QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
|
(I.R.S. EMPLOYER IDENTIFICATION NO.)
|
|
|
|
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
|
(ZIP CODE)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
|
|
|
☑
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
|
Emerging growth company
|
|
Item 1.
|
3
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
Item 2.
|
31
|
|
Item 3.
|
46
|
|
Item 4.
|
47
|
|
PART II—OTHER INFORMATION
|
||
Item 1.
|
47
|
|
Item 6.
|
49
|
|
49
|
||
Certifications
|
ITEM 1. |
FINANCIAL STATEMENTS.
|
June 30, 2022
|
December 31, 2021
|
|||||||
ASSETS
|
(unaudited)
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Patient accounts receivable, less allowance for credit
losses of $
|
|
|
||||||
Accounts receivable - other
|
|
|
||||||
Other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Fixed assets:
|
||||||||
Furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Fixed assets, gross
|
|
|
||||||
Less accumulated depreciation and amortization
|
|
|
||||||
Fixed assets, net
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Investment in unconsolidated affiliate |
||||||||
Goodwill
|
|
|
||||||
Other identifiable intangible assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST
|
||||||||
Current liabilities:
|
||||||||
Accounts payable - trade
|
$
|
|
$
|
|
||||
Accounts payable - due to seller of acquired business
|
||||||||
Accrued expenses
|
|
|
||||||
Current portion of operating lease liabilities
|
|
|
||||||
Current portion of term loan and notes payable
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Notes payable, net of current portion
|
|
|
||||||
Revolving line of credit
|
|
|
||||||
Term Loan, net of current portion and deferred financing costs |
||||||||
Deferred taxes
|
|
|
||||||
Operating lease liabilities, net of current portion
|
|
|
||||||
Other long-term liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Redeemable non-controlling interest - temporary equity
|
|
|
||||||
Commitments and Contingencies
|
||||||||
U.S. Physical Therapy, Inc. (“USPH”) shareholders’ equity:
|
||||||||
Preferred stock, $
|
|
|
||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated other comprehensive loss
|
( |
) | ||||||
Retained earnings
|
|
|
||||||
Treasury stock at cost,
|
(
|
)
|
(
|
)
|
||||
Total USPH shareholders’ equity
|
|
|
||||||
Non-controlling interest - permanent equity
|
|
|
||||||
Total USPH shareholders’ equity and non-controlling interest - permanent equity
|
|
|
||||||
Total liabilities, redeemable non-controlling interest,
|
||||||||
USPH shareholders’ equity and non-controlling interest - permanent equity
|
$
|
|
$
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30,2022
|
June 30, 2021
|
|||||||||||||
Net patient revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other revenue
|
|
|
|
|
||||||||||||
Net revenue
|
|
|
|
|
||||||||||||
Operating cost:
|
||||||||||||||||
Salaries and related costs
|
|
|
|
|
||||||||||||
Rent, supplies, contract labor and other
|
|
|
|
|
||||||||||||
Provision for credit losses
|
|
|
|
|
||||||||||||
Total operating cost
|
|
|
|
|
||||||||||||
Gross profit
|
|
|
|
|
||||||||||||
Corporate office costs
|
|
|
|
|
||||||||||||
Operating income
|
|
|
|
|
||||||||||||
Other income and expense
|
||||||||||||||||
Equity in earnings of unconsolidated affiliate
|
||||||||||||||||
Interest and other income, net
|
|
|
|
|
||||||||||||
Loss on revaluation of put-right liability
|
( |
) | ( |
) | ||||||||||||
Interest expense - debt and other
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Total other income and expense
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Income before taxes | ||||||||||||||||
Provision for income taxes
|
|
|
|
|
||||||||||||
Net income
|
|
|
|
|
|
|
|
|
||||||||
Less: net income attributable to non-controlling interest:
|
||||||||||||||||
Redeemable non-controlling interest - temporary equity
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Non-controlling interest - permanent equity
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|||||
Net income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Basic and diluted earnings per share attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Shares used in computation - basic and diluted
|
|
|
|
|
||||||||||||
Dividends declared per common share
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
For the Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other comprehensive loss
|
||||||||||||||||
Unrealized loss on cash flow hedge
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Tax effect at statutory rate (federal and state) of
|
|
|
|
|
||||||||||||
Comprehensive income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Comprehensive income attributable to non-controlling interest
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Comprehensive income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
Six Months Ended
|
||||||||
June 30, 2022
|
June 30, 2021
|
|||||||
OPERATING ACTIVITIES
|
||||||||
Net income including non-controlling interest and earnings from unconsolidated affiliates, net
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Provision for credit losses
|
|
|
||||||
Equity-based awards compensation expense
|
|
|
||||||
Deferred income taxes
|
|
|
||||||
Loss on revaluation of put-right liability
|
||||||||
(Gain) loss on sale of clinics and fixed assets
|
( |
) | ||||||
Earnings in unconsolidated affiliate
|
( |
) | ||||||
Changes in operating assets and liabilities:
|
||||||||
Increase in patient accounts receivable
|
(
|
)
|
(
|
)
|
||||
(Increase) decrease in accounts receivable - other
|
(
|
)
|
|
|||||
(Increase) decrease in other assets
|
|
(
|
)
|
|||||
Decrease in accounts payable and
accrued expenses
|
(
|
)
|
(
|
)
|
||||
(Decrease) increase in other long-term liabilities
|
(
|
)
|
|
|||||
Net cash provided by operating activities
|
|
|
||||||
INVESTING ACTIVITIES
|
||||||||
Purchase of fixed assets
|
(
|
)
|
(
|
)
|
||||
Purchase of majority interest in businesses, net of cash acquired
|
(
|
)
|
(
|
)
|
||||
Purchase of redeemable non-controlling interest, temporary equity
|
(
|
)
|
(
|
)
|
||||
Purchase of non-controlling interest, permanent equity
|
(
|
)
|
|
|||||
Proceeds on sales of partnership interest, clinics and fixed assets
|
|
(
|
)
|
|||||
Distributions from unconsolidated affiliate
|
||||||||
Proceeds on sales of redeemable non-controlling interest-temporary
|
||||||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
FINANCING ACTIVITIES
|
||||||||
Distributions to non-controlling interest, permanent and temporary equity
|
(
|
)
|
(
|
)
|
||||
Cash dividends paid to shareholders
|
(
|
)
|
(
|
)
|
||||
Proceeds from revolving line of credit
|
|
|
||||||
Proceeds from term loan
|
||||||||
Payments on revolving line of credit
|
(
|
)
|
(
|
)
|
||||
Principal payments on notes payable
|
(
|
)
|
(
|
)
|
||||
(Payment) receipt of Medicare Accelerated and Advance Funds
|
|
(
|
)
|
|||||
Payment of deferred financing costs
|
( |
) | ||||||
Other
|
|
|
||||||
Net cash used in financing activities
|
|
(
|
)
|
|||||
Net decrease in cash and cash equivalents
|
|
(
|
)
|
|||||
Cash and cash equivalents - beginning of period
|
|
|
||||||
Cash and cash equivalents - end of period
|
$
|
|
$
|
|
||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||
Cash paid during the period for:
|
||||||||
Income taxes
|
$
|
|
$
|
|
||||
Interest paid
|
$
|
|
$
|
|
||||
Non-cash investing and financing transactions during the period:
|
||||||||
Purchase of businesses - seller financing portion
|
$
|
|
$
|
|
||||
Purchase of businesses - contingent consideration
|
$ |
$ |
||||||
Notes payable related to purchase of redeemable non-controlling interest, temporary equity
|
$ | $ | ||||||
Notes payable due to purchase of non-controlling interest, permanent equity
|
$
|
|
$
|
|
||||
Notes receivable related to sale of partnership interest
|
$ |
$ |
||||||
Notes receivable related to sale of partnership interest - redeemable non-controlling interest
|
$ |
$ |
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
|
Common Stock
|
Additional
Paid-In Capital
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Treasury Stock
|
Total Shareholders’
Equity
|
Non-Controlling
Interests
|
Total
|
||||||||||||||||||||||||||||||||
For the three months ended June 30, 2022
|
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||||||||||||||||||||||||
Balance March 31, 2022
|
$
|
|
|
$
|
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Purchase of partnership interests - non-controlling interest
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
|
|
||||||||||||||||||||||||||||
Dividends paid to USPH shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Deferred taxes related to redeeemable non-controlling interest - temporary equity
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other comprehensive loss
|
- |
(
|
)
|
|
-
|
(
|
)
|
|
(
|
)
|
||||||||||||||||||||||||||||||
Balance June 30, 2022
|
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
|
Common Stock
|
Additional
Paid-In Capital
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Treasury Stock
|
Total Shareholders’
Equity
|
Non-Controlling
Interests
|
Total
|
||||||||||||||||||||||||||||||||
For the six months ended June 30, 2022
|
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||||||||||||||||||||||||
Balance December 31, 2021
|
$
|
|
|
$
|
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Purchase of partnership interests - non-controlling interest
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||
Dividends paid to USPH shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Deferred taxes related to redeeemable non-controlling interest - temporary equity
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other comprehensive loss
|
- |
(
|
)
|
|
- |
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||||||||
Balance June 30, 2022
|
|
|
$
|
|
$
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
|
Common Stock
|
Additional
Paid-In Capital
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Treasury Stock
|
Total Shareholders’
Equity
|
Non-Controlling
Interests
|
Total
|
||||||||||||||||||||||||||||||||
For the three months ended June 30, 2021
|
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||||||||||||||||||||||||
Balance March 31, 2021
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Dividends paid to USPT shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Other
|
-
|
|
(
|
)
|
|
(
|
)
|
-
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Balance June 30, 2021
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
|
Common Stock
|
Additional
Paid-In Capital
|
Accumulated Other
Comprehensive Loss
|
Retained
Earnings
|
Treasury Stock
|
Total Shareholders’
Equity
|
Non-Controlling
Interests
|
Total
|
||||||||||||||||||||||||||||||||
For the six months ended June 30, 2021
|
Shares
|
Amount
|
Shares
|
Amount
|
||||||||||||||||||||||||||||||||||||
Balance December 31, 2020
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Dividends paid to USPT shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Short swing profit settlement
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Balance June 30, 2021
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
1.
