U.S. Physical Therapy, Inc. ("USPH" or the “Company”) (NYSE:
USPH), a national operator of outpatient physical therapy clinics
and provider of industrial injury prevention (“IIP”) services,
today reported results for the second quarter and six months ended
June 30, 2022 (“2022 Second Quarter”).
QUARTER HIGHLIGHTS
- Operating Results per diluted share, a non-GAAP measure
(defined below), was $0.90 per diluted share for the 2022 Second
Quarter, the second highest quarterly amount in the Company’s
history. For the three months ended June 30, 2021 (“2021 Second
Quarter”), Operating Results per diluted share was $0.96, the
highest quarterly amount in the Company’s history.
- Adjusted EBITDA, a non-GAAP measure (defined below), was $21.3
million for the 2022 Second Quarter, a slight decrease from $21.4
million for the 2021 Second Quarter. See pages 14 and 15 for a
discussion and reconciliation to results according to GAAP.
- For the 2022 Second Quarter, USPH’s net income attributable to
its shareholders, a Generally Accepted Accounting Principles
(“GAAP”) measure, was $11.2 million compared to $12.4 million for
the 2021 Second Quarter. GAAP requires the Company to include a
charge for the revaluation of its non-controlling interest, net of
taxes, in its computation of earnings per diluted share. Earnings
per diluted share on a GAAP basis, was $0.87 for the 2022 Second
Quarter as compared to $0.82 for the 2021 Second Quarter.
- Average visits per clinic per day in the 2022 Second Quarter
was 29.5, an increase from the first quarter of 2022 of 27.9 and
slightly less than the Company-high 30.0 in the 2021 Second
Quarter.
- Total patient visits were 1,145,554 for the 2022 Second
Quarter, an increase of 5.7% from 1,084,070 for the 2021 Second
Quarter.
- The net rate per patient visit was $103.18 in the 2022 Second
Quarter as compared to $104.46 in the 2021 Second Quarter due to
rate reductions implemented by Medicare in 2022.
- Net patient revenue from physical therapy operations was $118.2
million for the 2022 Second Quarter, an increase of 4.4% from
$113.2 million for the 2021 Second Quarter.
- Industrial injury prevention (“IIP”) services revenue was an
all-time high of $19.4 million for the 2022 Second Quarter,
representing a 93.7% increase over the 2021 Second Quarter.
Excluding $6.8 million of revenue related to the November 2021 IIP
acquisition, IIP services revenue increased 25.5% period over
period.
- Total revenue of $140.7 million for the 2022 Second Quarter was
10.8% higher than total revenue of $126.9 million for the 2021
Second Quarter.
- Physical therapy total operating costs were $81.09 per visit in
the 2022 Second Quarter as compared to $76.50 per visit in the 2021
Second Quarter, an increase of 6.0%. Physical therapy salaries and
related costs were $58.29 per visit in the 2022 Second Quarter as
compared to $55.95 per visit in the Second Quarter 2021, an
increase of 4.2%.
- Total operating cost was 78.1% of total revenue in the 2022
Second Quarter, as compared to 73.0% for the 2021 Second Quarter.
Total salaries and related costs were 56.8% of total revenue for
the 2022 Second Quarter versus 54.3% for the 2021 Second
Quarter.
- On June 21, 2022, the Company announced the closing of a $325
million, five-year credit facility that includes a $150 million
term loan and a $175 million revolver. Based on strong lender
support, the credit facility was upsized from its $300 million
launch amount. This is an increase and extension of the Company’s
previous $150 million credit facility. The Company concurrently
announced that it entered into an interest rate swap agreement in
May, with a June 30 effective date, to lock the 1-month term SOFR
rate on $150 million of its debt at a 5-year swap rate of 2.815%.
The total interest rate in any particular period will also include
an applicable margin based on the Company’s consolidated leverage
ratio.
- The Company’s Board of Directors declared a quarterly dividend
of $0.41 per share payable on September 16, 2022 to shareholders of
record on August 18, 2022.
- Management updated the Company’s guidance to reflect the impact
of its recent financing transaction on interest expense as well as
inflation in wages and other costs it began experiencing in the
2022 Second Quarter. Management currently expects its Adjusted
EBITDA for the full year of 2022 to be in the range of $73.5
million to $75.4 million with Operating Results per share, which
reflects the increase in interest expense, to be in the range of
$2.65 to $2.75.
Management’s Comments
Chris Reading, Chief Executive Officer, said, “Despite an
increasingly difficult operating environment, our team produced the
second highest quarterly results in our Company’s history. In the
second quarter, we began to feel the impact of rising costs and
while we are working hard and making some adjustments to alleviate
some of those, we believe our costs will be higher than originally
expected for the remainder of the year which has been reflected in
our updated guidance numbers. Further, we took the important and
necessary step to expand our credit facility which gives us more
dry powder to use for acquisitions and other investments. On that
front, we have been very active and expect to close a number of
deals before year’s end which should be very positive for 2023 and
forward.”
Carey Hendrickson, Chief Financial Officer, said, “We are very
pleased to have completed the financing transaction in the second
quarter, which was important to provide us the capital we need for
growth. The related interest rate swap, which fixed the interest
rate on $150 million of our debt for five years, provides us
certainty in the rising interest rate environment at a rate that we
believe is favorable over the five-year period.”
