebtedness. The transaction is expected to be funded
primarily by a $500.0 million six-year term loan with a
variable interest rate based on the London Interbank Offered
Rate (LIBOR) with a LIBOR floor of 200 basis
points and an interest rate spread of 400 basis points. For
the purpose of calculating the pro forma interest expense
adjustment on such borrowings, the Company assumed an interest
rate of 6.0%. The Company also expects to borrow
$1.2 million under the revolver included in the Senior
Credit Facilities, which will accrue interest at LIBOR plus an
applicable margin of 400 basis points. For the purposes of
estimating the pro forma interest expense on such debt, the
Company has assumed an interest rate of 4.5%.
A hypothetical 1/8 of 1% increase in interest rates on the
$501.2 million of new indebtedness would result in
additional interest expense of approximately $0.6 million
on an annualized basis. The interest that the Company will
ultimately pay on the borrowings under the new term loan and the
revolving credit facility could vary greatly from what is
assumed in these unaudited pro forma condensed combined
financial statements and will depend on the actual timing and
amount of borrowings and repayments and the Companys
credit rating, among other factors.
k) To adjust the tax provision to reflect the
aggregate pro forma increase in earnings before income taxes at
an assumed effective tax rate of 39.0%.
l) To recognize the 4,350,000 shares of common
stock, par value of $0.01, expected to be issued by the Company
in connection with its proposed equity offering, which is
expected to result in gross proceeds of approximately
$108.6 million and net proceeds, after commissions and
other direct costs, of approximately $102.1 million. The
expected net proceeds from the Companys proposed equity
offering are based on an assumed average common share price of
$24.96, which was the Companys closing stock price on
November 6, 2009.
7