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|
Acquisition
|
Date
|
Acquired
|
Clinics
|
|||||||
March 2022 Acquisition
|
|
|
%
|
|
||||||
December 2021 Acquisition
|
|
|
%
|
|
||||||
November 2021 Acquisition
|
|
|
%
|
|
IIPS* | |||||
September 2021 Acquisition
|
|
|
%
|
|
IIPS* | |||||
June 2021 Acquisition
|
|
|
%
|
|
||||||
March 2021 Acquisition
|
|
|
%
|
|
*
|
|
Physical Therapy
Operations
|
||||
Cash paid, net of cash acquired
|
$
|
|
||
Seller notes
|
|
|||
Contingent payments
|
|
|||
Total consideration
|
$
|
|
||
Estimated fair value of net tangible assets acquired:
|
||||
Total current assets
|
$
|
|
||
Total non-current assets
|
|
|||
Total liabilities
|
(
|
)
|
||
Net tangible assets acquired
|
|
|||
Customer and referral relationships
|
|
|||
Non-compete agreements
|
|
|||
Tradenames
|
|
|||
Goodwill
|
|
|||
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
|
(
|
)
|
||
$
|
|
Physical Therapy
|
||||||||||||
IIPS*
|
Operations
|
Total
|
||||||||||
Cash paid, net of cash acquired
|
$
|
|
$
|
|
$
|
|
||||||
Seller notes
|
|
|
|
|||||||||
Contingent payments
|
|
|
|
|||||||||
Other payable
|
|
|
|
|||||||||
Seller put right
|
|
|
|
|||||||||
Total consideration
|
$
|
|
$
|
|
$
|
|
||||||
Estimated fair value of net tangible assets acquired:
|
||||||||||||
Total current assets
|
$
|
|
$
|
|
$
|
|
||||||
Total non-current assets
|
|
|
|
|||||||||
Total liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net tangible assets acquired
|
$
|
|
$
|
|
$
|
|
||||||
Customer and referral relationships
|
|
|
|
|||||||||
Non-compete agreements
|
|
|
|
|||||||||
Tradenames
|
|
|
|
|||||||||
Goodwill
|
|
|
|
|||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
$
|
|
$
|
|
$
|
|
*
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Net patient revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other revenue
|
|
|
|
|
||||||||||||
Physical therapy operations
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Management contract revenue
|
|
|
|
|
|
|
|
|
||||||||
Industrial injury prevention services revenue
|
|
|
|
|
||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Computation of earnings per share - USPH shareholders:
|
||||||||||||||||
Net income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
(Charges) credit to retained earnings:
|
||||||||||||||||
Revaluation of redeemable non-controlling interest
|
|
(
|
)
|
|
(
|
)
|
||||||||||
Tax effect at statutory rate (federal and state) of
|
(
|
)
|
|
(
|
)
|
|
||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
Earnings per share (basic and diluted)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Shares used in computation:
|
||||||||||||||||
Basic and diluted earnings per share - weighted-average shares
|
|
|
|
|
1. |
Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals
(the “Selling Shareholders”) most of whom are physical therapists that work in the Therapy Practice and provide physical therapy services to patients.
|
2. |
In conjunction with the Acquisition, the Seller Entity contributes the Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one
hundred percent (
|
3. |
The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from
|
4. |
The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the
limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo.
|
5. |
As noted above, the Company does not purchase
|
6. |
In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that
ranges from
to |
7. |
The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities
based on other employees in similar capacities within NewCo, the Company and the industry.
|
8. |
The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete
agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing business activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the Selling
Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing business during the Non-Compete Term.
|
9. |
The Non-Compete Term commences as of the date of the Acquisition and expires on the later
of :
|
a. |
|
b. |
|
10. |
The Non-Compete Agreement applies to a restricted region which is a defined mile radius from the Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in
competing businesses or activities outside the defined mileage (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the
competing business or activities outside the defined mileage.
|
1. |
Put Right
|
a) |
In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified date (the “Specified Date”), the Seller Entity thereafter may have an
irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.
|
b) |
In the event that any Selling Shareholder is not employed by NewCo as of the Specified Date and the Company has not exercised its Call Right with respect to the Terminated Selling
Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter shall have the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller
Entity’s Interest at the purchase price described in “3” below.
|
c) |
In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the Specified Date, the Seller Entity shall have the Put Right, and upon the
exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.
|
2. |
Call Right
|
a) |
If any Selling Shareholder’s employment by NewCo is terminated prior to the Specified Date, the Company thereafter shall have an irrevocable right to purchase from Seller Entity the
Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below.
|
b) |
In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after Specified Date, the Company shall have the Call Right, and upon the exercise of
the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.
|
3. |
For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes,
depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on available cash within
NewCo. Therefore, the undistributed earnings amount is small, if any.
|
4. |
The Purchase Price for the initial equity interest purchased by the Company is, in almost all cases, also based on the same specified multiple of the trailing twelve-month earnings that
is used in the Put Right and the Call Right noted above.
|
5. |
The Put Right and the Call Right do not have an expiration date, and the Seller Entity Interest is not required to be purchased by the Company or sold by the Seller Entity unless either
the Put Right or the Call Right is exercised.
|
6. |
The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire
ownership interest in the Seller Entity at the closing of the Acquisition.
|
1. |
Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual owners (the “Progressive Selling Shareholders”), who work in and manage the
Progressive business.
|
2. |
In conjunction with the acquisition, the Selling Shareholders caused the Progressive Parent to transfer its ownership of the Progressive Subsidiaries into a newly-formed limited liability company (“Progressive
NewCo”), in exchange for one hundred percent (
|
3. |
The Company entered into an agreement (the “Progressive Purchase Agreement”) to acquire from the Selling Shareholders a majority of the membership interest in NewCo. The consideration for the acquisition is
primarily payable in the form of cash at closing, a relatively small portion paid in cash after the closing contingent on certain performance criteria, and a small note in lieu of an escrow (the “Progressive Purchase Price”).
|
4. |
The Company and the Selling Shareholders also executed an operating agreement (the “Progressive Operating Agreement”) for NewCo that sets forth the rights and obligations of the members of NewCo.
|
5. |
As noted above, the Company did not purchase
|
6. |
The Company and the Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”) which restricts the Selling Shareholders from competing for a specified period of time (the
“Progressive Non-Compete Term”).
|
7. |
The Non-Compete Term commences as of the date of the Acquisition and expires on the later of:
|
a. |
|
b. |
|
8. |
The Non-Compete Agreement applies to the entire United States.
|
9. |
The Put Right (as defined below) and the Call Right (as defined below) do not have an expiration date.
|
1. |
Put Right
|
a.
|
Each of the Selling Shareholders has the right to sell
|
b.
|
In the event that any Selling Shareholder terminates his management relationship with NewCo for any reason on or after the seventh anniversary of the Closing Date, the Selling
Shareholder has the Put Right, and upon the exercise of the Put Right, the Selling Shareholder’s Interest shall be redeemed by the Company at the purchase price described in “3” below.
|
2. |
Call Right
|
a.
|
If any Selling Shareholder’s ceases to perform management services on behalf of NewCo, the Company thereafter shall have an irrevocable right to purchase from such Selling
Shareholder his Interest, in each case at the purchase price described in “3” below.
|
3.
|
For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest,
taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on
available cash within NewCo; therefore, the undistributed earnings amount is small, if any.
|
4.
|
The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in
the Put Right and the Call Right noted above.
|
5.