Second Quarter 2022 Compared to Second
Quarter 2021
- Reported total revenue for the 2022 Second Quarter was $140.7
million, an increase of 10.8% as compared to $126.9 million for the
2021 Second Quarter. See table below for a detail of reported total
revenue (in thousands):
Three Months Ended
June 30,
June 30,
2022
2021
Revenue related to Mature Clinics
$
108,582
$
110,105
Revenue related to 2022 Clinic
Additions
3,117
-
Revenue related to 2021 Clinic
Additions
6,191
2,414
Revenue from clinics sold or closed in
2022
306
592
Revenue from clinics sold or closed in
2021
-
127
Net patient revenue from physical therapy
operations
118,196
113,238
Other revenue
898
918
Revenue from physical therapy
operations
119,094
114,156
Revenue from management contracts
2,125
2,739
Revenue from industrial injury prevention
services
19,437
10,033
Total Revenue
$
140,656
$
126,928
- Revenue from physical therapy operations increased $4.9
million, or 4.3%, to $119.1 million for the 2022 Second Quarter
from $114.2 million for the 2021 Second Quarter. The average net
patient revenue per visit was $103.18 for the 2022 Second Quarter
as compared to $104.46 for the 2021 Second Quarter. Total patient
visits increased 5.7% to 1,145,554 for the 2022 Second Quarter from
1,084,070 for the 2021 Second Quarter.
- Net patient revenue related to clinics opened or acquired prior
to 2021 and still in operation at June 30, 2022 (“Mature Clinics”)
decreased $1.5 million, or 1.4%, to $108.6 million for the 2022
Second Quarter compared to $110.1 million for the 2021 Second
Quarter, due mostly to the decrease in average net patient revenue
per visit. Visits for Mature Clinics (same store) for the 2022
Second Quarter decreased slightly (0.2%) as compared to the 2021
Second Quarter.
- IIP services revenue increased 93.7% to $19.4 million for the
2022 Second Quarter as compared to $10.0 million for the 2021
Second Quarter. Excluding $6.8 million of revenue related to the
IIP acquisition in November 2021, IIP services revenue increased
25.5% in the 2022 Second Quarter as compared to the 2021 Second
Quarter.
- Total operating cost was $109.8 million for the 2022 Second
Quarter, or 78.1% of total revenue, as compared to $92.6 million,
or 73.0% of total revenue, for the 2021 Second Quarter. Operating
cost related to Mature Clinics increased by $4.0 million, or 5.0%,
for the 2022 Second Quarter compared to the 2021 Second Quarter. In
addition, operating cost related to the industrial injury
prevention services business increased by $7.8 million of which
$5.7 million related to the Company’s November 2021 IIP
acquisition. See table below for a detail of operating cost (in
thousands):
Three Months Ended
June 30, 2022
June 30, 2021
Operating cost related to Mature
Clinics
$
84,216
$
80,205
Operating cost related to 2022 Clinic
Additions
2,692
-
Operating cost related to 2021 Clinic
Additions
5,666
2,063
Operating cost related to clinics sold or
closed in 2022
324
555
Operating cost related to clinics sold or
closed in 2021
-
107
Operating cost related to physical therapy
operations
92,898
82,930
Operating cost related to management
contracts
1,622
2,203
Operating cost related to industrial
injury prevention services
15,315
7,491
Total operating cost
$
109,835
$
92,624
- Total salaries and related costs, including all operations,
were 56.8% of total revenue for the 2022 Second Quarter versus
54.3% for the 2021 Second Quarter. Rent, supplies, contract labor
and other costs as a percentage of total revenue were 20.2% for the
2022 Second Quarter versus 17.6% for the 2021 Second Quarter. The
provision for credit losses as a percentage of total revenue were
1.1% for 2022 Second Quarter and 2021 Second Quarter.
- Gross profit for the 2022 Second Quarter, was $30.8 million, a
decrease of $3.5 million, or 10.2%, as compared to $34.3 million
for the 2021 Second Quarter. The gross profit percentage was 21.9%
of total revenue for the 2022 Second Quarter as compared to 27.0%
for the 2021 Second Quarter. The gross profit percentage for the
Company’s physical therapy operations was 22.0% for the 2022 Second
Quarter as compared to 27.4% for the 2021 Second Quarter. The gross
profit percentage on management contracts was 23.7% for the 2022
Second Quarter as compared to 19.6% for the 2021 Second Quarter.
The gross profit percentage for industrial injury prevention
services was 21.2% for the 2022 Second Quarter as compared to 25.3%
for the 2021 Second Quarter. The IIP margin in 2022 has been
impacted by the lower margin profile of the Company’s November 2021
IIP acquisition. The table below details the gross profit (in
thousands):
Three Months Ended
June 30, 2022
June 30, 2021
Physical therapy operations
$
26,196
$
31,226
Management contracts
503
536
Industrial injury prevention services
4,122
2,542
Gross profit
$
30,821
$
34,304
- Corporate office costs were $10.7 million for the 2022 Second
Quarter compared to $12.1 million for the 2021 Second Quarter.
Corporate office costs were 7.6% of total revenue for the 2022
Second Quarter as compared to 9.5% for the 2021 Second Quarter. The
decrease was primarily due to lower estimated bonus expense in the
2022 Second Quarter than the 2021 Second Quarter.
- Operating income for the 2022 Second Quarter was $20.1 million
and $22.2 million for 2021 Second Quarter. Operating income as a
percentage of total revenue was 14.3% for the 2022 Second Quarter
as compared to 17.5% for the 2021 Second Quarter.
