EX-99.2 3 h51698a1exv99w2.htm UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS exv99w2
 

Exhibit 99.2
U. S. Physical Therapy, Inc.
Pro Forma Combined Financial Information (Unaudited)
The accompanying unaudited pro forma combined financial statements present the historical financial information of the Company as adjusted for the acquisition of STAR LP.
The STAR Acquisition closed on September 6, 2007. The Company acquired a 70% interest with the existing partners retaining a 30% interest. Pursuant to terms of the Reorganization and Securities Purchase Agreement among the Company and STAR, the limited partners of STAR and Regg E. Swanson, as Seller Representative and in his individual capacity (“Purchase Agreement”), the Company paid $23.3 million (inclusive of certain capitalized acquisition costs) including $19.2 million in cash, promissory notes aggregating $1.0 million and 227,618 in restricted shares of the Company’s common stock representing an aggregate of $3.1 million based on the market price of $13.72 per share. The amount of the consideration was derived through arm’s length negotiations. Funding for the STAR Acquisition was derived from $9.2 million of existing cash and $10.0 million of the proceeds from the Company’s credit agreement, dated as of August 27, 2007 among the Company, as the Borrower, Bank of America, N. A., as Administrative Agent, Swing Line Lender and L/C Issuer. The results of operations of STAR have been included in the Company’s consolidated financial statements since September 1, 2007, the effective date of the STAR Acquisition.
The Company filed its September Form 10Q on November 9, 2007. Included in the September Form 10Q is a consolidated balance sheet as of September 30, 2007 which includes the assets and liabilities of STAR Physical Therapy, LP. Therefore, the pro forma financial information included in this Current Report of Form 8-K/A includes pro forma income statements only.
The accompanying pro forma combined statements of operations for the nine months ended September 30, 2007 and the year ended December 31, 2006 combines the historical information of the Company for the nine months ended September 30, 2007 and year ended December 31, 2006 with the historical information of STAR LP for the eight months ended August 31, 2007 and the year ended December 31, 2006, respectively, as if the acquisition had occurred on January 1, 2006.
The pro forma combined financial statements have been prepared by management, based on the historical financial statements of the Company and STAR LP. These pro forma combined financial statements may not be indicative of the results that actually would have occurred if the STAR Acquisition had been in effect on the dates indicated or of the results that may be obtained in the future. The pro forma combined financial statements should be read in conjunction with the historical financial statements of the Company for the nine months ended September 30, 2007 and the year ended December 31, 2006 and with the historical financial statements of STAR LP for the year ended December 31, 2006, which are included as Exhibit 99.1 in this filing.

 

 

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
                                 
                    Adjustments     Proforma  
    USPT (1)     STAR LP (2)     Debit (Credit)     Consolidated  
Net patient revenues
   $ 106,353     $ 18,302     $ (637 )(3)   $ 125,292  
Management contract revenues
     1,090       1,558       —       2,648  
Other revenues
     89       506       —       595  
 
                        
Net revenues
     107,532       20,366       (637 )     128,535  
 
                                
Clinic operating costs:
                                
Salaries and related costs
     55,567       13,185       —       68,752  
Rent, clinic supplies, contract labor and other
     23,237       5,104       173 (4)     28,514  
Provision for doubtful accounts
     1,728       —       637 (3)     2,365  
Impairment of goodwill
     —       —       —       —  
 
                        
 
     80,532       18,289       810       99,631  
 
                                
Corporate office costs
     12,702       —       55 (5)     12,757  
 
                        
 
Operating income from continuing operations
     14,298       2,077       (1,502 )     16,147  
 
Interest and investment income
     252       62       241 (6)     73  
Interest expense
     (135 )     (36 )     (102 )(7)     (69 )
Other
     —       —       —       —  
Minority interests in subsidiary limited partnerships
     (4,151 )     —       (164) (8)     (4,315 )
 
                        
 
                                
Income before income taxes from continuing operations
     10,264       2,103       (1,527 )     11,836  
Provision for income taxes
     3,931       —       602 (9)     4,533  
 