|
The Put Right and the Call Right do not have an expiration date.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Beginning balance
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Operating results allocated to redeemable non-controlling interest partners
|
|
|
|
|
||||||||||||
Distributions to redeemable non-controlling interest partners
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Changes in the fair value of redeemable non-controlling interest
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Purchases of redeemable non-controlling interest
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Acquired interest
|
|
|
|
|
||||||||||||
Sales of redeemable non-controlling interest - temporary equity
|
|
|
|
|
||||||||||||
Notes receivable related to sales of redeemable non-controlling interest - temporary equity
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||
Adjustments in notes receivable related to the the sales of redeemable non-controlling interest - temporary equity
|
|
|
|
|
||||||||||||
Ending balance
|
$
|
|
$
|
|
$
|
|
$
|
|
|
Six Months Ended
|
|||||||
|
June 30, 2022
|
June 30, 2021
|
||||||
|
||||||||
Contractual time period has lapsed but holder’s employment has not terminated
|
$
|
|
$
|
|
||||
Contractual time period has not lapsed and holder’s employment has not terminated
|
|
|
||||||
Holder’s employment has terminated and contractual time period has expired
|
|
|
||||||
Holder’s employment has terminated and contractual time period has not expired
|
|
|
||||||
|
$
|
|
$
|
|
Six Months Ended
|
Year Ended
|
|||||||
June 30, 2022
|
December 31, 2021
|
|||||||
Beginning balance
|
$
|
|
$
|
|
||||
Goodwill acquired
|
|
|
||||||
Goodwill adjustments for purchase price allocation of businesses acquired in prior year
|
(
|
)
|
(
|
)
|
||||
Ending balance
|
$
|
|
$
|
|
June 30, 2022
|
December 31, 2021
|
|||||||
Tradenames
|
$
|
|
$
|
|
||||
Customer and referral relationships, net of accumulated amortization of $
|
|
|
||||||
Non-compete agreements, net of accumulated amortization of $
|
|
|
||||||
$
|
|
$
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Customer and referral relationships
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Non-compete agreements
|
|
|
|
|
||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
Customer and Referral Relationships
|
Non-Compete Agreements
|
||||||||||
Years
|
Annual Amount
|
Years
|
Annual Amount
|
||||||||
Ending December 31,
|
Ending December 31,
|
||||||||||
2022 (excluding the six months ended June 30, 2022)
|
$
|
|
2022 (excluding the six months ended June 30, 2022)
|
$
|
|
||||||
2023
|
$
|
|
2023 |
$
|
|
||||||
2024
|
$
|
|
2024 |
$
|
|
||||||
2025
|
$
|
|
2025 |
$
|
|
||||||
2026
|
$
|
|
2026 |
$
|
|
||||||
Thereafter
|
$
|
|
Thereafter
|
$
|
|
June 30, 2022
|
December 31, 2021
|
|||||||
Salaries and related costs
|
$
|
|
$
|
|
||||
Credit balances due to patients and payors
|
|
|
||||||
Group health insurance claims
|
|
|
||||||
Closure costs
|
|
|
||||||
Federal taxes payable
|
|
|
||||||
Contingent payments related to acquisition
|
|
|
||||||
Settlement of a legal matter |
||||||||
Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
|
June 30, 2022
|
December 31, 2021
|
||||||||||||||||||||||
|
Principal
Amount
|
Unamortized discount
and debt issuance cost
|
Net Debt
|
Principal
Amount
|
Unamortized discount
and debt issuance cost
|
Net Debt
|
||||||||||||||||||
Revolving Facilitiy
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Term Facility
|
|
|
|
|
|
|
||||||||||||||||||
Other Debt
|
|
|
|
|
|
|
||||||||||||||||||
Total Debt
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Less: Current portion of long-term debt
|
|
|
$
|
|
|
|
|
|||||||||||||||||
Total long-term debt, net of current portion
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
1)
|
Revolving Facility: $ |
2)
|
Term Facility: $
|
|
Three Months Ended
|
For the Six Months Ended
|
||||||||||||||
|
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
||||||||||||
Unrealized loss on cash flow hedge
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Tax effect at statutory rate (federal and state) of
|
|
|
|
|
||||||||||||
Other Comprehensive loss
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|
June 30, 2022
|
June 30, 2021
|
||||||
|
||||||||
Interest rate swap
|
$
|
(
|
)
|
$
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Operating lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Short-term lease cost
|
|
|
|
|
||||||||||||
Variable lease cost
|
|
|
|
|
||||||||||||
Total lease cost *
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Cash paid for amounts included in the measurement of operating lease liabilities (in thousands)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities (in thousands)
|
$
|
|
$
|
|
$
|
|
$
|
|
Fiscal Year
|
Amount
|
|||
2022
(excluding the six months ended June 30, 2022)
|
$
|
|
||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027 and
therafter
|
|
|||
Total lease payments
|
$
|
|
||
Less: imputed interest
|
|
|||
Total operating lease liabilities
|
$
|
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2022
|
June 30, 2021
|
June 30, 2022
|
June 30, 2021
|
|||||||||||||
Weighted-average remaining lease term - Operating leases
|
|
|
|
|
||||||||||||
Weighted-average discount rate - Operating leases
|
|
%
|
|
%
|
|
%
|
|
%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Net operating revenue:
|
||||||||||||||||
Physical therapy operations
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Industrial injury prevention services
|
|
|
|
|
||||||||||||
Total Company
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
||||||||||||||||
Gross profit:
|
||||||||||||||||
Physical therapy operations
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Industrial injury prevention services
|
|
|
|
|
||||||||||||
Gross profit
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
||||||||||||||||
Total Assets:
|
||||||||||||||||
Physical therapy operations
|
$
|
|
$
|
|
||||||||||||
Industrial injury prevention services
|
|
|
||||||||||||||
Total Company
|
$
|
|
$
|
|
Acquisition
|
Date
|
Acquired
|
Clinics
|
|||
March 2022 Acquisition
|
March 31, 2022
|
70%
|
6
|
|||
December 2021 Acquisition
|
December 31, 2021
|
75%
|
3
|
|||
November 2021 Acquisition
|
November 30, 2021
|
70%
|
IIPS*
|
|||
September 2021 Acquisition
|
September 30, 2021
|
100%
|
IIPS*
|
|||
June 2021 Acquisition
|
June 30, 2021
|
65%
|
8
|
|||
March 2021 Acquisition
|
March 31, 2021
|
70%
|
6
|
Three Months Ended June 30,
|
||||||||
2022
|
2021
|
|||||||
Computation of earnings per share - USPH shareholders:
|
||||||||
Net income attributable to USPH shareholders
|
$
|
11,195
|
$
|
12,436
|
||||
Credit (charges) to retained earnings:
|
||||||||
Revaluation of redeemable non-controlling interest
|
210
|
(2,549
|
)
|
|||||
Tax effect at statutory rate (federal and state) of 25.55%
|
(54
|
)
|
651
|
|||||
$
|
11,351
|
$
|
10,538
|
|||||
Earnings per share (basic and diluted)
|
$
|
0.87
|
$
|
0.82
|
||||
Adjustments:
|
||||||||
Change in revaluation of put-right liability
|
617
|
-
|
||||||
Revaluation of redeemable non-controlling interest
|
(210
|
)
|
2,549
|
|||||
Tax effect at statutory rate (federal and state)
|
(104
|
)
|
(651
|
)
|
||||
Operating Results (a non-GAAP measure)
|
$
|
11,654
|
$
|
12,436
|
||||
Basic and diluted Operating Results per share (a non-GAAP measure)
|
$
|
0.90
|
$
|
0.96
|
||||
Shares used in computation - basic and diluted
|
12,998
|
12,902
|
Six Months Ended June 30,
|
||||||||
2022
|
2021
|
|||||||
Computation of earnings per share - USPH shareholders:
|
||||||||
Net income attributable to USPH shareholders
|
$
|
19,994
|
$
|
20,609
|
||||
Credit (charges) to retained earnings:
|
||||||||
Revaluation of redeemable non-controlling interest
|
57
|
(9,819
|
)
|
|||||
Tax effect at statutory rate (federal and state) of 25.55%
|
(15
|
)
|
2,508
|
|||||
$
|
20,036
|
$
|
13,298
|
|||||
Earnings per share (basic and diluted)
|
$
|
1.55
|
$
|
1.03
|
||||
Adjustments:
|
||||||||
Change in revaluation of put-right liability
|
14
|
-
|
||||||
Revaluation of redeemable non-controlling interest
|
(57
|
)
|
9,819
|
|||||
Tax effect at statutory rate (federal and state)
|
11
|
(2,508
|
)
|
|||||
Operating Results (a non-GAAP measure)
|
$
|
20,004
|
$
|
20,609
|
||||
Basic and diluted Operating Results per share (a non-GAAP measure)
|
$
|
1.54
|
$
|
1.60
|
||||
Shares used in computation - basic and diluted
|
12,968
|
12,886
|
Three Months Ended June 30,
|
||||||||
2022
|
2021
|
|||||||
Net operating revenue:
|
||||||||
Physical therapy operations
|
$
|
121,219
|
$
|
116,895
|
||||
Industrial injury prevention services
|
19,437
|
10,033
|
||||||
Total Company
|
$
|
140,656
|
$
|
126,928
|
||||
Gross profit:
|
||||||||
Physical therapy operations
|
$
|
26,698
|
$
|
31,761
|
||||
Industrial injury prevention services
|
4,123
|
2,543
|
||||||
Gross profit
|
$
|
30,821
|
$
|
34,304
|
||||
Total Assets:
|
||||||||
Physical therapy operations
|
$
|
414,172
|
$
|
545,449
|
||||
Industrial injury prevention services
|
382,272
|
203,977
|
||||||
Total Company
|
$
|
796,444
|
$
|
749,426
|
Three Months Ended
|
||||||||
June 30, 2022
|
June 30, 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 - Management contracts
|
2,125
|
2,739
|
||||||
Revenue - Industrial injury prevention services
|
19,437
|
10,033
|
||||||
Total Revenue
|
$
|
140,656
|
$
|
126,928
|
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
|
5,996
|
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
|
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
|
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
|
%
|
Six Months Ended June 30,
|
||||||||
2022
|
2021
|
|||||||
Net operating revenue:
|
||||||||
Physical therapy operations
|
$
|
233,855
|
$
|
219,253
|
||||
Industrial injury prevention services
|
38,505
|
20,043
|
||||||
Total Company
|
$
|
272,360
|
$
|
239,296
|
||||
Gross profit:
|
||||||||
Physical therapy operations
|
$
|
49,135
|
$
|
54,935
|
||||
Industrial injury prevention services
|
8,274
|
5,265
|
||||||
Gross profit
|
$
|
57,409
|
$
|
60,200
|
||||
Total Assets:
|
||||||||
Physical therapy operations
|
$
|
414,172
|
$
|
545,449
|
||||
Industrial injury prevention services
|
382,272
|
203,977
|
||||||
Total Company
|
$
|
796,444
|
$
|
749,426
|
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
|
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 related to physical therapy operations
|
181,268
|
159,870
|
||||||
Operating cost related to management contracts
|
3,453
|
4,448
|
||||||
Operating cost related to industrial injury prevention services
|
30,230
|
14,778
|
||||||
Total operating cost
|
$
|
214,951
|
$
|
179,096
|
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
|
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
|
%
|
1) |
Revolving Facility: $175 million, five-year, revolving credit facility (“Revolving Facility”), which includes a $12 million sublimit for the issuance of standby letters of credit and a $15 million sublimit for
swingline loans (each, a “Swingline Loan”).