- The loss on revaluation of put-right liability was $617,000. As
part of the IIP business acquisition on November 30, 2021, the
Company also agreed to the potential future purchase of a separate
company under the same ownership that provides physical therapy and
rehabilitation services to hospitals and other ancillary providers
in a distinct market area. The owners have the right to put this
transaction to the Company approximately five years, with such
right having a $3.5 million value at June 30,2022, as reflected on
the Company’s consolidated balance sheet in Other long-term
liabilities. The value of this right will continue to be adjusted
in future periods, as appropriate.
- The provision for income tax was $4.2 million for the 2022
Second Quarter and $4.6 million for the 2021 Second Quarter. The
provision for income tax as a percentage of income before taxes
less net income attributable to non-controlling interest (effective
tax rate) was 27.5% for the 2022 Second Quarter and 26.9% for the
2021 Second Quarter. See table below ($ in thousands):
Three Months Ended
June 30, 2022
June 30, 2021
Income before taxes
$
19,495
$
22,039
Less: net income attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(2,626
)
(3,611
)
Non-controlling interest - permanent
equity
(1,435
)
(1,425
)
$
(4,061
)
$
(5,036
)
Income before taxes less net income
attributable to non-controlling interest
$
15,434
$
17,003
Provision for income taxes
$
4,239
$
4,567
Percentage
27.5
%
26.9
%
- Net income attributable to redeemable non-controlling interest
(temporary equity) was $2.6 million for the 2022 Second Quarter and
$3.6 million for the 2021 Second Quarter. Net income attributable
to non-controlling interest (permanent equity) was $1.4 million for
the 2022 Second Quarter and for the 2021 Second Quarter.
- For the 2022 Second Quarter, the Company’s net income
attributable to its shareholders was $11.2 million as compared to
$12.4 million for the 2021 Second Quarter. In accordance with GAAP,
the revaluation of redeemable non-controlling interest, net of
taxes, is not included in net income but charged directly to
retained earnings; however, the charge for this change is included
in the earnings per basic and diluted share calculation. Inclusive
of the charge for revaluation of non-controlling interest, net of
taxes, the amount is $11.4 million, or $0.87 per diluted share, for
the 2022 Second Quarter, and $10.5 million, or $0.82 per diluted
share, for the 2021 Second Quarter.
- For the 2022 Second Quarter, the Company’s Operating Results, a
non-GAAP measure, was $11.7 million, or $0.90 per diluted share, a
decrease of 6.3%, as compared to $12.4 million, or $0.96 per
diluted share, for the 2021 Second Quarter. See table on page
15.
- For the 2022 Second Quarter, the Company’s Adjusted EBITDA, a
non-GAAP measure, was $21.3 million, a slight decrease from $21.4
million in the 2021 Second Quarter. See definition, explanation and
calculation of Adjusted EBITDA, a non-GAAP measure, in the schedule
on pages 14 and 15.
2022 Six Months Compared to 2021 Six
Months
- Reported total revenue for the 2022 Six Months was $272.4
million, an increase of 13.8% as compared to $239.3 million for the
2021 Six Months. See table below for a detail of reported total
revenue (in thousands):
For the Six Months
Ended
June 30, 2022
June 30, 2021
Revenue related to Mature Clinics
$
211,215
$
208,531
Revenue related to 2022 Clinic
Additions
3,312
-
Revenue related to 2021 Clinic
Additions
12,346
2,465
Revenue from clinics sold or closed in
2022
861
1,104
Revenue from clinics sold or closed in
2021
-
392
Net patient revenue from physical therapy
operations
227,734
212,492
Other revenue
1,770
1,464
Revenue from physical therapy
operations
229,504
213,956
Revenue - Management contracts
4,351
5,297
Revenue - Industrial injury prevention
services
38,505
20,043
Total Revenue
$
272,360
$
239,296
- Revenue from physical therapy operations increased $15.5
million, or 7.3%, to $229.5 million for the 2022 Six Months from
$214.0 million for the 2021 Six Months. The average net patient
revenue per visit was $103.09 for the 2022 Six Months as compared
to $104.58 for the 2021 Six Months. Total patient visits increased
8.7% to 2,209,073 for the 2022 Six Months from 2,031,858 for the
2021 Six Months.
- Net patient revenue related to clinics opened or acquired prior
to 2021 and still in operation at June 30, 2022 (“Mature Clinics”)
increased $2.7 million, or 1.3%, to $211.2 million for the 2022 Six
Months compared to $208.5 million for the 2021 Six Months. Visits
for Mature Clinics (same store) for the 2022 Six Months increased
3.0% as compared to the 2021 Six Months. The increase in visits was
partially offset by a reduction in the net patient revenue per
visit.
- IIP services revenue increased 92.1% to $38.5 million for the
2022 Six Months as compared to $20.0 million for the 2021 Six
Months. Excluding $13.7 million of revenue related to the IIP
acquisition in November 2021, IIP services revenue increased 24.0%
in the 2022 Six Months as compared to the 2021 Six Months.
