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EXHIBIT 99.2
RENAL CARE GROUP
MODERATOR: DIRK ALLISON
SEPTEMBER 21, 2000
8:00 AM CT
Operator: Ladies and gentlemen, thank you for standing by. Welcome
to the Renal Care Group conference call. At this time all
participants are in a listen only mode. Later we will
conduct a question and answer session. At that time if you
have a question, you will need to press the 1 followed by
the 4 on your telephone. As a reminder, this conference is
being recorded. Today is Thursday, September 21, 2000.
I would now like to turn the conference over to Mr. Dirk
Allison, Chief Financial Officer for Renal Care Group.
Please go ahead sir.
Dirk Allison: Thank you. Good morning. Welcome to the Renal Care Group
special conference call. The purpose of our call today is
to discuss our expected three to five year earnings per
share growth rate, update you on our exit from the wound
care business and give you an update on the remainder of
2000.
Let me first introduce the members of management present
today. Sam Brooks, our Chairman and Chief Executive
Officer, is here along with Gary Burkhardt, our Chief
Operating Officer and Ray Hakim, our Chief Medical
Officer. Ray is joining us today from Jackson,
Mississippi. Also, Doug Chappell, our Corporate Counsel is
with us.
Sam will be making our formal presentation, after which
all members of management will be available for the
question and answer session. Before I
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turn things over to Sam, Doug Chappell needs to talk about
forward-looking statements.
Doug Chappell: Thank you Dirk. I just wanted to remind all of you that
much of the information we discuss this morning is
forward-looking information and is given in reliance on
the Safe Harbor provided by the Private Securities
Litigation Reform Act. These forward-looking statements
involve risks and uncertainties. Our actual results could
differ materially from these forward-looking statements
due to certain factors including business and economic
conditions and the availability of financing. These and
other risks and uncertainties are discussed in our reports
filed with the SEC, copies of which are available from the
company.
Dirk Allison: Thanks Doug. Now let me turn the call over to Sam Brooks,
our Chief Executive Officer.
Sam Brooks: Okay, thank you Dirk. Well, thank you for being here
ladies and gentlemen. We might as well get to the number
one issue and that has to do with missing analysts'
earnings estimate for this year. It's the first time it's
happened. As you know, we've finished our first four years
ended 1999 meeting all our analysts' estimates, but this
year, the year 2000, we've had a bit of trouble.
As you know, we gave you some guidance up to about $1.40 a
share back in November, and then we had an unexpected
event with the EPO price being increased by Amgen that
brought us down another 5 cents back in, oh I think we did
that around March, April, May when we reported the second
quarter.
And now, you know, we're having a bit of difficulty
meeting our acquisition targets, and some of the ones that
we've acquired we have had trouble getting
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them closed in the time we thought we would. So therefore,
we're going to have to lower our earnings estimate for
this year again. That's cost us severely in the stock
price, and that hurts us all.
And I'm here to apologize for that. It's an event we can't
avoid. I mean those are the facts. That's what happened so
we need to report it to you as soon as we can.
Most analysts have expected us to be growing 20% a year.
That was the estimate for this year, the estimate ongoing,
but we don't think we can do that. We think it's going to
be closer to a 15% EPS growth company going forward, and
that's what we indicated in the press release.
The full explanation of that has to do with our
acquisition program because our ability to achieve both
the 20% and the 15%, but to a much lesser degree, is
partially dependent on our M&A activity. As you know,
we're a pretty disciplined buyer of dialysis facilities.
We look for a 20% internal rate of return. We act as if
this is our personal money. We are businessmen, and we're
buying businesses. We are not stock promoters who are out
trying to make earnings per share increases regardless of
whether it's a good business decision or not.
So we've had some problems closing those deals at the
prices we thought were acceptable. When we started the
year, we thought we'd be doing pretty well because TRL,
now DaVita, is out of the market, Fresenius was out of the
market, but it raised the money around July, and Gambro
has always been a disciplined buyer.
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But lately, Fresenius is back in the market, and we ran
into a few privately financed companies. The nonpublic
ones took a couple of deals away from us with some prices
paid that wouldn't give us the rates of return that we
want, and I suppose their return levels are less than ours
or else they're desperate enough to get into the business.
So the result is that we closed on fewer deals than we had
planned and it's principally because of price.
Let me just speak briefly to the acquisition process, not
to overdo this but just to set the stage. You know, we
have an M&A team of about four people, and their principal
job is to identify deals, create a pipeline, prioritize
the candidates and negotiate the price. We've got a due
diligence team that includes the participation by our
operating people, and they look at the deals carefully,
evaluate the medical care, the quality of the equipment,
the market and calculate the projected financials, and
that gives us our return on invested capital.
So our operating people accept the projections by the M&A
staff as their budgets, and I must say that this has
worked extremely well. So I cannot think of a single
acquisition that I regret having made or that didn't make
the budget that we set forward.
So our history has been exceptional. Our standards are
pretty high, but we're trying to create a first class
company here and that's our first priority.
Our company has suffered; well our stock has suffered
severely here in the past few days. It was 24 about June
30, and now it's 15 or 16 or so. That's down about 30%,
and it's attributable I'm told, and I pretty well believe,
to failing to meet earnings estimates.
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The business, just to remind you, as you all know is doing
well. Our EPS will be up about 18% we believe this year,
but it won't be up the 20% we anticipated it to be. I
might add that the company is fortunate to be in the
financial position it's in. We've got a great deal of
financial flexibility. We have a low debt level as you
know. Our cash flow is extremely strong. It's always been
a focus at this company.
We have a relatively modern plant and equipment. That's
one of Ray Hakim's jobs to make sure there is no deferred
maintenance here. We have first class equipment. And we've
done that since inception. So we've never let our existing
business suffer in order to shift money over to M&A and
the growth side, so we don't have any deferred maintenance
or any demands on our cash either from that or excessive
levels of debt. The bottom line is that leaves a pretty
significant sum available to the company to use to
increase shareholder value in the future, but we won't use
it unless it does increase shareholder value and it is a
good business decision.
Let me talk about Youngstown just a minute and Ray and
Gary and Dirk will all be available in the Q&A session if
you have to inquire further about this event.
This event too is, of course, unexpected. It's cut into
our profits in the third quarter, possibly the fourth
quarter, but as you know in any crisis situation like
this, your profits and your earnings go and take a second
seat if they even have a seat at all because you must
respond and put the patient first and handle that
immediately.