|
2) |
Term Facility: $150 million term loan facility (the “Term Facility”). The Term Facility amortizes in quarterly installments of: (a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year, and
(c) 1.875% in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date.
|
• |
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.
|
• |
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.
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
ITEM 4. |
CONTROLS AND PROCEDURES.
|
(a) |
Evaluation of Disclosure Controls and Procedures
|
(b) |
Changes in Internal Control over Financial Reporting
|
ITEM 1. |
LEGAL PROCEEDINGS.
|
ITEM 1A. |
RISK FACTORS.
|
• |
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.
|
Exhibit
Number
|
Description
|
|
|
10.1+ |
Third Amended and Restated Credit Agreement dated as of June 17, 2022 among the Company, as the borrower, and Bank of America, N.A., as Administrative Agent,
Regions Capital Markets as Syndication Agent, BofA Securities Inc. and Regions Capital Markets as Joint Load Arrangers, BofA Securities Inc., as Sole Bookrunner and the lenders named therein. [incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 10-Q filed with the SEC on June 21, 2022.]
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
|
|
Certification Pursuant to 18 U.S.C 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith
|
|
U.S. PHYSICAL THERAPY, INC.
|
|
|
|
|
Date: August 8, 2022
|
By:
|
/s/ CAREY HENDRICKSON
|
|
|
Carey Hendrickson
|
|
|
Chief Financial Officer
|
|
|
(Principal financial and accounting officer)
|
|
|
|
1. |
I have reviewed this quarterly report on Form 10-Q of U.S. Physical Therapy, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
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/s/ CHRISTOPHER READING
|
|
|
Christopher Reading
|
|
President and Chief Executive Officer
(Principal executive officer)
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1. |
I have reviewed this quarterly report on Form 10-Q of U.S. Physical Therapy, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
|
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/s/ CAREY HENDRICKSON
|
|
Carey Hendrickson
|
|
Chief Financial Officer
|
|
(Principal financial and accounting officer)
|
/s/ CHRISTOPHER J. READING
|
|
Christopher J. Reading
|
|
Chief Executive Officer
|
|
|
|
/s/ CAREY HENDRICKSON
|
|
Carey Hendrickson
|
|
Chief Financial Officer
|
|
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Current assets: | ||
Allowance for credit losses, patient accounts receivable | $ 2,948 | $ 2,768 |
U.S. Physical Therapy, Inc. ("USPH") shareholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 500,000 | 500,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, shares issued (in shares) | 15,218,982 | 15,126,160 |
Treasury stock (in shares) | 2,214,737 | 2,214,737 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract] | ||||
Net income | $ 15,256 | $ 17,472 | $ 27,238 | $ 29,358 |
Other comprehensive loss | ||||
Unrealized loss on cash flow hedge | (531) | 0 | (531) | 0 |
Tax effect at statutory rate (federal and state) of 25.55% | 136 | 0 | 136 | 0 |
Comprehensive income | 14,861 | 17,472 | 26,843 | 29,358 |
Comprehensive income attributable to non-controlling interest | (4,061) | (5,036) | (7,244) | (8,749) |
Comprehensive income attributable to USPH shareholders | $ 10,800 | $ 12,436 | $ 19,599 | $ 20,609 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2022 |
Jun. 30, 2022 |
|
Other comprehensive loss | ||
Federal statutory income tax rate | 25.55% | 25.55% |
State statutory income tax rate | 25.55% | 25.55% |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
The consolidated financial statements include the accounts of U.S. Physical Therapy, Inc. and its subsidiaries (the “Company”). All significant intercompany transactions
and balances have been eliminated.
The Company operates its business through two reportable business segments. The Company’s reportable segments include the physical therapy operations segment and the
industrial injury prevention services segment. The Company’s physical therapy operations consist of physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic-related disorders,
sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries. Services provided by the industrial injury prevention services segment include onsite injury prevention and rehabilitation, performance
optimization and ergonomic assessments.
During the 2021 year and the six months ended June 30, 2022, the Company completed the acquisitions of four
multi-clinic practices and two industrial injury prevention businesses as detailed below.
As of June 30, 2022, the Company operated 608
clinics in 39 states. The Company also manages physical therapy facilities for third parties, primarily hospital and physicians, with
33 third-party facilities under management as of June 30, 2022.
During the six months ended June 30, 2022, the Company closed three clinics and sold five clinics.
Physical Therapy Operations
The physical therapy operations segment primarily operates through subsidiary clinic partnerships, in
which the Company generally owns a 1% general partnership interest in the Clinic Partnerships. Our limited partnership interests
generally range from 65% to 75%
in the Clinic Partnerships. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most of the clinics (hereinafter referred to as “Clinic Partnerships”). To a lesser extent, the Company
operates some clinics, through wholly-owned subsidiaries, under profit sharing arrangements with therapists (hereinafter referred to as “Wholly-Owned Facilities”).
The Company continues to seek to attract for employment physical therapists who have established relationships with physicians and other referral sources, by offering these
therapists a competitive salary and incentives based on the profitability of the clinic that they manage. For multi-site clinic practices in which a controlling interest is acquired by the Company, the prior owners typically continue as employees to
manage the clinic operations, retain a non-controlling ownership interest in the clinics and receive a competitive salary for managing the clinic operations. In addition, the Company has developed satellite clinic facilities as part of existing
Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operate more than one clinic location.
Clinic Partnerships
For non-acquired Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interests, typically owned by the managing therapist, directly or
indirectly, are recorded within the balance sheets as non-controlling interest – permanent equity and within the income statements as net income attributable to non-controlling interest – permanent equity.
For acquired Clinic Partnerships with redeemable non-controlling interest, the earnings attributable to the redeemable non-controlling interest are recorded within the
consolidated statements of income line item – net income attributable to non-controlling interest – redeemable non-controlling interest – temporary equity and
the equity interest is recorded on the consolidated balance sheet as redeemable non-controlling interest – temporary equity. In accordance with current
accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but charged directly to retained earnings and is included in the basic and diluted earnings per share calculation.
Wholly-Owned Facilities
For Wholly-Owned Facilities with profit sharing arrangements, an appropriate accrual is recorded for the amount of profit sharing due to the profit sharing therapists. The
amount is expensed as compensation and included in operating cost – salaries and related costs. The respective liability is included in current liabilities – accrued expenses on the balance sheets.
Industrial Injury Prevention Services
Services provided in the industrial injury prevention services segment include onsite services for clients’ employees including injury prevention and rehabilitation,
performance optimization, post offer employment testing, functional capacity evaluations, and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies.
Other clients include large insurers and their contractors. The Company performs these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and certified athletic trainers.
Basis of Presentation The accompanying unaudited consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions for Form 10-Q.