- Total operating cost was $215.0 million for the 2022 Six
Months, or 78.9% of total revenue, as compared to $179.1 million,
or 74.8% of total revenue, for the 2021 Six Months. Operating cost
related to Mature Clinics increased by $10.1 million for the 2022
Six Months compared to the 2021 Six Months. In addition, operating
cost related to the industrial injury prevention services business
increased by $15.5 million of which $11.3 million related to the
recent IIP acquisition. See table below for a detail of operating
cost (in thousands):
For the Six Months
Ended
June 30, 2022
June 30, 2021
Operating cost related to Mature
Clinics
$
166,468
$
156,321
Operating cost related to 2022 Clinic
Additions
3,083
-
Operating cost related to 2021 Clinic
Additions
11,466
2,128
Operating cost related to clinics sold or
closed in 2022
251
979
Operating cost related to clinics sold or
closed in 2021
-
442
Operating cost - Physical therapy
operations
181,268
159,870
Operating cost - Management contracts
3,453
4,448
Operating cost - Industrial injury
prevention services
30,230
14,778
Total operating cost
$
214,951
$
179,096
- Total salaries and related costs, including all operations,
were 56.9% of total revenue for the 2022 Six Months versus 55.4%
for the 2021 Six Months. Rent, supplies, contract labor and other
costs as a percentage of total revenue were 20.9% for the 2022 Six
Months versus 18.3% for the 2021 Six Months. The provision for
credit losses as a percentage of total revenue was 1.0% for 2022
Six Months and 1.1% for 2021 Six Months.
- Gross profit for the 2022 Six Months, was $57.4 million, a
decrease of $2.8 million, or 4.6%, as compared to $60.2 million for
the 2021 Six Months. The gross profit percentage was 21.1% of total
revenue for the 2022 Six Months as compared to 25.2% for the 2021
Six Months. The gross profit percentage for the Company’s physical
therapy operations was 21.0% for the 2022 Six Months as compared to
25.3% for the 2021 Six Months. The gross profit percentage on
management contracts was 20.6% for the 2022 Six Months as compared
to 16.0% for the 2021 Six Months. The gross profit percentage for
industrial injury prevention services was 21.5% for the 2022 Six
Months as compared to 26.3% for the 2021 Six Months. The IIP margin
in 2022 has been impacted by the lower margin profile of the
Company’s November 2021 IIP acquisition. The table below details
the gross profit (in thousands):
For the Six Months
Ended
June 30, 2022
June 30, 2021
Physical therapy operations
$
48,236
$
54,086
Management contracts
898
849
Industrial injury prevention services
8,275
5,265
Gross profit
$
57,409
$
60,200
- Corporate office costs were $22.3 million for the 2022 Six
Months compared to $22.9 million for the 2021 Six Months. Corporate
office costs were 8.2% of total revenue for the 2022 Six Months as
compared to 9.6% for the 2021 Six Months. The decrease was
primarily due to lower estimated bonus expense in the 2022 Six
Months than the 2021 Six Months.
- Operating income for the 2022 Six Months were $35.1 million and
$37.3 million for 2021 Six Months. Operating income as a percentage
of total revenue was 12.9% for the 2022 Six Months as compared to
15.6% for the 2021 Six Months.
- The loss on revaluation of the put-right liability was $14,000.
As part of the IIP business acquisition on November 30, 2021, the
Company also agreed to the potential future purchase of a separate
company under the same ownership that provides physical therapy and
rehabilitation services to hospitals and other ancillary providers
in a distinct market area. The owners have the right to put this
transaction to the Company in approximately five years, with such
right having a $3.5 million value at June 30, 2022, as reflected on
the Company’s consolidated balance sheet in Other long-term
liabilities. The value of this right will continue to be adjusted
in future periods, as appropriate.
- The provision for income tax was $7.7 million for the 2022 Six
Months and $7.5 million for the 2021 Six Months. The provision for
income tax as a percentage of income before taxes less net income
attributable to non-controlling interest (effective tax rate) was
27.9% for the 2022 Six Months and 26.7% for the 2021 Six Months.
See table below ($ in thousands):
For the Six Months
Ended
June 30, 2022
June 30, 2021
Income before taxes
$
34,975
$
36,869
Less: net income attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(5,183
)
(6,064
)
Non-controlling interest - permanent
equity
(2,061
)
(2,685
)
$
(7,244
)
$
(8,749
)
Income before taxes less net income
attributable to non-controlling interest
$
27,731
$
28,120
Provision for income taxes
$
7,737
$
7,511
Percentage
27.9
%
26.7
%
- Net income attributable to redeemable non-controlling interest
(temporary equity) was $5.2 million for the 2022 Six Months and
$6.1 million for the 2021 Six Months. Net income attributable to
non-controlling interest (permanent equity) was $2.1 million for
the 2022 Six Months and $2.7 million for the 2021 Six Months.
- For the 2022 Six Months, the Company’s net income attributable
to its shareholders was $20.0 million for the 2022 Six Months and
$20.6 million for 2021 Six Months. Inclusive of the charge for
revaluation of non-controlling interest, net of taxes, the amount
is $20.0 million, or $1.55 per diluted share, for the 2022 Six
Months, and $13.3 million, or $1.03 per diluted share, for the 2021
Six Months. See table on page 15.
- For the 2022 Six Months, the Company’s Operating Results, a
non-GAAP measure, was $20.0 million, or $1.54 per diluted share, a
decrease of 3.0%, as compared to $20.6 million, or $1.60 per
diluted share, for the 2021 Second Quarter. See table on page
15.
- For the 2022 Six Months, the Company’s Adjusted EBITDA, a
non-GAAP measure, was $38.8 million, an increase of 5.5% from $36.8
million in the 2021 Six Months. See definition, explanation and
calculation of Adjusted EBITDA, a non-GAAP measure, in the schedule
on pages 14 and 15.