And I must say I'm very proud of the way our people
responded starting with the people in Youngstown, the
physicians responsible for those patients, the
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unit nurses, the nurses' aides, the social workers. Yes, I
was very proud to be with a company that they are
associated with.
Our Chief Medical Officer, Ray Hakim, and some of the
water system techs went down to Youngstown immediately
upon hearing about it. We heard about it in the afternoon.
Within an hour and a half, Ray had his bag packed and was
on a plane we had chartered and was down there
immediately. Our Chief Operating Officer was in Milwaukee
when he heard it, and he left immediately along with the
Regional Chief Operating Officer who was there.
And we brought in people from Phoenix and other places
that assisted the operating group there in that region in
solving that problem. But all the focus was on solving the
problem, getting the patients taken care of, putting the
patients and the families first.
Again, I was quite proud of the way they responded. As you
know, when you're under pressure is when the cracks in
your character start to show, and I didn't see any cracks
in our people or in our company's character. I think they
did the right thing, and, as importantly, they did it
immediately.
So that cost us some money. I'm not fully aware of all the
costs. Dirk may have the numbers, but I really haven't
asked for a final accounting because there probably isn't
one yet. We're probably not fully aware of all the costs
that will come from this, but Dirk might be able to give
you a reasonable estimate.
Again, if you have any further questions on that, Ray and
Gary were on the spot, and they can answer those.
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As to the Wound Care business and the write-off of this,
first a little background. Some of you who've been with us
for some time might know we purchased that company in
December of '97, and we picked it up as part of a large
dialysis operation we acquired. We weren't quite sure what
to do with it, but we decided to keep it for several
reasons.
One of which, we really liked the people running it. They
were first class people, and the service they provided was
of benefit to many of our patients and other patients with
end stage renal disease that weren't being treated in our
centers.
We've operated it for 2-1/2 years. It's profitable.
Quality initiatives and quality measurements have been
implemented. They already have (unintelligible) and we
implemented a system in documenting that. We have a first
rate medical director, the Ray Hakim of Wound Care I call
him. He's a first class guy, a guy you'd really like to
build a business around.
The contract renewals have been positive. The problem with
it is size. We worked hard at making it larger. We looked
at acquisitions, four or five of them. We looked at
building it from scratch. We put in a major effort with an
M&A team to get more contracts with a focus on this as a
good service that we'd be proud of this medical service
being a part of Renal Care Group. Let's see if we can't
build it up to $50 to $100 million revenues. Well, we
can't do that. So we've decided to reposition the company.
It's taken some top management time, and we haven't been
able to achieve our objectives of building it into a large
company and a major profit producer. So we think the best
way to handle that is to put it in the hands of other
management, perhaps sell it to the existing management,
and perhaps sell it to others. But our
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primary focus would be to use it in our company as more of
an outside vendor than it would as a wholly owned
subsidiary.
Renal Care Group may retain an ownership piece in this,
not only perhaps to help management to buy it but also to
keep our access to their services and get the benefit of
those services.
Okay, so let me finally say this before we get into the
Q&A session. As I mentioned, the past four years we've
done a good job of meeting our targeted EPS but we all
know the story. It's every quarter you have to do the job,
and we haven't done it this quarter.
And we felt now is the time to let you know. We would have
loved to have waited a little later, maybe a month or two,
because there's still some events occurring, especially in
Washington that Ray can bring you up to date on that will
affect our profitability next year, but we think we've got
- you know, we based some adjustments and some allowances
that we hope will account for that in the year 2000.
But the bottom line is we think this is closer to a 15%
growth company in terms of earnings per share in the
future than it is 20%. The internal business is a good
business. It has a good internal growth rate, and our
company has the cash flow to be able to enhance that a
bit, but we essentially missed closing on some deals
during 2000, and we don't intend to lower our internal
invested capital objectives. So I think we need to be a
little more modest in our earnings growth projections.
I want to finally point out that we too feel your pain.
You know, our management incentives, our cash incentives
are tied to financial objectives
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and earnings per share. So all our management team will
suffer this year as a result of not meeting these
earnings.
And in addition, there's a significant part of it tied to
stock options. And a great deal of those are underwater as
a result of missing these projections. So it's not
something we're particularly proud of, and we don't
particularly like it. Our commitment is to do better in
the coming years in meeting our objectives, and everyone
is committed to that.
I'd be somewhat remiss if I didn't point out that the
business is very good. The cash flow is the focus of our
operating people, and they've once again hit their
targets. It is a primary focus of this company to make
sure of to have a good business. We do a good job in
caring for these patients and we run the business in a
professional way.
And finally, our company is in excellent shape, and that's
reflected principally by the balance sheet and the profit
and loss statement. Our projections aren't very good, but
we haven't screwed up the company by making deals that are
improper or overleveraged in any way. So I'm quite proud
of the way our medical outcomes are, the way our financial
statements look and the fact that the business is in good
shape.
I'm not very happy as CEO with the way we do our
projections, but I think we've got some estimates going
forward that I think are more reasonable and that I think
we'll be able to attain.
Okay Dirk, I think I'm ready for Q&A then.
Dirk Allison: Thank you. Operator, if you'll now open it up for question
and answers.
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Operator: Thank you sir. Ladies and gentlemen, we will now begin the
question and answer session. If you have a question, you
will need to press the 1 followed by the 4 on your
push-button phone. You will hear a three tone prompt
acknowledging your request. If your questions have been
answered and you would like to withdraw your polling
request, you may do so my pressing the 1 followed by the 3
on your push button phone. And if you are using a speaker
phone, please pick up your handset before entering your
request.
One moment please for the first question...
Andrea Bici with CS First Boston, please go ahead with
your question.
Andrea Bici: Good morning. A couple of questions. In the guidance that
you've provided, what have you assumed in Medicare update
factor, and what do you think the likelihood of being able
to receive an annual update factor is?
And secondly, at these levels and I think the DCA
acquisition was long ago enough would you be able to look
into share repurchases, you know to bolster the share
price and given your pause from the acquisition market.
And finally, what's a reasonable price per patient? I
think the price per patient last fall was around $40,000.
I think it sort of crept up to $50,000 was what I was
seeing, so if you could provide more color on that as well
that would be great.
Dirk Allison: Andrea, great, thanks. What I'll do, I'll answer two or
three of those myself. I'll pass the annual update to Ray
when I get through, and then Sam will probably want to
comment on the share repurchase.