However, the statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Management believes this report contains all
necessary adjustments (consisting only of normal recurring adjustments) to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented. For further information
regarding the Company’s accounting policies, please read the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2021 filed with the Securities and Exchange Commission on March 1, 2022.
The Company believes, and the Chief Executive Officer and Chief Financial Officer have certified, that the financial statements included in this report present fairly, in
all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented.
Operating results for the three and
six months ended June 30, 2022, are not necessarily indicative of the results the Company expects for the entire year.
In addition to the risk factors described in our Annual Report on Form 10-K for the year ended December 31,
2021 filed with the SEC on March 1, 2022, see Item 1A in Part II of this report.
Impact of COVID-19
Medicare Accelerated and Advance
Payment Program (“MAAPP Funds”)
On March 27, 2020, in response to the COVID-19 pandemic, the federal government
approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provided waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for
preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care providers for lost revenues and health care related expenses that are attributable to COVID-19.
The CARES Act allowed for qualified healthcare providers to receive advanced payments under the MAAPP
Funds during the COVID-19 pandemic. Under this program, healthcare providers could choose to receive advanced payments for future Medicare services provided. The Company
applied for and received approval from Centers for Medicare & Medicaid Services (“CMS”) in April 2020. The Company recorded the $14.1
million in advance payments received as a liability. During the three months ended March 31, 2021, the Company repaid the MAAPP Funds of $14.1
million rather than applying them to future services performed. During the six months ended June 30, 2022, and 2021, the Company did not record any income from payments under the CARES Act.
Significant Accounting Policies
Cash Equivalents
The Company maintains its cash and cash equivalents at financial institutions. The Company considers all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. The combined account balances at several institutions typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related on
deposits in excess of FDIC insurance coverage. Management believes that the risk is not significant.
Long-Lived Assets
Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for furniture
and equipment range from
to eight years and for purchased software from to seven years. Leasehold improvements are amortized over the shorter of the lease term or estimated useful lives of the assets, which is generally to five years.The Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances which indicate that
the amounts may be impaired. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
The Company did not note an impairment to long-lived assets during the three and six months ended June 30, 2022.
Goodwill
Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over the
fair value of the acquired business assets, which include certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009,
from the purchase of some or all of a particular local management’s equity interest in an existing clinic. Effective January 1, 2009, if the purchase price of a
non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic
impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair
value if considered impaired. These events or conditions include but are not limited to: a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating or cash flow loss combined
with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these
events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite lived tradenames in conjunction with its annual goodwill impairment test.
The Company has a two operating segment business which is made up of various clinics within partnerships, and an industrial injury prevention services business. The partnerships are components of regions
and are aggregated to the operating segment level for the purpose of determining the Company’s reporting units when performing its annual goodwill impairment test. In 2021 and 2020, there were six regions. In addition to the six regions, the impairment analysis included a separate analysis for the industrial injury prevention services
business, as a separate reporting unit.
As part of the impairment analysis, the Company is first required to assess qualitatively if it can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, the Company is then required to complete a quantitative analysis of whether
a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that
affect the fair value or carrying amount of a reporting unit. The Company considers both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis.
An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting
unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit. The evaluation of goodwill in 2021 and 2020 did not result in any goodwill amounts that were deemed impaired.
As part of the annual assessment, the Company evaluated whether events or circumstances indicated that it was more likely than not that
the fair value of the reporting units were reduced below their carrying value as of December 31, 2021. As a result of the assessment, the Company determined that it was not more likely than not that goodwill and tradenames of the reporting
units were impaired as of December 31, 2021.
The Company will continue to monitor for any triggering events or other indicators of impairment.
Redeemable Non-Controlling Interest
The non-controlling interests that are reflected as redeemable non-controlling interest in the consolidated financial statements consist of those that the owners and the
Company have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met.
The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements. The redemption rights can be triggered by the owner or the
Company at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction,
typically
to five years,
as defined in the limited partnership agreement. The redemption rights are not automatic or mandatory (even upon death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been
satisfied.On the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under
the control of the Company, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption – Redeemable non-controlling interest – temporary equity. Then, in each reporting period thereafter until it
is purchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined in the respective limited partnership
agreement. As a result, the value of the non-controlling interest is not adjusted below its initial carrying value. The Company records any adjustments in the redemption value, net of tax, directly to retained earnings and the adjustments are not
reflected in the consolidated statements of income. Although the adjustments are not reflected in the consolidated statements of income, current accounting rules require that the Company reflects the adjustments, net of tax, in the earnings per
share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statements of net income. Management believes the redemption value (i.e.
the carrying amount) and fair value are the same.
Non-Controlling Interest
The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent equity in the
consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interest is included in consolidated net income on the face of the statements of net income. Changes in a parent
entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income when a
subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.
When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment
to additional paid-in capital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.
Revenue Recognition
Revenues are recognized in the period in which services are rendered. See Note 3- Revenue Recognition, for further discussion of revenue recognition.
Provision for Credit Losses
The Company determines provisions for credit losses based on the specific agings and payor classifications at
each clinic. The provision for credit losses is included in operating cost in the consolidated statements of net income. Net accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and
provisions for credit losses, includes only those amounts the Company estimates to be collectible.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the
position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
settlement with the relevant tax authority.
The CARES Act includes changes to certain tax law related to net operating losses and the deductibility of
interest expense and depreciation. ASC 740, Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which
the legislation is enacted. The legislation had no effect on the Company’s deferred income taxes and current income taxes payable during the three and six months ended June 30,
2022.
The Company did not have any accrued interest or
penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the three and six months ended June 30, 2022. The Company records any interest or penalties, if required, in interest and other
expense, as appropriate.
Fair Value of Financial Instruments
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy has been established that prioritizes
the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3
measurement).
The three levels of the fair value hierarchy
are as follows:
Level 1 – Quoted prices in active markets for
identical assets or liabilities;
Level 2 – Quoted prices for similar instruments
in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and
Level 3 – Unobservable inputs in which there is
little or no market data which require the reporting entity to develop its own assumptions.
The carrying amounts reported in the balance sheets for cash and cash equivalents, contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values
due to the short-term maturity of these financial instruments. The carrying amount of the debt under the Third Amended and Restated Credit Agreement (defined as “Credit Agreement” in Note 9) approximates the fair value. The interest rate on the
debt under the Third Amended and Restated Amended Credit Agreement is tied to the Secured Overnight Financing Rate (“SOFR”).
The redeemable non-controlling interest included on the consolidated balance sheets and the put right
associated with the potential future purchase of the separate company in the November 2021 acquisition (as described in Note 2) are both marked to fair value on a recurring basis using Level 3 inputs. The redemption value of redeemable
non-controlling interests approximates the fair value. The put right associated with the potential future purchase of the separate company in the November 2021 acquisition is determined using a Monte Carlo simulation model utilizing unobservable
inputs such as asset volatility and discount rates. The unobservable inputs in the valuation include asset volatility of 25% and a
discount rate of 10.49%. See Note 5 for the changes in the fair value of redeemable non-controlling interest. The put right increased $0.6 million for the three months ended June 30, 2022 and was valued at $3.5 million on June 30, 2022.
The valuations of the Company’s interest rate derivatives are measured as the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been
adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2 fair value measurement. The carrying and fair value of the Company’s interest rate derivative as of June 30, 2022, was $0.5 million, which is included in current liabilities in the Company’s consolidated balance sheet. See Note 10 for changes in the fair value of the
interest rate swap.
Segment Reporting
Operating segments are components of an enterprise for which separate financial information is available
that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and industrial injury prevention services.
Use of Estimates
In preparing the Company’s consolidated financial statements, management makes certain estimates and
assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames and other intangible assets, allocations of purchase price, provision for credit losses, tax provision and contractual allowances, that affect the amounts
reported in the consolidated financial statements and related disclosures. Actual results may differ from these estimates.
Self-Insurance Program
The Company utilizes a self-insurance plan for its employee group health insurance coverage administered by a third party. Predetermined loss limits have been arranged with
an insurance company to minimize the Company’s maximum liability and cash outlay. Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims. Management believes that the current accrued
amounts are sufficient to pay claims arising from self-insurance claims incurred through June 30, 2022.
Restricted Stock
Restricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock
granted to employees lapse in equal annual installments on the following
anniversaries of the date of grant. For those shares granted
to directors, the restrictions will lapse in equal quarterly installments during the year after the date of grant. For those granted
to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant. Compensation
expense for grants of restricted stock is recognized based on the fair value per share on the date of grant amortized over the vesting period. The Company recognizes any forfeitures as they occur. The restricted stock issued is included in basic and
diluted shares for the earnings per share computation.Recently Adopted Accounting Guidance
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income
Taxes (“ASU 2019-12”). The objective of ASU 2019-12 is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of
financial statements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and early adoption was permitted. The Company adopted this pronouncement as of January 1, 2021. The adoption of ASU 2020-06 did not
have a material impact on the Company’s financial statements.