Other Comprehensive
Income
Concurrently with the amended credit facility, the Company
entered into an interest rate swap agreement in May 2022, which has
a $150 million notional value, a maturity date of June 30, 2027 and
was effective on June 30, 2022. Beginning in July 2022, the Company
pays a fixed rate of interest of 2.815% based on 1-month SOFR. The
total interest rate in any period will also include an applicable
margin based on the Company’s consolidated leverage ratio.
Currently, the Company’s interest rate including the applicable
margin is 4.665%. Unrealized gains and losses related to the fair
value of the interest rate swap are recorded to accumulated other
comprehensive income (loss), net of tax. The fair value of the
interest rate swap at June 30, 2022, was $0.5 million, which has
been included within current liabilities in the accompanying
Consolidated Balance Sheet. The impact of the interest rate swap on
the accompanying Consolidated Statements of Comprehensive Income
for the three and six months ended June 30, 2022 was an unrealized
loss of $0.4 million, net of tax.
Quarterly Dividend
The Board of Directors declared a quarterly dividend of $0.41
per share payable on September 16, 2022, to shareholders of record
on August 18, 2022.
Management Revises 2022
Guidance
Management currently expects the Company’s Adjusted EBITDA for
the full year of 2022 to be in the range of $73.5 million to $75.4
million and for its Operating Results to be in the range of $34.4
million to $35.8 million, or $2.65 to $2.75 per share. The change
in guidance is primarily attributable to two factors:
- Increases in the Company’s interest expense due to rising
interest rates in the U.S. and the Company’s financing transaction
completed in the second quarter of 2022. The Company has $150
million of fixed debt which is currently expected to generate
interest at a fixed rate of 4.665% for the remainder of the
year.
- The impact of inflation on the Company’s wages and other costs
which elevated during the second quarter and are expected to
continue through the remainder of the year.
Please note that the earnings guidance represents projected
results from existing operations and excludes future acquisitions.
The annual guidance figures will not be updated unless there is a
material development that causes management to believe that results
will be significantly outside the given ranges.
Second Quarter 2022 Conference
Call
U.S. Physical Therapy's management will host a conference call
at 10:30 a.m. Eastern Time, 9:30 a.m. Central Time, on August 4,
2022, to discuss results for the Company's 2022 Second Quarter and
Six months ended June 30, 2022. Interested parties may participate
in the call by dialing 1-800-459-5346 or 203-518-9544 and entering
reservation number USPHQ22022 approximately 10 minutes before the
call is scheduled to begin. To listen to the live call via webcast,
go to the Company's website at www.usph.com at least 15 minutes
early to register, download and install any necessary audio
software. The conference call will be archived and can be accessed
until November 5, 2022, at U.S. Physical Therapy’s website.
Forward-Looking
Statements
This press release contains statements that are considered to be
forward-looking within the meaning under Section 21E of the
Securities Exchange Act of 1934, as amended. These statements
contain forward-looking information relating to the financial
condition, results of operations, plans, objectives, future
performance and business of our Company. These statements (often
using words such as “believes”, “expects”, “intends”, “plans”,
“appear”, “should” and similar words) involve risks and
uncertainties that could cause actual results to differ materially
from those we expect. Included among such statements may be those
relating to new clinics, availability of personnel and the
reimbursement environment. The forward-looking statements are based
on our current views and assumptions and actual results could
differ materially from those anticipated in such forward-looking
statements as a result of certain risks, uncertainties, and
factors, which include, but are not limited to:
- the multiple effects of the impact of public health crises and
epidemics/pandemics, such as the novel strain of COVID-19 and its
variants, for which the total financial magnitude cannot be
currently estimated;
- changes in Medicare rules and guidelines and reimbursement or
failure of our clinics to maintain their Medicare certification
and/or enrollment status;
- revenue we receive from Medicare and Medicaid being subject to
potential retroactive reduction;
- changes in reimbursement rates or payment methods from third
party payors including government agencies, and changes in the
deductibles and co-pays owed by patients;
- compliance with federal and state laws and regulations relating
to the privacy of individually identifiable patient information,
and associated fines and penalties for failure to comply;
- competitive, economic or reimbursement conditions in our
markets which may require us to reorganize or close certain clinics
and thereby incur losses and/or closure costs including the
possible write-down or write-off of goodwill and other intangible
assets;
- the impact of COVID-19 related vaccination and/or testing
mandates at the federal, state and/or local level, which could have
an adverse impact on staffing, revenue, costs and the results of
operations;
- changes as the result of government enacted national healthcare
reform;
- business and regulatory conditions including federal and state
regulations;
- governmental and other third party payor inspections, reviews,
investigations and audits, which may result in sanctions or
reputational harm and increased costs;
- revenue and earnings expectations;
- legal actions, which could subject us to increased operating
costs and uninsured liabilities;
- general economic conditions, including but not limited to
inflationary and recessionary periods;
- availability and cost of qualified physical therapists;
- personnel productivity and retaining key personnel;
- competitive environment in the industrial injury prevention
services business, which could result in the termination or
nonrenewal of contractual service arrangements and other adverse
financial consequences for that service line;
- acquisitions, and the successful integration of the operations
of the acquired businesses;
- impact on the business and cash reserves resulting from
retirement or resignation of key partners and resulting purchase of
their non-controlling interest (minority interests);
- maintaining our information technology systems with adequate
safeguards to protect against cyber-attacks;
- a security breach of our or our third party vendors’
information technology systems may subject us to potential legal
action and reputational harm and may result in a violation of the
Health Insurance Portability and Accountability Act of 1996 of the
Health Information Technology for Economic and Clinical Health
Act;
- maintaining clients for which we perform management and other
services, as a breach or termination of those contractual
arrangements by such clients could cause operating results to be
less than expected;
- maintaining adequate internal controls;
- maintaining necessary insurance coverage;
- availability, terms, and use of capital; and
- weather and other seasonal factors.
