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Original Source: FD (FAIR DISCLOSURE) WIRE
. Gary Brukardt, Renal Care Group, Inc., President & CEO . Douglas Chappell, Renal Care Group, Inc., SVP & General Counsel . Raymond Hakim, Renal Care Group, Inc., EVP & Chief Medical Officer & Director - University Division . David Dill, Renal Care Group, Inc., EVP & CFO
1Q04 revenues increased 14.8% to $278m. Net income increased 38.3% to $30.1m, or $0.63 per share. RCI opened a total of six de novos in 1Q04. Co. expects revenue per treatment in 2Q04 to decline from $323 per treatment in 1Q04. For FY04, RCI is revising its EPS objective upward from the previously announced range of $2.45-2.55 per share to its current projected range of $2.54-2.64 per share. Q&A Focus: NNA, AMI, EPO, ESRD, and EBITDA.
A. Key Data From Call 1. 1Q04 revenues = $278m. 2. 1Q04 net income = $30.1m. 3. 1Q04 EPS = $0.63. 4. 1Q04 EBITDA = $68.9m. 5. 1Q04 DSO = 62 days. 6. 1Q04 cash flow from operations = $45.5m. 7. 1Q04 Capex = $19.1m.
S1. Business Overview (G.B.) 1. 1Q04 Highlights: 1. Revenues increased 14.8% to $278m vs. 1Q03. 2. Net income increased 38.3% to $30.1m, or $0.63 per share vs. $21.8m or $0.44 per share in 1Q03. 3. RCI opened a total of six de novos in 1Q04. 4. In early April, RCI completed the acquisition of National Nephrology Associates (NNA). 1. With NNA, co. added approx. 5,600 patients and 87 outpatient dialysis facilities in 15 states. 2. Also added acute care contracts with approx. 55 hospitals. 3. Subsequently, RCI completed the acquisition of outstanding minority interest in two JV in NNA's Kentucky and Memphis markets. 4. Completed NNA's acquisition of certain Saint Barnabas Healthcare locations in New Jersey. 5. Since the closing, RCI had worked to integrate NNA's clinics into its ten existing regions, and has added 11th region to cover middle-Tennessee, Alabama, South Carolina, and Georgia.
6. Representatives of RCI and NNA jointly visited and reviewed
all 87 clinics during the last 30 days. 7. This initiative resulted in a development and implementation of action plans to further facilitate a successful integration. 5. Co. is in a process of transitioning, billing, and collections to its exiting AR offices with an expected date of June 1, for completion. 6. Benefit enrolment meetings for former NNA employees are underway and the transition of RCI benefit plans should be completed by July 1. 7. Expects to transition human recourses, accounting, payroll,
and administrative functions before July 31. 8. This past weekend, RCI participated in a national meeting with NNA's medical directors to discuss and review the progress of the transition.
9. Anticipated transition of NNA's patients to renal lab, based
in Jackson, Mississippi is also on progress. 10. Installing additional equipment needed to serve the new patients and are hiring and training the new associates to handle the increased volume. 11. A three-phase conversion process will commence on June 1, and should be completed before year-end. 12. So far, the transition and integration has been extraordinarily smooth due to the hard work, flexibility, and cooperative attitudes of the associates of RCI and NNA. 13. The various clinical and operational disciplines of both companies have come together to identify and implement best demonstrative practices. 14. Credits for 8,000 dedicated associates in the transition team
who had performed admirably to assimilate NNA's operations
well, at the same time keeping their focus on providing optimal care for over 28,000 patients. 2. Share Details: 1. Board of Directors has approved the three-for-two split to be
effected in the form of the stock dividend. 2. One additional share of common stock will be issued for every two share held by shareholders of record as of the close of business on 05/07/04.
3. The additional shares will be distributed on or above 05/24/04. 4. The co. currently has approx. 44.5m share of common stock outstanding, net of approx. 9.7m treasury shares. 5. Making the decision to declare the three-to-two stock split,
the Board considered the recent appreciation of RCI shares
coupled with its overall performance. 6. The Board believes that the split should broaden the marketability of RCI shares and symbolizes the Board's confidence and co.'s ability to deliver future growth.
S2. Patient Outcomes Highlights (R.K.) 1. Patient Outcome Snippets:
1. Includes data on more than 22,000 patients that RCI presently
serves. 2. The patient data provided by RCI does not include any NNA patient data, since it has not yet integrated them in its quality outcomes number, but it does include the data from the Peroria Group, with which the co. affiliated late 2003.
3. In terms of the dialysis outcomes, co. tracked the percentage
of patients that receive the optimum dose of dialysis. 1. Expressed either as Urea Reduction Rate (URR) or Kt/V. 2. Both are interchangeable, but because there is a trend to reporting Kt/V, RCI would adopt this measure from now on. 3. Co.'s target for Kt/V set by the Medical Advisory Board is 1.4, which is higher than the minimum target of 1.2 set by KDOQI, (quality guidelines established by the National Kidney Foundation). 4. RCI currently has 85% of its patients achieving this target, which is 180 bp higher than a year-ago. 5. In terms of the minimum dose of Kt/V of 1.2, which is the target reported by CMS, 95% of co.'s patients have received
this dose vs. 89% nationally. 6. In terms of anemia management, the percentage of patients with hematocrits of 33 or greater, over one-year rolling avg. is 77.6%. 4. RCI has maintained this level for some time to remain within the hematocrit target guideline set by CMS. 1. RCI has made several representations to CMS on this issue. 2. About a month ago, all Chief Medical Officers of the public companies met with the medical staff of CMS to advocate for broadening the range of allowable hematocrits up to 39%, from the current 33-36%. 3. This is because of the strong evidence that it is better for patient outcomes in terms of: 1. Lower hospitalization. 2. Lower mortality, and frankly because of that the per member per month cost to CMS is indeed lower, when there in this range of hematocrits. 4. RCI expects decision of CMS soon. 5. In terms of hospitalization, co.'s one-year rolling avg. hospital days has increased slightly to 12.2 days per patient per year, reflecting the seasonal increase in hospitalization rates seen in 1Q of every year, because of the flu season and so on.
1. This is still more than two days lower than the national avg. of 14.3 days published by USRDS. 6. RCI is pleased that the one-year rolling avg. for mortality has remained at 21.2%, about 2% lower than the national avg. 2. Major Initiatives: 1. Co. is continuing with many of the initiatives presented in the last call, mainly the …