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As far as the medical update in our projections, what we
have done as everyone should be aware, there is 1.2% that
is already in the law for next year. There is another 1.2%
that's been proposed, bringing it to a total of 2.4%. We
have put a little of that in our number, but we reserve
back against it, so there is not a lot of effect of the
2.4 in there, but there is some. It should not change our
projections the way we did it, though, either way.
We are certainly anticipating that that will be a positive
result. As relating to price per patient in our
acquisition, you know we told you all year long on each of
the previous conference calls that our company was looking
to purchase new businesses in the $40,000 to $45,000 range
for our acquisitions. And we have been very consistent
with that.
At the early part of the year, there was some at the low
end of that. The later ones have been a little on the top
end of that, but we've been pretty consistent. And just
within the last few weeks has it come to our attention
that, as Sam mentioned, a couple of the deals that we
thought we were very close to bringing on board, we were
told that we were outbid significantly. And when I say
significantly, the indications that we have on pricing are
now more closely aligned to the $50,000 to $60,000 range,
somewhere in that range. And as Sam mentioned, being a
disciplined buyer, that's not something that we feel we
can give our shareholders the return that's necessary with
a dollar spent.
Relating to date the timing of the share repurchase,
you're correct, we did the RDM transaction at the
beginning of April. We will actually pass a six month
window on October 2 of this year and so in a minute Sam
will comment
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possibly a little more on that. But let me turn it over to
Ray to talk about the possibility of an annual update
going forward.
Ray Hakim: Thanks Dirk. As you know, a bipartisan bill has been
introduced both in the Senate and in the House that has
two elements in it. One is to increase the projected
updates from 1.2 starting January to 2.4, which is an
increase of another 1.2. And that also has the support of
the Administration, which had proposed it in their July
Medicare budget.
So that element to us looks reasonable. The bills both in
the House and in the Senate include an annual update. That
has to be scored by the Budget Office before everybody
signs on to it. But there is a lot of sympathy and
recognition of the unfairness of having dialysis being
completely excluded from an annual update and that this
might be a way to correct this inequity.
So the bill has been introduced as I said in a bipartisan
way and also by some of the more conservative members of
both the Congress and the Senate, those who have been
generally labeled fiscally very conservative.
And I must say that it's been supported by every element
of this industry from the National Kidney Foundation to,
you know, the people, the patients. And so we are hopeful
that this will pass. I don't know that I can tell you that
for certainty. As you know, a lot of these things get
finalized at the last minute, but we have been able to
mobilize a lot of the Senate members and the House members
to focus on this issue. And I think we are hopeful that
both elements of the bill, the increase of an additional
1.2% and, you know, the annual updates after that will
occur.
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You all know better than I do, that none of this is with
any certainty, but we are still going to work hard at it.
We've had a lot of employees and associates writing
letters in support of this and also the patients.
Surprisingly, the patients also have been very mobilized.
So that's really what I would want to say about that
possibility.
Sam Brooks: On stock repurchase, we're committed to building
shareholder value and at this price a repurchase of shares
would do that. We did have an acquisition accounted for as
a pooling of interest, and we'd like to retain it. We
looked very hard at that, and there are some tax reasons,
some P&L reasons and some other things that cause us to
come down and decided we'd like to try and retain that
pooling.
And Dirk tells me that on Monday, October 2, we're past
the six month date that we have to honor. So I think
that's all I can say on that. Dirk. . . .
Dirk Allison: Thank you, Sam.
Operator: Next question comes from Kip Hewitt with Legg Mason.
Please go ahead with your question.
Kip Hewitt: Two questions. First, could you give us a little color on
the amount and the components of what you expect to be
spending relating to the Youngstown problem so we can get
a sense of how much that does affect your earnings in the
third quarter if not in the fourth.
And then secondly, could you talk a little about same
facility treatment growth and whether you're seeing a
change on that and if so, what the factors are behind
that.
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Dirk Allison: Okay. Kip, as it relates to Youngstown, as Sam said, it's
still a little bit of a moving target. And we're probably
at the end of the day, that range is going to be $0.5
million to $1.0 million or so that we will have spent on
that. It really affects more the third quarter than the
fourth. And let me tell you the type costs that we're
taking care of there.
Obviously, we stated that we are adequately covered in our
opinion from an insured standpoint, but there are
deductibles associated with that. We have the cost of
mobilizing our management team on the site as Sam
mentioned, Gary and Ray's response and the team of
Operations folks and experts that went up there, the
consultants that we hired to work with our water treatment
system.
And then also, you know, we think it's our responsibility.
These patients are under our care, so we're going to take
care of the medical costs associated with that.
So those are the type expenses, like the ones related to
the water treatment system, that's in process right now.
Again, that will be largely in the third quarter.
Ray, why don't I turn it over to you and let you talk a
little bit about the treatment growth we're seeing.
Ray Hakim: Let me just add also that as the events unfolded in
Youngstown, as you know there were five other facilities
that were able to accommodate all the patients that were
traditionally dialyzed in the facility that had the
problem. So in terms of servicing the other patients
because we had to close down the unit to
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do the investigations, we have been able to do that
without major disruptions to the patients. We were able to
accommodate them in the other facilities.
So the closing of the facility with the problem really has
not affected our ongoing ability to provide treatment. Now
we have also been very diligent in working with all the
interested parties from the Health Department and CDC and
we have now started the process of changing the water
systems in that facility. And our projections are that
sometime next week, provided we get all the okays from all
the relevant health authorities primarily local, that we
should be able to open the facility and service the
patients back at their usual place.
And frankly, that's been a request that everybody has
heard from the patients over and over again, when can we
get back to my facility? So we're very pleased with that
and as I said we hope that sometime by next week we should
be able to open that facility.
Kip Hewitt: And then on the treatment growth issue?
Ray Hakim: I think, you know, we're all waiting for the report from
the new USRDS that's coming from Minneapolis this time. We
have always prided ourselves that we'll do better than the
national inherent growth in the number of patients because
of our really focusing on reducing mortality and reducing
hospitalization.
Just as a background for you, we have snippets of the new
USRDS that have been published, and in 1998, which is the
latest one, there were 85,000 new patients coming into
dialysis. Unfortunately, there was also immortality of
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about 63,000. So our focus has been to really focus on
reducing immortality, and we feel we have done that.
And so the latest number that I'm aware is that we're
still tracking well into the 6-7% range. We obviously want
to do better than that, but that's what this year seems to
look like.
We'll also focus on de novos because in many areas we have
growth enough to justify new facilities. We'll be doing
that also so...