In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of
liabilities and equity, including convertible instruments and contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the
treasury stock method. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive,
regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy.
This pronouncement was effective for fiscal years, and for interim periods within those fiscal years,
beginning after December 15, 2021.The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The use of either the modified retrospective or
fully retrospective method of transition is permitted. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements.
Recently Issued Accounting Guidance
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects
of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market
transition from LIBOR and other interbank offered rates to alternative reference rates. The new guidance was effective upon issuance, and the Company has elected to apply the amendments prospectively through December 31, 2022. Borrowings under
the Third Amended and Restated Credit Agreement bear interest based on SOFR. The interest rate applicable to the Third Amended and Restated Credit Agreement is tied to SOFR.
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ACQUISITIONS OF BUSINESSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS OF BUSINESSES |
2. ACQUISITIONS OF BUSINESSES
On
March 31, 2022, the Company acquired a 70% interest in a six-clinic physical therapy practice. The practice’s owners retained 30% of the equity interests. The
purchase price for the 70% equity interest was approximately $11.5 million, of which $11.2 million was paid in cash and $0.3 million in the form of a note payable. The note accrues interest at 3.5% per annum and the principal and interest are payable on March 31, 2024.
The
purchase price for the 2022 acquisition has been preliminarily allocated as follows (in thousands):
On December 31, 2021, the Company acquired a 75% interest in a three-clinic physical therapy practice with
the practice founder retaining 25%. The purchase price for the 75% interest was approximately $3.6 million, of which $3.4 million was paid in cash and $0.2
million in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest are payable on
December 31, 2023.
On November 30, 2021, the Company acquired an approximate 70% interest in a leading provider of industrial injury prevention services. The previous owners retained the remaining interest. The purchase price for the approximate 70% equity interest, not inclusive of a $2.0
million contingent payment, was approximately $65.2 million of which $60.7 million was paid in cash and $1.0 million in the form of a
note payable. The note accrues interest at 3.25% per annum and the principal and interest is payable on November 30, 2023. As part of
the transaction, 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 current owners have the right to put this transaction to the Company in approximately five years, with such right having an
initial fair value of $3.5 million value on December 31, 2021, as reflected on the Company’s consolidated balance sheet in Other
long-term liabilities. The value of this right will be adjusted in future periods, as appropriate, with any change in value reflected in the Company’s consolidated statement of income. The Company does not currently possess any of the controlling
interests in this separate company, does not control this company through contract or governance rights and currently does not exercise significant influence over this separate company. Due to these reasons, and based on current accounting
guidance, the Company did not consolidate the separate company through the variable interest or voting interest model. On June 30, 2022, the fair value of this put right was $3.5 million. The increase was reflected in the consolidated statement of income in the line item – Loss
on revaluation of put-right liability.
On September 30, 2021, the Company
acquired a company that specializes in return-to-work and ergonomic services, among other offerings. The Company acquired the company’s assets at a purchase price of approximately $3.3 million (which includes the obligation to pay an amount up to $0.6
million in contingent payment consideration in conjunction with the acquisition if specified future operational objectives are met) and contributed those assets to the industrial injury services business. The initial purchase price, not inclusive
of the $0.6 million contingent payment, was approximately $2.7 million, of which $2.4 million was paid in cash, and $0.3 million is in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest are payable on September 30, 2023.
On June 30, 2021, the Company
acquired a 65% interest in an eight-clinic
physical therapy with the previous owners retaining 35%. The purchase price was approximately $10.7 million, of which $8.6 million was
paid in cash, $1.0 million was payable based on the achievement of certain business criteria and $0.3 million is in the form of a note payable. The business criteria were met and accordingly $1.0 million was paid in July 2022. The note accrues interest at 3.25%
per annum and the principal and interest are payable on June 30, 2023. Additionally, the Company has an obligation to pay an additional amount up to $0.8
million in contingent payment consideration in conjunction with the acquisition if specified future operational objectives are met. The Company recorded acquisition-date fair value of this contingent liability based on the likelihood of the
contingent earn-out payment. The earn-out payment will subsequently be remeasured to fair value each reporting date.
On March 31, 2021, the Company
acquired a 70% interest in a five-clinic
physical therapy practice with the previous owners retaining 30%. When acquired, the practice was developing a sixth clinic which has
been completed. The purchase price for the 70% interest was approximately $11.6 million, of which $11.3 million was paid in cash and $0.3 million is in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest are payable on March 31, 2023.
The purchase price for the 2021 acquisitions has been preliminarily allocated as follows (in thousands):
The results of operations of the acquired clinics have been included in the Company’s consolidated financial statements since the date of their respective acquisition.
For the 2022 and 2021 acquisitions, a majority of total current assets primarily represents accounts receivable. Total non-current assets are fixed assets and equipment
used in the practice.
The purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2021 were allocated to the fair value of the assets acquired, inclusive of
identifiable intangible assets, i.e. trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill.
For the acquisitions in 2021, the values assigned to the customer and referral relationships and
non-compete agreements are being amortized to expense equally over the respective estimated lives. For customer and referral relationships, the weighted-average amortization period was 13.8 years. For non-compete agreements, the weighted-average amortization period was 5.6 years at the end of the year. The values assigned to tradenames are tested annually for impairment.
The consideration paid for each of the
acquisitions was derived through arm’s length negotiations. Funding for the cash portions was derived from proceeds from the Company’s revolving credit facility. The results of operations of the acquisitions have been included in the Company’s
consolidated financial statements since their respective date of acquisition. Unaudited proforma consolidated financial information for the acquisitions in 2022 and 2021 have not been included, as the results, individually and in the aggregate,
were not material to current operations.
The purchase price plus the fair
value of the non-controlling interest for the acquisitions in 2022 and those acquired after June 30, 2021 was allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, i.e. tradenames, referral relationships
and non-compete agreements, and liabilities assumed based on the estimated fair values at the acquisition date, with the amount in excess of fair values being recorded as goodwill. The Company is in the process of completing its formal valuation
analysis of the acquisitions, to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates
used on June 30, 2022 based on additional information obtained and completion of the valuation of the identifiable intangible assets. Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of
identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments
to goodwill. The Company does not expect the adjustments to be material. The purchase price allocation for the March 2021 and the June 2021 Acquisitions have been finalized. The Company continues to evaluate the components for the purchase price
allocations for other acquisitions in 2021.
For the acquisitions in 2022, the
values assigned to the customer and referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. For customer and referral relationships, the weighted-average amortization period is
12.0 years. For non-compete agreements, the weighted-average amortization period is 5.0 years. The values assigned to tradenames are tested annually for impairment.
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REVENUE RECOGNITION |
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REVENUE RECOGNITION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION |
3. REVENUE RECOGNITION
Categories
Revenues are recognized in the period in which services are rendered.
Net patient revenue consists of revenue for physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic-related
disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. Net patient revenue (patient revenue less estimated contractual adjustments) is recognized at the estimated net realizable
amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this
occurs as the Company provides physical and occupational therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that
provide for payments to the Company at amounts different from its established rates. The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience.
Management contract revenue, which is included in other revenue in the consolidated statements of net income, is derived from contractual arrangements whereby the Company
manages a clinic owned by a third party. The Company does not have any ownership interest in these clinics. Typically, revenue is determined based on the number of visits conducted at the clinic and recognized at the point in time when services are
performed. Costs, typically salaries for our employees, are recorded when incurred.
Revenue from the industrial injury prevention services segment, which is included in other revenue in the consolidated statements of net income, is derived from onsite
services the Company provides to clients’ employees including injury prevention, rehabilitation, ergonomic assessments and performance optimization. Revenue from the industrial injury prevention services segment is recognized when obligations under
the terms of the contract are satisfied. Revenue is recognized at an amount equal to the consideration the Company expects to receive in exchange for providing injury prevention services to its clients. The revenue is determined and recognized based
on the number of hours and respective rate for services provided in a given period.
Additionally, other revenue includes services the Company provides on-site, such as schools, for physical or occupational therapy services, and fees from athletic trainers.
Contract terms and rates are agreed to in advance between the Company and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service. If the services are paid in advance, revenue is
recorded as a liability over the period of the agreement and recognized at the point in time, when the services are performed.
The Company determines credit losses based on the specific agings and payor classifications at each clinic.
The provision for credit losses is included in clinic operating cost in the statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and provision for credit
losses, includes only those amounts the Company estimates to be collectible.
The following table details the revenue related to the various categories (in thousands):
Medicare Reimbursement
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee
Schedule (“MPFS”). For services provided in 2017 through 2019, a 0.5% increase was applied to the fee schedule payment rates before applying the mandatory budget neutrality adjustment. For services provided in 2020 through 2025 no adjustment is expected to be applied each year to the fee schedule payment rates, before applying the mandatory budget
neutrality adjustment.