In addition to the above, see Risk Factors in Item 1A of our
Annual Report on Form 10-K for the year ended December 31, 2021 and
the additional risk factor below:
Our debt and financial obligations could adversely affect our
financial condition, our ability to obtain future financing, and
our ability to operate our business.
We have outstanding debt obligations that could adversely affect
our financial condition and limit our ability to successfully
implement our business strategy. Furthermore, from time to time, we
may need additional financing to support our business and pursue
our business strategy, including strategic acquisitions. Our
ability to obtain additional financing, if and when required, will
depend on investor demand, our operating performance, the condition
of the capital markets, and other factors. We cannot assure that
additional financing will be available to us on favorable terms
when required, or at all.
Our loan agreements contain certain restrictions and
requirements that among other things:
- require us to maintain a quarterly fixed charge coverage ratio
and minimum working capital ratio;
- limit our ability to obtain additional financing in the future
for working capital, capital expenditures and acquisitions, to fund
growth or for general corporate purposes;
- limit our future ability to refinance our indebtedness on terms
acceptable to us or at all;
- limit our flexibility in planning for or reacting to changes in
our business and market conditions or in funding our strategic
growth plan; and
- impose on us financial and operational restrictions.
Our ability to meet our debt service obligations will depend on
our future performance, which will be affected by the other risk
factors described in our Annual Report on Form 10-K filed on March
1, 2022. If we do not generate enough cash flow to pay our debt
service obligations, we may be required to refinance all or part of
our existing debt, sell our assets, borrow more money or raise
equity. There is no guarantee that we will be able to take any of
these actions on a timely basis, on terms satisfactory to us, or at
all.
If we fail to satisfy our debt service obligations or the other
restrictions and requirements in our loan agreements, we could be
in default. Unless cured or waived, a default would permit lenders
to accelerate the maturity of the debt under the credit agreement
and to foreclose upon the collateral securing the debt.
Our outstanding loans bear interest at variable rates. In
response to the variable rates, we entered into entered into an
interest rate swap agreement. See above for further discussion of
this swap agreement.
Many factors are beyond our control. Given these uncertainties,
you should not place undue reliance on our forward-looking
statements. Please see the other sections of this report and our
other periodic reports filed with the Securities and Exchange
Commission (the “SEC”) for more information on these factors. Our
forward-looking statements represent our estimates and assumptions
only as of the date of this report. Except as required by law, we
are under no obligation to update any forward-looking statement,
regardless of the reason the statement may no longer be
accurate.
About U.S. Physical Therapy,
Inc.
Founded in 1990, U.S. Physical Therapy, Inc. operates 608
outpatient physical therapy clinics in 39 states. The Company's
clinics provide preventative and post-operative care for a variety
of orthopedic-related disorders and sports-related injuries,
treatment for neurologically-related injuries and rehabilitation of
injured workers. In addition to owning and operating clinics, the
Company manages 33 physical therapy facilities for unaffiliated
third parties, including hospitals and physician groups. The
Company also has an industrial injury prevention services business
which provides onsite services for clients’ employees including
injury prevention and rehabilitation, performance optimization,
post-offer employment testing, functional capacity evaluations, and
ergonomic assessments.
More information about U.S. Physical Therapy, Inc. is available
at www.usph.com. The information
included on that website is not incorporated into this press
release.
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(unaudited)
Three Months Ended
For the Six Months
Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Net patient revenue
$
118,196
$
113,238
$
227,734
$
212,492
Other revenue
22,460
13,690
44,626
26,804
Net revenue
140,656
126,928
272,360
239,296
Operating cost:
Salaries and related costs
79,939
68,866
155,088
132,681
Rent, supplies, contract labor and
other
28,345
22,394
57,007
43,851
Provision for credit losses
1,551
1,364
2,856
2,564
Total operating cost
109,835
92,624
214,951
179,096
Gross profit
30,821
34,304
57,409
60,200
Corporate office costs
10,741
12,074
22,297
22,948
Operating income
20,080
22,230
35,112
37,252
Other income and expense
Equity in earnings of unconsolidated
affiliate
340
-
679
-
Other and interest income
679
46
725
100
Change in revaluation of put-right
liability
(617
)
-
(14
)
-
Interest expense - debt and other, net
(987
)
(237
)
(1,527
)
(483
)
Total other income and expense
(585
)
(191
)
(137
)
(383
)
Income before taxes
19,495
22,039
34,975
36,869
Provision for income taxes
4,239
4,567
7,737
7,511
Net income
15,256
17,472
27,238
29,358
Less: net income attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(2,626
)
(3,611
)
(5,183
)
(6,064
)
Non-controlling interest - permanent
equity
(1,435
)
(1,425
)
(2,061
)
(2,685
)
(4,061
)
(5,036
)
(7,244
)
(8,749
)
Net income attributable to USPH
shareholders
$
11,195
$
12,436
$
19,994
$
20,609
Basic and diluted earnings per share
attributable to USPH shareholders
$
0.87
$
0.82
$
1.55
$
1.03
Shares used in computation - basic and
diluted
12,998
12,902
12,968
12,886
Dividends declared per common share
$
0.41
$
0.35
$
0.82
$
0.70
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(unaudited)
Three Months Ended
For the Six Months
Ended
June 30, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Net income
$
15,256
$
17,472
$
27,238
$
29,358
Other comprehensive loss
Unrealized loss on cash flow hedge
(531
)
-
(531
)
-
Tax effect at statutory rate (federal and
state) of 25.55%
136
-
136
-
Comprehensive income
$
14,725
$