Kip Hewitt: Okay, so if I could just ask one more question on the
acquisitions, you mentioned that there are new buyers
coming into the market. In terms of the people that you're
seeing bidding the $50,000 to $60,000 per patient, are
these any large existing players? Are they pretty much new
financial entrants into the market? Or is it a change in
the seller expectations that you're seeing?
Dirk Allison: Well, I think there is a change in the seller expectations
driven by the fact that there's two or three companies out
there apparently willing to pay a little more, and they
appear to be private companies. We have not yet seen any
of the large public companies to our knowledge go that
high.
Sam Brooks: Yes, this is Sam. I might add that wasn't expected this
year. I didn't expect those private companies. You know, I
looked at the big public companies, and I thought I had a
pretty good handle on what their M&A activity would be for
this year. But then there were three deals that I thought
we would get this year. We had worked on them for some
time. We liked them and we lost them on the price.
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And they were to privately financed companies, and we were
rather surprised at that. We would have thought that a
privately financed organization would have a pretty high
return on investment criteria. They're paying all cash and
they're probably borrowing some. But we lost those.
Kip Hewitt: Thank you.
Operator: Our next question comes from Bill Bonello with US Bancorp
Piper Jaffrey. Please go ahead with your question.
Bill Bonello: Good morning guys. I just wanted to follow up a little bit
on some of the assumptions again underlying the numbers.
Just first of all, I not sure I understood your answer
about your assumption on the increase in the composite
rate. It sounds like what you're saying is if we do get a
2.4% increase we wouldn't necessarily assume that the
numbers would then be higher than what we're currently
projecting.
Dirk Allison: That's correct.
Bill Bonello: And if we don't get that increase?
Dirk Allison: There can be some slight effect if we don't get the
increase. We tried to cushion that a bit, Bill, to protect
against it. But we did use some of that into our numbers.
Bill Bonello: Okay. And then in terms of what you're assuming on the AWP
or potential AWP changes for a couple of the drugs that
you administer, is that baked into the numbers?
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Dirk Allison: We did back a little bit of that in there. We didn't back
a lot. The reason being, we do believe that there's a
potential that that will in fact come about January 1 of
next year, and so we wanted to put some of the number in
there, but we believe there are various ways and things
that we can do to mitigate a lot of that increase. And so
we tried to factor in both the increase as well as what we
can do to mitigate that going to our bottom line.
Ray Hakim: And Bill, I know you mentioned in the report that maybe we
are looking at transitions related to AWP changes. I think
clearly these are medical decisions. I did not expect that
this will be anytime over by October or January. I think
this will be a gradual process. So I just wanted to make
sure that we're not the type of the company that will say
all right, tomorrow you stop doing this.
So we will work through that process, but I think Dirk is
right that, you know, it's not completely mitigated but
it's not completely factored in either.
Bill Bonello: Okay, thanks. That's helpful. And then in terms of cost
pressure, I know last quarter you saw a bit of a bump in
the cost per treatment and some of that was labor cost
driven and due to sort of one-time salary increases and
you thought there may be some more of those coming down
the pike. Can you give us any sense of what's happened
there and what's kind of assumed in the projections?
Dirk Allison: Yes Bill, we have seen a labor market that's tightening.
We've seen some market adjustments necessary to keep pace,
try to lower our turnover rate that we're experiencing,
and so what we have done going forward in the EPS growth
rate that Sam has shared with you today, we've raised our
wage factor up into the 5 to 6% range. We believe that
maybe in the future that will
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moderate a bit. We don't know but we wanted to protect
ourselves, the company and the estimates by putting that
in there.
Bill Bonello: Okay, great. Thank you very much.
Dirk Allison: Thanks Bill.
Operator: Our next question comes from Adrian Dawes with J. M.
Hartwell. Please go ahead with your question...
Adrian Dawes with J. M. Hartwell, please go ahead with
your question.
Adrian Dawes: Thank you. A couple of questions. Relating to the balance
sheet, how much net cash do you have and how much cash
flow do you expect to generate on a quarterly basis going
forward?
Dirk Allison: We have approximately $20 million or so net cash on the
balance sheet. From a free cash flow basis, let me talk
about that. Operating cash flow we should generate
anywhere from $18 million to $22 million, $23 million a
quarter from that standpoint.
But from a free cash flow, after-cap-ex, taxes and what
not, you're going to be in the $65 million to $75 million
range for the year 2001.
Adrian Dawes: Is there an existing share buyback on the books at the
moment that just needs to be activated post October 2 or
does the Board need to meet and then authorize one?
Dirk Allison: We have not done anything on a share buyback at this
point.
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Doug Chappel: Yes, the Board would have to meet.
Adrian Dawes: Okay. What have been some of the prices that Fresenius and
Gambro have made acquisitions at? Are they around the
$40,000 to $45,000 level?
Dirk Allison: I'm sorry, that's who? Is that Gambro you mentioned?
Adrian Dawes: Correct.
Dirk Allison: And Fresenius.
Sam Brooks: Fresenius. Well, Fresenius has been out of the market for
some time, Dirk. I can't remember when but I bet it's been
a year and a half probably -- maybe more. So they're back
in now. We're competing with them on two deals right now
whereas I know we hadn't seen them in a year and a half.
It could have been longer than that.
Gambro, we competed with them on one deal. And we got that
deal, right Dirk?
Dirk Allison: Yes.
Sam Brooks: But generally speaking, Gambro is trying hard to get Vivra
integrated, and they've had some management changes. So
their focus has been more internal than external recently,
which I took into account when we were looking at our
targets for the coming year. So our competition has been,
I call it reasonable, very disciplined buyers as we are.
So I don't mind competing with Gambro on deals. Of course,
I'd rather not compete with anyone...
<PAGE> 21
Adrian Dawes: Sure.
Dirk Allison: But I think that might give you a picture, doesn't it?
Adrian Dawes: Final question. Given the slower growth rate, would you
consider selling the company to one of those two entities?
Dirk Allison: Well, we run this company as professionally as we can, and
that is a Board decision and they're fully aware of that.
We do have a shareholders' rights plan in effect. So that
helps put the decision more in the Board's hands. So, yes,
it'd be a consideration.
I haven't had any offers, of course. I'm not supposed to
say that, am I? But yes, it's not something, we're
thinking of actively. Management is committed to running
the company professionally and part of that is getting the
best deal for the shareholders. So we would be open to
those. We're not here working 80 house a week because we
love our salaries.
Adrian Dawes: Thanks guys.
Operator: Peter Emch with CS First Boston, please go ahead with your
question.
Peter Emch: Sam, could you talk a little bit more broadly about how
you see using the free cash that you're going to generate?