                        
Net income from continuing operations
     6,333       2,103       (2,129 )     7,303  
 
                                
Earnings per share:
                                
 
Basic — net income from continuing operations
   $ 0.55                     $ 0.62  
Diluted — net income from continuing operations
   $ 0.54                     $ 0.62  
 
                                
Shares used in computation:
                                
Basic earnings per common share
     11,578                       11,781  
 
                            
Diluted earnings per common share
     11,657                       11,860  
 
                            
See Notes to Unaudited Combined Condensed Pro Forma Statements of Operations.

 

 

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
                                 
                    Adjustments     Proforma  
    USPT (10)     STAR LP (11)     Debit (Credit)     Consolidated  
Net patient revenues
   $ 133,376     $ 23,660     $ (790 )(3)   $ 157,826  
Management contract revenues
     1,784       2,184       —       3,968  
Other revenues
     34       613       —       647  
 
                        
Net revenues
     135,194       26,457       (790 )     162,441  
 
                                
Clinic operating costs:
                                
Salaries and related costs
     69,340       16,984       —       86,324  
Rent, clinic supplies, contract labor and other
     27,896       6,574       159 (4)     34,629  
Provision for doubtful accounts
     2,115       —       790 (3)     2,905  
Impairment of goodwill
     —       212       (212 )(12)     —  
 
                        
 
     99,351       23,770       737       123,858  
Corporate office costs
     17,247       —       82 (5)     17,329  
 
                        
 
Operating income from continuing operations
     18,596       2,687       (1,609 )     21,254  
 
                                
Interest and investment income
     382       63       311 (6)     134  
Interest expense
     (50 )     (57 )     377 (7)     (484 )
Other
     (31 )     3       —       (28 )
Minority interests in subsidiary limited partnerships
     (5,647 )     —       (268 )(8)     (5,915 )
 
                        
 
                                
Income before income taxes from continuing operations
     13,250       2,696       (1,189 )     14,961  
Provision for income taxes
     5,057       —       658 (9)     5,715  
 
                        
Net income from continuing operations
     8,193       2,696       (1,847 )     9,246  
 
                                
Earnings per share:
                                
 
Basic — net income from continuing operations
   $ 0.70                     $ 0.78  
Diluted — net income from continuing operations
   $ 0.70                     $ 0.77  
 
                                
Shares used in computation:
                                
Basic earnings per common share
     11,690                       11,918  
 
                            
Diluted earnings per common share
     11,731                       11,959  
 
                            
See Notes to Unaudited Combined Condensed Pro Forma Statements of Operations.

 

 

 
Notes to Unaudited Combined Condensed Pro Forma Statements of Operations
 
1)   Based on the historical financial statements of the Company filed in its Form 10Q for the quarterly period ended September 30, 2007.
 
2)   Based on the internal financial statements of STAR Physical Therapy, LLC (predecessor of STAR LP) for the eight months ended August 31, 2007.
 
3)   To reflect provision for doubtful accounts in operating expenses for STAR LP.
 
4)   To adjust depreciation expense based on the step-up in basis to the fair market value of the assets acquired and to amortize the fair market value assigned to referral sources.
 
5)   To record amortization of non competition agreements related to the STAR Acquisition.
 
6)   To eliminate interest income on funds used in the STAR Acquisition and eliminate interest recorded on STAR LP related party receivable.
 
7)   To adjust interest expense based on funding of the STAR Acquisition. 8) To reflect the 30% minority interest of the minority limited partners of STAR LP.
 
9)   To adjust the provision for income taxes of the combined entity based on the effective tax rate of the Company for the respective periods.
 
10)   Based on the audited historical financial statements of the Company filed in its Form 10K for the year ended December 31, 2006.
 
11)   Based on the audited historical financial statements of STAR Physical Therapy, LLC for the year ended December 31, 2006.
 
12)   To eliminate the charge taken by STAR LP for impairment of goodwill.