17,472
$
26,707
$
29,358
Comprehensive income attributable to
non-controlling interest
(4,061
)
(5,036
)
(7,244
)
(8,749
)
Comprehensive income attributable to USPH
shareholders
$
10,664
$
12,436
$
19,463
$
20,609
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEET
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
June 30, 2022
December 31, 2021
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
48,572
$
28,567
Patient accounts receivable, less
allowance for credit losses of $2,948 and $2,768, respectively
50,549
46,272
Accounts receivable - other
18,915
16,144
Other current assets
3,810
4,183
Total current assets
121,846
95,166
Fixed assets:
Furniture and equipment
60,379
58,743
Leasehold improvements
41,038
39,194
Fixed assets, gross
101,417
97,937
Less accumulated depreciation and
amortization
77,188
74,958
Fixed assets, net
24,229
22,979
Operating lease right-of-use assets
101,274
96,427
Investment in unconsolidated affiliate
12,346
12,215
Goodwill
442,761
434,679
Other identifiable intangible assets,
net
92,655
86,382
Other assets
1,333
1,578
Total assets
$
796,444
$
749,426
LIABILITIES, REDEEMABLE
NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND
NON-CONTROLLING INTEREST
Current liabilities:
Accounts payable - trade
$
3,793
$
3,268
Accounts payable - due to seller of
acquired business
3,203
3,203
Accrued expenses
41,246
45,705
Current portion of operating lease
liabilities
32,083
30,475
Current portion of term loan and notes
payable
4,780
830
Total current liabilities
85,105
83,481
Notes payable, net of current portion
4,258
3,587
Revolving line of credit
-
114,000
Term Loan, net of current portion and
deferred financing costs
144,631
-
Deferred taxes
19,483
14,385
Operating lease liabilities, net of
current portion
77,776
74,185
Other long-term liabilities
4,858
7,345
Total liabilities
336,111
296,983
Redeemable non-controlling interest -
temporary equity
151,400
155,262
Commitments and Contingencies
U.S. Physical Therapy, Inc. ("USPH")
shareholders’ equity:
Preferred stock, $.01 par value, 500,000
shares authorized, no shares issued and outstanding
-
-
Common stock, $.01 par value, 20,000,000
shares authorized,
15,218,982 and 15,126,160 shares issued,
respectively
152
151
Additional paid-in capital
106,801
102,688
Accumulated other comprehensive loss
(395
)
-
Retained earnings
232,247
224,395
Treasury stock at cost, 2,214,737
shares
(31,628
)
(31,628
)
Total USPH shareholders’ equity
307,177
295,606
Non-controlling interest - permanent
equity
1,756
1,575
Total USPH shareholders' equity and
non-controlling interest - permanent equity
308,933
297,181
Total liabilities, redeemable
non-controlling interest,
USPH shareholders' equity and
non-controlling interest - permanent equity
$
796,444
$
749,426
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(unaudited)
Six Months Ended
June 30, 2022
June 30, 2021
OPERATING ACTIVITIES
Net income including non-controlling
interest and earnings from unconsolidated affiliates, net
$
27,238
$
29,358
Adjustments to reconcile net income
including non-controlling interest to net cash provided by
operating activities:
Depreciation and amortization
7,298
5,484
Provision for credit losses
2,856
2,564
Equity-based awards compensation
expense
3,660
3,405
Deferred income taxes
4,307
3,160
Loss on revaluation of put-right
liability
14
-
(Gain) loss on sale of clinics and fixed
assets
(614
)
106
Earnings in unconsolidated affiliate
(679
)
-
Changes in operating assets and
liabilities:
Increase in patient accounts
receivable
(7,459
)
(5,325
)
(Increase) decrease in accounts receivable
- other
(2,862
)
129
(Increase) decrease in other assets
230
(255
)
Decrease in accounts payable and accrued
expenses
(3,891
)
(3,672
)
(Decrease) increase in other long-term
liabilities
(2,587
)
602
Net cash provided by operating
activities
27,511
35,556
INVESTING ACTIVITIES
Purchase of fixed assets
(4,569
)
(3,301
)
Purchase of majority interest in
businesses, net of cash acquired
(11,799
)
(20,402
)
Purchase of redeemable non-controlling
interest, temporary equity
(8,648
)
(9,536
)
Purchase of non-controlling interest,
permanent equity
(156
)
-
Proceeds on sales of partnership interest,
clinics and fixed assets
740
(168
)
Distributions from unconsolidated
affiliate
548
-
Proceeds on sales of redeemable
non-controlling interest-temporary
344
32
Net cash used in investing activities
(23,540
)
(33,375
)
FINANCING ACTIVITIES
Distributions to non-controlling interest,
permanent and temporary equity
(7,202
)
(9,398
)
Cash dividends paid to shareholders
(10,659
)
(9,028
)
Proceeds from revolving line of credit
61,000
128,000
Proceeds from term loan
150,000
-
Payments on revolving line of credit
(175,000
)
(106,000
)
Principal payments on notes payable
(338
)
(4,207
)
(Payment) receipt of Medicare Accelerated
and Advance Funds
-
(14,054
)
Payment of deferred financing costs
(1,779
)
-
Other
12
7
Net cash used in financing activities
16,034
(14,680
)
Net decrease in cash and cash
equivalents
20,005
(12,499
)
Cash and cash equivalents - beginning of
period
28,567
32,918
Cash and cash equivalents - end of
period
$
48,572
$
20,419
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Income taxes
$
4,524
$
6,967
Interest paid
$
1,319
$
741
Non-cash investing and financing
transactions during the period:
Purchase of businesses - seller financing
portion
$
374
$
550
Purchase of businesses - contingent
consideration
$
-
$
1,000
Notes payable related to purchase of
redeemable non-controlling interest, temporary equity
$
948
$
-
Notes payable due to purchase of
non-controlling interest, permanent equity
$
296
$
-
Notes receivable related to sale of
partnership interest
$
-
$
287
Notes receivable related to sale of
partnership interest - redeemable non-controlling interest
$
1,476
$
-
U. S. PHYSICAL THERAPY, INC. AND
SUBSIDIARIES OPERATING RESULTS AND ADJUSTED EBITDA (IN
THOUSANDS, EXCEPT PER SHARE DATA) (unaudited)
The following tables provide detail of the diluted earnings per
share computation and reconcile net income attributable to USPH
shareholders calculated in accordance with GAAP to Operating
Results and Adjusted EBITDA. Management believes providing
Operating Results and Adjusted EBITDA to investors is useful
information for comparing the Company's period-to-period
results.