It would seem like if you're only going to acquire 500
patients a year or so, that's maybe top end $25 million.
And given the stability of the nature of your business,
what kind of debt-to-cap do you think is appropriate for
the company at this point and how would you apply your
free cash?
<PAGE> 22
Sam Brooks: Well, I think the highest debt-to-cap is a 1:1 ratio, so
as you can see, we are considerably underleveraged. But
Peter, I'm not going to invest the money unless I make
some money on it. And we have some opportunities. There
are opportunities to buy units, but I'm only going to buy
them if I make money off of it. I not only need to
increase earnings per share, but I need to get a return on
the money I'm laying out because it's an all cash
transaction and I want a return on it.
Anything else I should comment on that, Dirk? I think it's
been brought out now at these prices our company's selling
at a pretty cheap price per patient. I'm not sure what it
is, but that's an attractive use of our money. And I will
say this, I think that opportunity is there because the
company is in great shape. You know, like I said, the
business is a good business. We haven't screwed it up, and
the margins are there. We have the highest operating
margins in the business, so we ought to be able to pay
more than anybody else because we get better margins, and
our debt-to-equity ratio is low, our cash flow is strong
because we haven't deferred any maintenance, so it gets us
some choices. And we're doing our best to put that to work
as quickly and as a well as we can, but we haven't done a
good job this year of estimating our earnings per share,
and our stock has suffered because of that.
The good news is the stock hasn't suffered because the
company has done poorly. The business is doing okay. So
that presents you with an opportunity to buy the stock
back and we have the fire power to do that.
Peter Emch: I would think, as a follow-up, that given how high your
margins are that on a per patient basis maybe acquisitions
if you price them per patient are not going to be much
higher than you are on stock but on an EBITDA basis, if
<PAGE> 23
that's what you're looking at buying at a multiple of
EBITDA. I would think your stock would be more attractive
than acquisitions you would be making with the stock at
this price. Would that be true?
Ray Brooks: Yes. Dirk would - I don't know the numbers but I'm sure it
is.
Dirk Allison: Yes, and Peter one thing you need to understand, and I
know you do. We've talked enough and I think most people
understand. When we talk dollars per patient, how much we
pay per patient, that's not how we price acquisitions. We
are EBITDA driven. So we actually price all of our
acquisition opportunities off a multiple of EBITDA, and
based on that criteria, I certainly agree with what you
said.
Sam Brooks: I might add our Chief Operating Officer is here, and he
runs his business based on EBITDA, and when I pass him in
the hall and ask him how are things, his reply has to do
with EBITDA. And the same thing occurs when he's at his
meetings of our Regional chief operating officers.
So it's a principal business focus around here, and I
think you as an analyst investor would appreciate that,
right Gary?
Gary Brukhardt: Yes, I think our people - solid performance is what we try
to stress. And our Regional chief operating officers, our
chief financial officers, our area administrators,
facility managers, we take a very measured, consistent,
focused approach on operations. It's hard work. People
have to stay focused. They can't let up. Looking at labor
costs, we've got a whole listing of things that we do.
There's no one thing that you can do or magic way to deal
with those issues.
<PAGE> 24
And this management team steps up and continually stays
focused on that.. Margin improvement and EBITDA
improvement is what we try to constantly strive for, and
I'm pretty proud of what they've accomplished in that
area.
Peter Emch: Do you think you can hold EBITDA margins constant going
forward?
Gary Brukhardt: Well, I think one of the big issues that has been talked
about is the labor cost issue. And I just want to add a
couple of things and I know everyone wants to say what's
the one thing that you do.
But let me go through a couple of things on the labor cost
side and what our operators are doing because I think
that's reflective of the solid core of the business that
we have here, and you don't get that done easily. So I
want to go over a couple of things on that because I know
that's on the minds of a lot of folks.
We've got some things working in our favor. We've got some
geographic dispersion. First you have to find good staff,
then the most important thing is to keep them. Because of
our geographic dispersion of the company, we've got some
areas and markets that help us out in terms of that.
We've had to make some market adjustments because
obviously people are the most important resource in our
company. And then a couple of other things that we've been
doing to address that, and, by the way, each market also
does some specific things that they have to do to stay
competitive. We installed a new computerized human
resources system last year and a software product called
(FastGap). It probably doesn't mean a lot to people, but
it means a lot to us because it allows us to focus on our
labor cost per treatment,
<PAGE> 25
looking at overtime, outside labor, etc., giving our
managers tools to constantly stay focused on that.
There's no doubt that in several of our markets, we're
going to continue to face challenges on the labor side.
We've also gone to a new program also just within the last
month that we call targeted selection because not only do
you want to find people, but you want to make sure that
you hire people that are going to stay with you. So we are
rolling out to all of our facility managers a targeted
selection process to hire staff.
So we've got a lot of things that we're working on and all
of that focuses on margin improvement. So I'm pretty proud
of what these people have accomplished and will continue
to accomplish going forward, but it's just a lot of basic
activity that you have to perform. So I thought I'd share
some of that with you.
And by the way, because of our best demonstrated practices
in our regional operations, we got a lot of people with a
lot of creative ideas. Every quarter I meet with facility
managers and our management staff here does and our chief
operating officers. I've never seen a more dedicated and
committed group of people to make sure that they take good
care of these patients. We have good patient satisfaction
and they manage the resources of the company effectively.
So that's kind of a long answer, but I thought I wanted to
share and address that labor issue because that's
something every one of us gets up every day worrying about
after we worry about taking care of patients.
Peter Emch: Okay, thank you.
<PAGE> 26
Operator: Our next question comes from Jim Baker with SunTrust
Equitable. Please go ahead with your question.
Jim Baker: Sam, I wonder if you could comment on managed care pricing
and specifically I'm interested if you look at, for
example, health care services, i.e. hospitals. They've
been able to do a very good job of taking the sort of
givebacks for price increases they've gotten from the
government and been able to go to managed care and get,
you know, other pretty nice managed care price increases.
Would the prospects of getting, you know, potential
inflationary annual adjustment increase in place and just
some increases from the government - can you just talk
about number one, sort of the managed care pricing you've
seen this year and perhaps more importantly, what we
should maybe look for in 2001?
Sam Brooks: Well, in talking to my friends in the hospital business in
Nashville and in talking to people that are in the
hospital business in not for profits, I've seen that
they've achieved some pretty good price increases with
managed care. They have probably been more aggressive than
we have.