In the 2020 MPFS Final Rule, the Centers for Medicare and Medicaid Services (“CMS”) revised coding, documentation guidelines, and increased the code values for
office/outpatient evaluation and management (“E/M”) codes and cuts to other codes to maintain budget neutrality of the MPFS beginning in 2021. Under the 2021 MPFS Final Rule, CMS increased the values for the E/M office visit codes and made cuts to
other specialty codes to maintain budget neutrality. As a result, CMS projected a 9% decrease in fee schedule payment rates for therapy services set to take effect in 2021.
However, Congress intervened with passage of the Consolidated Appropriations Act, 2021 and reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics received an
estimated 3.5% decrease in the aggregate in payment from Medicare
in calendar year 2021 as compared to 2020.
In the 2022 MPFS Final Rule published on November 2, 2021, there was to be an approximately 3.75% reduction to Medicare payments for physical/occupational therapy services. This was due to the expiration of the additional funding to the conversion factor provided by Congress in
2021 under the Consolidated Appropriations Act, 2021. However, this reduction was addressed in the Protecting Medicare and American Farmers from Sequester Cuts Act (“2021 Act”) signed into law on December 10, 2021. Based on various provisions in
the 2021 Act, the Company now estimates that the Medicare rate reduction for the full year of 2022 will be approximately 0.75%. The
2021 Act did not address the 15% reduction in Medicare payments for services performed by a physical or occupational therapist
assistant, which began on January 1, 2022.
In the 2023 MPFS Proposed Rule published on July 7, 2022, CMS proposed a 4.4% reduction in the Physician Fee Schedule conversion factor. In addition, the Consolidated Appropriations Act, 2021 included a reduction in Medicare payment rates of approximately 3% in 2024. These payment reductions are expected to take effect unless regulatory or Congressional action results in modifications to such rates as
has occurred in 2021 and 2022.
The Budget Control Act of 2011 increased the federal debt ceiling in connection with deficit reductions over
the next ten years and requires automatic reductions in federal
spending by approximately $1.2 trillion. Payments to Medicare
providers are subject to these automatic spending reductions, subject to a 2% cap. On April 1, 2013, a 2% reduction to Medicare
payments was implemented. The Bipartisan Budget Act of 2015, enacted on November 2, 2015, extended the 2% reductions to Medicare payments through fiscal year 2025. The Bipartisan Budget Act of 2018, enacted on February 9, 2018, extends the 2% reductions to Medicare payments through fiscal year 2027. The CARES Act suspended the 2% payment reduction to Medicare payments for dates of service from May 1, 2020, through
December 31, 2020. The Consolidated Appropriations Act, 2021 further suspended the 2% payment reduction until March 31, 2021. On April 14, 2021, additional legislation was enacted that waived the 2% payment reduction for the remainder of calendar 2021. The 2021 Act, which was signed into law on December 10, 2021, included a three-month extension of the 2% sequester relief applied to all Medicare
payments through March 31, 2022, followed by three months of 1% sequester relief through June 30, 2022. Sequester relief is scheduled to
then end on June 30, 2022.
Beginning in 2021, payments to individual therapists (Physical/Occupational Therapist in Private Practice)
paid under the fee schedule may be subject to adjustment based on performance in the Merit Based Incentive Payment System (“MIPS”), which measures performance based on certain quality metrics, resource use, and meaningful use of electronic health
records. Therapists eligible to participate in MIPS include only those therapists who are enrolled with Medicare as private practice providers, and does not include therapists in facility-based providers, such as our clinics enrolled as certified
rehabilitation agencies. Less than 3% of the Company’s therapist
providers currently participate in MIPS. Under the MIPS requirements, a provider’s performance is assessed according to established performance standards each year and then is used to determine an adjustment factor that is applied to the
professional’s payment for the corresponding payment year. The provider’s MIPS performance in 2019 will determine the payment adjustment in 2021. For those therapist providers who actually participated in MIPS during 2019, the resulting average
payment adjustment was an increase of 1%.
Under the Middle-Class Tax Relief and Job Creation Act of 2012 (“MCTRA”), since October 1, 2012, patients who
met or exceeded $3,700 in therapy expenditures during a calendar year have been subject to a manual medical review to determine whether applicable payment criteria are satisfied. The $3,700 threshold is applied to Physical Therapy and Speech Language Pathology Services; a separate $3,700 threshold is applied to the Occupational Therapy. The MACRA directed CMS to
modify the manual medical review process such that those reviews will no longer apply to all claims exceeding the $3,700 threshold and instead will be determined on a targeted basis based on a variety of factors that CMS considers appropriate.
The Bipartisan Budget Act of 2018 extends the targeted medical review indefinitely but reduces the threshold to $3,000 through December 31, 2027. For 2028, the threshold amount will be increased by the percentage increase in the Medicare
Economic Index (“MEI”) for 2028 and in subsequent years the threshold amount will increase based on the corresponding percentage increase in the MEI for such subsequent year.
CMS adopted a multiple procedure payment reduction (“MPPR”) for therapy services in the final update to the MPFS for calendar year 2011. The MPPR applied to all outpatient
therapy services paid under Medicare Part B — occupational therapy, physical therapy and speech-language pathology. Under the policy, the Medicare program pays 100% of the practice expense component of the Relative Value Unit (“RVU”) for the therapy procedure with the highest practice expense RVU, then reduces the payment for the practice expense
component for the second and subsequent therapy procedures or units of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate sessions. In 2013, the practice expense
component for the second and subsequent therapy service furnished during the same day for the same patient was reduced by 50%.
Medicare claims for outpatient therapy services furnished by therapist assistants on or after January 1, 2020 must include a modifier indicating the service was furnished
by a therapist assistant. Outpatient therapy services furnished on or after January 1, 2022, in whole or part by a therapist assistant are paid at an amount equal to 85% of the payment amount otherwise applicable for the service.
Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation. The Company
believes that the Company is in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material
effect on the Company’s financial statements as of June 30, 2022. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and
exclusion from the Medicare program. For the six months ended June 30, 2022, and 2021, respectively, net patient revenue from Medicare was approximately $74.9
million and $62.1 million, respectively.
Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, the Company may not continue to receive reimbursement rates from
Medicare that sufficiently compensate us for the Company’s services or, in some instances, cover the Company’s operating costs. Limits on reimbursement rates or the scope of services being reimbursed could have a material adverse effect on the
Company’s revenue, financial condition and results of operations. Additionally, any delay or default by the federal or state governments in making Medicare and/or Medicaid reimbursement payments could materially and, adversely, affect the Company’s
business, financial condition and results of operations.
Contractual Allowances
Contractual allowances result from the differences between the rates charged for services performed and
expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third-party payors and managed care contracts are often complex and may include multiple
reimbursement mechanisms payable for the services provided in Company clinics. The Company estimates contractual allowances based on its interpretation of the applicable regulations, payor contracts and historical calculations. Each month the
Company estimates its contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and applies an appropriate contractual allowance reserve percentage to the gross accounts receivable
balances for each payor of the clinic. Based on the Company’s historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow the Company to provide the necessary detail and accuracy with
its collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from the Company’s estimates. Payor terms are periodically revised
necessitating continual review and assessment of the estimates made by management. The Company’s billing system does not capture the exact change in its contractual allowance reserve estimate from period to period in order to assess the accuracy
of its revenues and hence its contractual allowance reserves. Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, historically the
difference between net revenues and corresponding cash collections has generally reflected a difference within approximately 1.0% to 1.5%
of net revenue. Additionally, analysis of subsequent periods’ contractual write-offs on a payor basis reflects a difference within approximately 1.0% to 1.5%
between the actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated with the same period end balance. As a result, the Company believes that a change in the contractual
allowance reserve estimate would not likely be more than 1.0% to
1.5% on June 30, 2022.
A contract’s transaction price is allocated to each distinct performance obligation and recognized when, or as, the performance obligation is satisfied. To determine the
transaction price, the Company includes the effects of any variable consideration, such as the probability of collecting that amount. The Company applies established rates to the services provided, and adjusts for the terms of payor contracts, as
applicable. These contracted amounts are different from the Company’s established rates. The Company has established a “contractual allowance” for this difference. The allowance is based on the terms of payor contracts, historical and current
reimbursement information and current experience with the clinic and partners. The Company’s established rates less the contractual allowance is the revenue that is recognized in the period in which the service is rendered. This revenue is deemed
the transaction price and stated as “Net Patient Revenue” on the Company’s consolidated statements of income.
The Company’s performance obligations are satisfied at a point in time. After the clinic has provided
services and satisfied its obligation to the customer for the reimbursement rates stipulated in the payor contracts (i.e. the transaction price), the Company recognizes the revenue, net of contractual allowances, in the period in which the
services are rendered. The Company recognizes the full amount of revenue and reports the contractual allowances as a contra (or offset) revenue account to report a net revenue number based on the expected collections.
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EARNINGS PER SHARE |
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EARNINGS PER SHARE |
4. EARNINGS PER SHARE
In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest (see Note 5 – Redeemable Non-Controlling Interest), net of tax,
charged directly to retained earnings is included in the earnings per basic and diluted share calculation. The following table provides a detail of the basic and diluted earnings per share computation (in thousands, except per share data).