Operating Results, a non-GAAP measure, equals net income
attributable to USPH shareholders per the consolidated statements
of income less the change in the revaluation of the put-right
liability. In accordance with GAAP, the revaluation of redeemable
non-controlling interest, net of tax, is included in the earnings
per basic and diluted share calculation, although it is not
included in net income but charged directly to retained
earnings.
Adjusted EBITDA is defined as net income attributable to USPH
shareholders before interest income, interest expense, taxes,
depreciation, amortization, gain on revaluation of put-right
liability, equity-based awards compensation expense and related
portion for non-controlling interests. Management believes
reporting Adjusted EBITDA is useful information for investors in
comparing the Company’s period-to-period results as well as
comparing with similar businesses which report adjusted EBITDA as
defined by their company.
Management uses Operating Results and Adjusted EBITDA, which
eliminates certain items described above that can be subject to
volatility and unusual costs, as one the principal measures to
evaluate and monitor financial performance period over period.
Management believes that Operating Results and Adjusted EBITDA is
useful information for investors to use in comparing the Company's
period-to-period results as well as for comparing with other
similar businesses since most do not have redeemable instruments
and therefore have different equity structures.
Operating Results and Adjusted EBITDA are not measures of
financial performance under GAAP. Adjusted EBITDA and Operating
Results should not be considered in isolation or as an alternative
to, or substitute for, net income attributable to USPH shareholders
presented in the consolidated financial statements.
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
OPERATING RESULTS AND ADJUSTED
EBITDA
2022 PERIODS COMPARED TO 2021
PERIODS
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
*
2022
2021
*
Computation of earnings per share - USPH
shareholders:
Net income attributable to USPH
shareholders
$
11,195
$
12,436
$
19,994
$
20,609
Credit (charges) to retained earnings:
Revaluation of redeemable non-controlling
interest
210
(2,549
)
57
(9,819
)
Tax effect at statutory rate (federal and
state) of 25.55%
(54
)
651
(15
)
2,508
$
11,351
$
10,538
$
20,036
$
13,298
Earnings per share (basic and diluted)
$
0.87
$
0.82
$
1.55
$
1.03
Adjustments:
Change in revaluation of put-right
liability
617
-
14
-
Revaluation of redeemable non-controlling
interest
(210
)
2,549
(57
)
9,819
Tax effect at statutory rate (federal and
state)
(104
)
(651
)
11
(2,508
)
Operating Results (a non-GAAP measure)
$
11,654
$
12,436
$
20,004
$
20,609
Basic and diluted Operating Results per
share (a non-GAAP measure)
$
0.90
$
0.96
$
1.54
$
1.60
Shares used in computation - basic and
diluted
12,998
12,902
12,968
12,886
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Net income attributable to USPH
shareholders
$
11,195
$
12,436
$
19,994
$
20,609
Adjustments:
Depreciation and amortization
3,474
2,803
7,298
5,484
Other and interest income
(679
)
(46
)
(725
)
(100
)
Change in revaluation of put-right
liability
617
-
14
Interest expense - debt and other, net
987
236
1,527
483
Provision for income taxes
4,239
4,567
7,737
7,511
Equity-based awards compensation
expense
1,814
1,754
3,660
3,405
Allocation to non-controlling
interests
(300
)
(305
)
(697
)
(602
)
Adjusted EBITDA (a non-GAAP measure)
$
21,347
$
21,445
$
38,808
$
36,790
* Revised to conform to current year
presentation.
U.S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
RECAP OF PHYSICAL THERAPY
OPERATIONS
CLINIC COUNT
Date
Number of Clinics
March 31, 2021
564
June 30, 2021
575
September 30, 2021
579
December 31, 2021
591
March 31, 2022
601
June 30, 2022
608
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005175/en/
U.S. Physical Therapy, Inc. Carey Hendrickson, Chief Financial
Officer email: chendrickson@usph.com
Chris Reading, Chief Executive Officer (713) 297-7000
Three Part Advisors Joe Noyons (817) 778-8424
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