We've done a pretty good job in the past, and I don't have
any criticism of it in the past. I think we can do a
better job in the future.
But I will say this, in looking at the average revenue per
treatment - that's the number, isn't it - average revenue
per treatment in the four public companies, I think we are
the second from bottom. We are in third place. There are
two others that have total charges greater than ours, so
it appears that there's some ability for us to increase
our prices just based on that alone. And I know it's a
<PAGE> 27
principal focus of Gary. He has people responsible for
this. So Dirk, do you want to comment?
Dirk Allison: Yes, I want to comment on what we've done in this budget
looking forward, and then I'm going to pass it over to
Gary and let him talk a little bit about that. Jim, right
at this point in time not really knowing, we put anywhere
from 4 to 7% increases in our projection to get to the 15%
as it relates to managed care pricing.
And Gary, why don't you comment a little bit on what
you're seeing there?
Gary Brukhardt: Jim, a couple of things that we're doing. First of all, as
you know, we've got several people on our senior staff and
in our field operations actually that have managed care
backgrounds. We've got some good dialysis resources
clearly in the company, and we were fortunate to attract
some folks that come out of the managed care industry. And
I think that always helps when you're sitting across the
table from a managed care company and negotiating a
contract.
They're getting premium increases 10, 15, 30% in some
cases. That's a very cyclical industry, and I think it's
an opportunity for us as providers to go back to these
managed care companies on a market by market basis.
A couple of comments on things we're trying to do mitigate
and to make sure we can stay consistent with the pressure
in that area. Again we've got some pretty significant
market share in a lot of markets, which I think when we
put the company together, we knew that was a positive. And
I think it gives us an opportunity to effectively deal
with these managed care organizations.
<PAGE> 28
I've always felt very positive about the fact that our
accounts receivable management and our billing offices are
in multiple markets. One of the things that's real
critical in dealing with these managed care companies is
knowing these payers. And because we don't bill out of one
shop, we're able to deal effectively and know our payers
and know what they're doing and try to be proactively
working with them rather than reactively because that's
where you don't want to be with them, is on a reactive
basis.
So I think our multiple billing offices - we've got some
good folks with some good background of knowledge in terms
of managed care dealing with them. I think there's some
opportunity here in certain select markets to look at
these increases in payments to us. And everything that we
do is, we'll catalog and analyze all of our contracts
locally and nationally so that we know what's happening.
As you know, there's some consolidation in that industry,
too, and we have make sure we stay on top of that. So it's
not a simple answer, but there's a lot going on. I think
there's some opportunity there to take advantage of our
market position and to deal with this.
And I think over the long period of time, people still buy
price and geography, but I think that quality in the end
will win out, and I think we should stay focused on that
in our business. We're going to be the provider of choice
for both the patient, the physician and the payer. So
that's kind of how I think it through on what we're
working on. Not an easy answer, not a simple answer, but
you've just got to do a lot of things to address it.
<PAGE> 29
Jim Baker: But Dirk, if I can just follow-up. If you're sort of
expecting maybe looking for 4 to 7% next year, I'd assume
that's an increase from what you've experienced this year?
Dirk Allison: That's correct.
Jim Baker: Okay, thank you.
Operator: Our next question comes from Joel Ray with First Union
Securities. Please go ahead with your question.
Joel Ray: Good morning. I've got two unrelated questions. First is
internal growth and development of new centers. I know
that again 12, 15 new properties have developed this year.
Is there any chance of focusing your cash flow on
heightened internal development project team given the
fact that it's cheaper certainly in the long run to
internally develop?
And secondly, as we're focusing the company's initiatives
just onto dialysis versus other potential related
businesses or diversification, is there any chance that
you're going to reevaluate your corporate structure to
look to trim G&A?
Dirk Allison: Okay, those are both good questions. Let me let Gary
discuss those just a bit.
Gary Brukhardt: Joel, one of the things that we're right now focused on
obviously in our 2001 budget and our business planning
process - in fact all of our Regional chief operating
officers and chief financial officers are in town today,
and one of the things we're focusing on for next year is
what we call a fulfillment strategy. We have very good
operations in place, and what we've done is and what we're
in the process of doing is - your comment's excellent.
<PAGE> 30
Where are all the opportunities within the existing
operations that we have? And where are opportunities to
partner with physicians, where are opportunities where we
can recruit physicians to markets that are underserved and
need to meet the needs of the patients?
And we're going to put a very big emphasis next year on de
novo development because in that fulfillment strategy, we
don't have to add G&A. We already have the structure in
place. It doesn't take additional resources to do that.
And when you can incrementally add a clinic, that's the
best thing that we can do. So that's an excellent
observation. That's something we're really focused on in
the 2001 budget.
Ray Hakim: Dirk, can I add in something here?
Dirk Allison: Sure, Ray.
Ray Hakim: I think the other focus that we are doing actively
starting sort of mid this year and really ongoing next
year are two other areas that I think will again focus on
internal growth.
One is to increase the number of patients who are aware or
have the option of peritoneal dialysis because that is a
very viable therapy that has not been really focused on as
much perhaps within the company or the industry. But it is
a very viable therapy that allows patients to be at home,
allows them much more mobility and incidentally can be
done with much less capital expenditure. That's one area
that we are focusing on in the context of providing
patients with options for their treatment so that it's not
always only hemodialysis.
<PAGE> 31
The other area, of course, is to do really a process of
education both to the patients and to the physicians about
when is the time to initiate patients on dialysis and how
to get them ready for dialysis without having to
necessarily admit them to the hospital and have them with
temporary catheters and so on.
So these are the two areas also from a medical point of
view that we are focusing on that we believe will help
internal growth also.
Dirk Allison: Thank you Ray. Joel, as it relates to your second part
about the fact that we're really focusing on dialysis in
our corporate structure. Realize that we created this
corporate structure we have today to a decentralized
approach for a reason. We think it is absolutely essential
to some of the things we are doing, our low days' sales
outstanding, the control that Gary has over his operation.
So I think we are solidly behind the decentralized
approach.
What we are always doing, and we are doing that right now,
is that we're constantly working to lower our G&A. And we
will continue that process and we should see results on
that in the coming years.
Joel Ray: Thank you very much.
Dirk Allison: Sam, would you like to comment any more on that?
Sam Brooks: No thank you.
Operator: Our next question comes from Andrew Bhak with Morgan
Stanley, Dean Witter. Please go ahead with your question.
<PAGE> 32
Andrew Bhak: Yes, good morning. I'd just like to get a little gut check
here in trying to summarize some of the comments you've
made. If we look at the company today and I'm thinking
obviously to my own forecast where we've revised earnings
for next year to $1.52. I had incorporated a 6% increase
in labor cost. I had not incorporated the AWP versus the
1.2 because it seems to me it is a little bit of a jump
ball but we should know by the end of next month. I've
made adjustments to the revenue model that would affect
the exit of the wound care business.
When you sort of sum total all of these elements and we
look forward, is it reasonable to assume that the 15%
earnings growth that you factored in really, largely to me
reflects organic growth in the market. In that sense, when
I look at the operating costs in thinking about what could
be a wild card in terms of pressuring it, it would really
only be an acceleration in labor costs and potentially
another EPO hike by Amgen, although I guess next week
we'll, or towards the end of this month we'll find out
what's happening with the TKT ruling.
So when I look at that and look forward over the next 12
months, am I missing anything or does that seem sort of a
reasonable characterization of where the company is today?
Sam Brooks: I might comment, Andrew. I think that's a good analysis.
Those are the three big unknowns at this time. In the
first four years, our company did pretty well in meeting
its estimates and anticipating negative surprises, and of
course our budgets always have a reserve in there for
those things, but this year we somewhat missed it because
we were surprised by EPO. That just hadn't been increased
in ten years. It came right out of the blue.
<PAGE> 33
So there could be something that none of us in this room
have thought of, so we're being a little more cautious
than we have in the past, but I wouldn't say that 15% is
just internal growth. I think it requires some use of
money and some investment and might have some M&A activity
in it also.
But I think you've identified the major risks to our
projections. Dirk, did I speak to soon there?
Dirk Allison: No, I might add I think it will take about 500 patients to
get to the 15% but we feel like that is more than
achievable, in fact there may be a potential for upside in
the future should prices moderate. I think the only other
issue out there that could be both a positive and a
potential negative is our managed care. Just realize that
we have a percentage of our reimbursement structure that
is dependent on the private aspect, and we're going to
focus and do a much better job. I think we do a good job
in managed care. We're going to work to do a better job,
so there's potential there that we might be a little
higher than we are currently anticipating.
On the other hand, as you know managed care is a tough
market, and if they focus on dialysis then we run the risk
that there could be a little pressure there.
Ray Hakim: And Andrew, I think I'm sure you know that the full force
of the AWP if it passes more than equals the gain that we
could expect even from the additional 1.2% increase. So
how that will play out we'll see in hopefully the next
month or so positively. But we need to make adjustments
for AWP and hopefully that will be mitigated as we go
along.
Sam Brooks: As you know, that's a significant risk. I would love to
have had this phone call a month from now after Congress
adjourned. We'd have some visibility
<PAGE> 34
on AWP and the price increases because they're significant
in determining our 2001 budget, but the price was
declining on the stock and Dirk thought we ought to do it
right now.
So yes, you've correctly analyzed that, Andrew, as a big
risk but we ought to have some visibility on it in 30
days.
Andrew Bhak: Okay, sounds good. Thanks very much.
Dirk Allison: Thank you Andrew.
Operator: Our next question comes from Tim Curro with Value
Holdings. Please go ahead with your question.
Tim Curro: Sam, you mentioned the pooling issue. I just don't see how
preserving pooling would affect cash flow enough to use it
as a reason to not buy back stock around the current
levels, do you?
Sam Brooks: It has to do with some issues, some tax issues surrounding
the seller. They're not significant. You're correct,
that's not a significant reason. But the more significant
reason is it's only a few days, and it's a lot of work to
recast all those documents.
Tim Curro: Thank you.
Operator: Greg Macosko with Lord Abbott, please go ahead with your
question.
<PAGE> 35
Greg Macosko: Yes, I'd like to follow-up on a couple of the previous
questions if I could. Just so I understand, you mentioned
6 to 7% growth. I'm assuming that's internal unit growth?
Dirk Allison: That is same store treatment growth. Correct, Greg.
Greg Macosko: And is that lower than what it has been in the past for
the past few years?
Dirk Allison: Yes, it has. We've been anywhere from 7 to 9% in the past
few years.
Greg Macosko: And can you tell me why that number has come down?
Dirk Allison: Ray, are you there?
Ray Hakim: Yes, there are complex reasons that we don't control and
that basically relates to the number of patients who begin
therapy. That because of as you know 50% of our patients
who come to dialysis are diabetics - to the extent that
there have been advances that can slow down the rate at
which these patients' renal failure progresses then that
starts picking up, that is reducing the rate of new
patients coming in.
Second, as a treatment for hypertension, which is the
other major cause of patients developing end stage renal
disease, become more tolerable in terms of side effects.
The ability to control blood pressure has improved, and
that will also slow down the rate at which patients
develop end stage renal disease.
Unfortunately, and I say that as a physician, there is
also the trend that we're beginning to see where there is
a much higher incidence of obesity and
<PAGE> 36
development of secondary diabetes, the adult onset
diabetes, that we are beginning to see across this
country.
And then also, the aging of the population is clearly
increasing. I think the number of patients over 70 where
there is a very high incidence of end stage renal disease
is increasing.
So all of these factors put together - at the moment I
think we are seeing some slow down, but you know from a
growth point of view, we still feel that - and as I said
in 1998, there were 85,000 new patients coming into
dialysis in 1998 which is the latest number. And that is a
considerable number. So our focus has been the numbers
coming into dialysis. What we want to do is reduce
mortality rate as we go forward, and that's why we think
our growth rate can be sustained at about 6 to 7%.
But you're right, it has gone down from the 8% or so that
we had last year. We think as we concentrate on internal
growth, on new development and peritoneal dialysis, we may
be able to, not next year, but hopefully the year after
that, retain a internal growth rate back to the 7 - 8%.
Greg Macosko: Okay, and could you talk about the pricing? You mentioned
the 4 to, I believe 4 to 6%, or 4 to 7% pricing. That is
in addition to the unit growth, right?
Dirk Allison: That is correct.
Greg Macosko: Okay. And could you tell me when the next Board meeting
is?
Sam Brooks: What good would it do to tell you when the next regularly
scheduled Board meeting is, but I'd be glad to tell you.
When is it, Doug?
<PAGE> 37
Doug Chappell: Our next regularly scheduled Board meeting is the first
week in November, but we can call a special meeting, and
have historically called special meetings, on 24 hours'
notice under our bylaws.
Sam Brooks: Great, yes. I think that answered your question, didn't
it?
Greg Macosko: Yes, yes, very good.
Sam Brooks: That's what you were looking for, yes.
Greg Macosko: Right. And also, you are going to - can we expect more
than 12 to 15 properties to be added in '01?
Dirk Allison: You know, we're in the capital budget process right now,
and that's all coming together. As Gary mentioned earlier,
that stems from our operators driving where growth can be
achieved, and so if in fact opportunities exist to
increase our growth by adding more than 12 to 15 de novos,
you rest assured we will consider that strongly.
Ray Hakim: And again, keep in mind our focus is going to be on the
peritoneal dialysis, which does not necessarily need
additional centers. So the fact that we may not have more
growth than 12 to 15 facilities does not mean that we are
not looking for a substantial increase in the treatments.
Greg Macosko: So the peritoneal dialysis would be an incremental 6 to 7%
sort of patient growth...
<PAGE> 38
Ray Hakim: No, no, no. We're considering that but whether the 6 to 7%
growth needs 12 or 15 or 20 or less than that depending on
how many patients choose one therapy versus another,
that's something that, you know, I wanted to at least put
out so that you don't think if we decide to have only 12
that our internal growth rate will necessarily be less
than what we expect.
Greg Macosko: Okay and finally, would you talk about nursing homes? I've
heard rumors that the nursing homes are looking at setting
up small dialysis centers in their facilities or something
along that line. Could you comment about that?
Ray Hakim: Well, all I know are mostly rumors. I think as you well
know for a nursing home to be involved in dialysis, there
are fairly substantial regulatory hurdles that they have
to cross in terms of getting permission. And second, those
facilities are by nature small facilities with high
overhead cost. So I'm not sure what their projections or
their financial model is. I don't think it would represent
a threat. In fact, my thinking is that a few of them may
try, but then they'll come back to a major provider and
see whether those services can be provided on site by the
provider, not by the nursing home.
<PAGE> 39
It's simply not an easy business to get into, and not very
economical when you only treat four and five patients a
day. That's not going to make it.
Greg Macosko: I agree with you, but have you heard of any specific
examples of it happening at this point?
Ray Hakim: Maybe Dirk...
Dirk Allison: Ray, let me comment. Yes, there's a national pharmacy
provider to nursing home chains that has been presenting
that they're going to be opening dialysis centers in some
of their facilities.
In fact, I've gone through the numbers on that. And the
problem you have that you have to be aware of is as Ray
mentioned, the concentration of patients in a home - a
typical nursing home averages about a hundred patients.
You're not going to have three or four of those on
dialysis. It's very difficult to run a program of that
size on any cost effective basis, although I understand
they already have the fixed cost of the building.
But realize, too, that the patient population is going to
be largely skewed to Medicare patients at that point in
time, whereas as you are aware, our revenue mix on most of
the companies, about 55% of our revenue runs Medicare, 5%
Medicaid with the majority of the rest in the private and
managed care markets.
So the financial model for us is a little difficult to
understand.
Greg Macosko: I agree with you, but have they opened one at this point?
Is one specifically open?
Dirk Allison: I do know they're trying at least one.
Greg Macosko: Okay, thank you.
Operator: Our next question comes from Howard Capek with UBS
Warburg. Please go ahead with your question.
<PAGE> 40
Howard Capek: Hi, Howard Capek. Good morning. Just two brief, quick
questions. On the charge for the wound care, is any piece
of that cash?
Dirk Allison: Yes, of the $9 million, you've got about 30% that will be
cash, and the other 70% will be noncash.
Howard Capek: To circle back to Youngstown and the fallout there, when
does the contract for the water treatment on Youngstown
and the rest of those clinics that you acquired wind down?
Are you going to try to accelerate that and bring it in
house faster?
Ray Hakim: It's winding down in November, Howard. And we are at the
moment in the phase where we are training our inside staff
to do their own training in preparation for taking over
the management of the water system. This is the model
we've had in all other facilities. I think I may have
mentioned to you earlier. The one sort of time where we
said well, the contract is running out in November as we
train new staff to take over. So that's where we are.
Howard Capek: Okay, thanks. Last, just to circle back on the
acquisitions, the stuff that sort of traded away from you.
Were they hospital-based, physician-owned? And what size
were they? And that's it, thank you.
Sam Brooks: On the acquisitions that we missed?
Howard Capek: Yes.
Sam Brooks: Okay.
Dirk Allison: Howard, I apologize. Could you repeat that question one
more time?
<PAGE> 41
Howard Capek: Yes, on the acquisitions that traded away from you.
Dirk Allison: Yes.
Howard Capek: Were they physician-owned, hospital-based and what size
range?
Sam Brooks: Actually, they were both hospital and physician and
they're going to be in the size of between 150 and 300
patients.
Howard Capek: Thanks very much.
Operator: Ladies and gentlemen, if there are any additional
questions, please press the 1 followed by the 4 at this
time.
Chuck Ruff with Insight Investments, please go ahead with
your question.
Chuck Ruff: Hi, just two quick ones. You talked about acquisition
pricing and really you priced it on a EBITDA multiple
basis. What sort of multiples do you like to see them in
and what kind of multiples did those recent acquisitions
go at that ran away from you?
Sam Brooks: Well, Chuck I like to see them in the 4-1/2 range but
that's probably not feasible. Actually, we probably look
in the 5, 5-1/2. You can pay up to 6, but it would have to
really be a good acquisition. I don't know the final price
of that those went in, but I would tell you they are above
the 6 EBITDA multiple range.
<PAGE> 42
Chuck Ruff: Okay and this 15% earnings growth. As someone mentioned,
if you apply that to next year, you come up with about
$1.52 or so. And we talked a lot about the assumptions to
get there. Does that assume share buyback or is that
before any share buyback?
Dirk Allison: No, it does not assume any share buyback.
Chuck Ruff: Great, thanks a lot guys.
Dirk Allison: Thanks.
Sam Brooks: Okay, well ladies and gentlemen, thank you very much for
being with us today. We apologize for this call. We wish
it hadn't of happened, but we thought it best to have it
and get it out and get it out to you as soon as we can. So
I think you got a good understanding of where we are and
of our estimates for the coming year and the risks as best
as we know them for those estimates having to do with
three or four things that have been brought up during this
call.
So okay, thanks for being with us and I believe we'll be
talking to you again at our earnings release in November,
isn't it Dirk?
Dirk Allison: Right.
Sam Brooks: Okay, thank you Operator. Thank you Ray.
Operator: Ladies and gentlemen, that does conclude your conference
for today. You may all disconnect and thank you for
participating.
END