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REDEEMABLE NON-CONTROLLING INTEREST [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REDEEMABLE NON-CONTROLLING INTEREST |
5. REDEEMABLE NON-CONTROLLING INTEREST
Since October 2017, when the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic business (referred to as “Therapy Practice”), these
Acquisitions occur in a series of steps which are described below.
The Partnership Agreement contains provisions for the redemption of the Seller Entity Interest, either at the option of the Company (the “Call Right”) or at the option
of the Seller Entity (the “Put Right”) as follows:
ProgressiveHealth
Acquisition
On November 30, 2021, the Company acquired a
majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest in certain subsidiaries (“Progressive Subsidiaries”) that operate in the industrial injury prevention and therapy services businesses. The
Progressive transaction was completed in a series of steps which are described below.
The Operating Agreement contains provisions
for the redemption of the Selling Shareholder’s Interest, either at the option of the Company (the “Progressive Call Right”) or at the option of the Selling Shareholder (the “Progressive Put Right”) as follows:
Neither the Operating Agreement nor the
Non-Compete Agreement contain any provision to escrow or “claw back” the equity interest in NewCo held by the Selling Shareholders, in the event of a breach of the operating agreement or non-compete terms, or the management services agreement
pursuant to which the Selling Shareholders perform services on behalf of NewCo. The Company’s only recourse against the Selling Shareholder for breach of any of these agreements is to seek damages and other legal remedies under such agreements.
There are no conditions in any of the arrangements with a Selling Shareholder that would result in a forfeiture of the equity interest in NewCo held by a Selling Shareholder.
An Employed Selling
Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the Company’s purchase of its partnership interest in NewCo. The Employment Agreement and the Non-Compete Agreement do not contain any provision
to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling Shareholder, nor the Seller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms. More specifically, even if the
Employed Selling Shareholder is terminated for “cause” by NewCo, such Employed Selling Shareholder does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any
portion of the Seller Entity Interest. The Company’s only recourse against the Employed Selling Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies under such agreements.
There are no conditions in any of the arrangements with an Employed Selling Shareholder that would result in a forfeiture of the equity interest held in the Seller Entity or of the Seller Entity Interest.
For the dates indicated, the following table
details the changes in the carrying amount (fair value) of the redeemable non-controlling interest (in thousands):
The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interest (in thousands):
|
GOODWILL |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL |
6. GOODWILL
The changes in the carrying amount of goodwill consisted of the following (in thousands):
|
INTANGIBLE ASSETS, NET |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET |
7. INTANGIBLE ASSETS, NET
Intangible assets, net as of June 30, 2022, and December 31, 2021 consisted of the following (in thousands):
Tradenames, referral relationships and non-compete agreements are related to the businesses acquired. The value assigned to tradenames has an indefinite life and is tested
at least annually for impairment using the relief from royalty method in conjunction with the Company’s annual goodwill impairment test. The value assigned to referral relationships is being amortized over their respective estimated useful lives
which range from
to fourteen years.
Non-compete agreements are amortized over the respective term of the agreements which range from to six years.The following table details the amount of amortization expense recorded for intangible
assets for the three months ended June 30, 2022, and 2021 (in thousands):
Based on the balance of referral relationships and non-compete agreements as of June 30, 2022, the expected
amount to be amortized in 2022 and thereafter by year is as follows (in thousands):
|
ACCRUED EXPENSES |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES |
8. ACCRUED EXPENSES
Accrued expenses as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
In January 2022, to avoid the legal fees and discovery costs in defending a legal matter and the uncertainty of protracted litigation, the Company entered into a settlement agreement. The Company admitted no
liability or wrongdoing. Under the terms of the settlement, the Company agreed to make payments which amounted to $2.75
million, of which $2.6 million was recorded as an expense in 2021.
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NOTES PAYABLE AND AMENDED CREDIT AGREEMENT |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE AND AMENDED CREDIT AGREEMENT [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE AND AMENDED CREDIT AGREEMENT |
9. NOTES PAYABLE AND AMENDED CREDIT AGREEMENT
Effective December 5, 2013, the Company entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility. This agreement was amended
and/or restated in August 2015, January 2016, March 2017, November 2017, January and 2021 (hereafter referred to as (“Amended Credit Agreement”).
On June 17, 2022, the Company entered into the Third
Amended and Restated Credit Agreement (the “Credit Agreement”) among Bank of America, N.A., as administrative agent (“Administrative Agent”) and the lenders from time-to-time party thereto.
Amounts outstanding under the Amended Credit Agreement and Credit Agreement (as
defined above) and notes payable as of June 30, 2022 and
December 31, 2021 consisted of the following (in
thousands):
The Credit Agreement, which matures on June 17, 2027, provides for loans in an aggregate principal amount of $325 million. Such loans were made available through the following
facilities (collectively, the “Senior Credit Facilities”):
The proceeds of the Revolving Facility shall be used by the Company for working capital and other general corporate purposes of the Company and
its subsidiaries, including to fund future acquisitions and invest in growth opportunities. The proceeds of the Term Facility were used by the Company to refinance the indebtedness outstanding under the Amended Credit Agreement, to pay fees and
expenses incurred in connection with the transactions involving the loan facilities, for working capital and other general corporate purposes of the Company and its subsidiaries.
The Company is permitted to increase the Revolving Facility and/or add one or more tranches of term loans in an aggregate amount not to exceed the sum of (i) $100 million plus (ii) an unlimited additional amount, provided that (in the case of clause (ii)), after giving effect to
such increases, the pro forma Consolidated Leverage Ratio (as defined in the Credit Agreement) would not exceed 2.0:1.0, and the aggregate amount of all incremental increases under the
Revolving Facility does not exceed $50,000,000.
The interest rates per annum applicable to the Senior Credit Facilities (other
than in respect of Swingline Loans) will be Term SOFR (as defined in the Credit Agreement) plus an applicable margin or, at the option of the Company, an alternate base rate plus an applicable margin. Each Swingline Loan shall bear interest at
the base rate plus the applicable margin. The applicable margin for Term SOFR borrowings ranges from 1.50% to 2.25%, and the applicable margin for alternate
base rate borrowings ranges from 0.50% to 1.25%, in each case, based on the Consolidated Leverage Ratio of the Company and its subsidiaries. Interest is payable at the
end of the selected interest period but no less frequently than quarterly and on the date of maturity.
The Company will also pay to the Administrative Agent, for the account of each
lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”). Such unused fee will range between 0.25% and 0.35% per annum and is also based on the Consolidated Leverage Ratio of the Company and
its subsidiaries. The Company may prepay and/or repay the revolving loans and the term loans, and/or terminate the revolving loan commitments, in whole or in part, at any time without premium or penalty, subject to certain conditions.
The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of
liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions,
thresholds and baskets. The Credit Agreement includes certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio, and the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement also
contains customary events of default.
The Company’s obligations under the Credit Agreement are guaranteed by its
wholly-owned material domestic subsidiaries (each, a “Guarantor”), and the obligations of the Company and any Guarantors are secured by a perfected first
priority security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions.
As of June 30, 2022, $150.0
million was outstanding on the Senior Credit Facilities, resulting in $175.0 million of availability. As of June 30, 2022, the Company was in compliance with all of the covenants contained in the Credit Agreement.
The Company generally enters into various notes payable as a means of financing a
portion of its acquisitions and purchasing of non-controlling interests. In conjunction with these transactions in 2022 and 2021, the Company entered into notes payable in the aggregate amount of $4.9 million of which an aggregate principal payment of $0.8 million is due in 2022, $4.1 million
is due in 2023. Interest accrues in the range of 3.25% to 3.50% per annum and is payable with each principal installment.
|
DERIVATIVE INSTRUMENTS |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS |
10. DERIVATIVE INSTRUMENTS
The Company is
exposed to certain market risks during the ordinary course of business due to adverse changes in interest rates. The exposure to interest rate risk primarily results from the Company’s variable-rate borrowing. The Company may elect to use
derivative financial instruments to manage risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile and the Company’s risk
management activities do not eliminate these risks.
Interest Rate Swap
In May 2022, the Company entered into an interest rate swap agreement, effective on
June 30, 2022, with Bank of America, N.A, which has a $150 million notional value, and a maturity date of June 30, 2027. Beginning in July 2022, the Company receives 1-month SOFR, and pays a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis. The total interest rate in any period will also include an applicable margin based on the Company’s consolidated
leverage ratio.
In connection with the swap, no cash was exchanged between the Company and the
counterparty.
The Company designated its interest rate swap as a cash flow hedge and structured
it to be highly effective. Consequently, 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 impacts of the Company’s derivative instruments on the accompanying
Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2022 are presented in the table below (in thousands):
The valuations of the Company’s interest rate derivatives are measured as the
present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2 fair
value measurement.
The carrying and fair value of the Company’s interest rate derivatives (included in
current liabilities) were as follows:
|
LEASES |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
11. LEASES
The Company has operating leases for its corporate offices and operating facilities. The Company determines if an arrangement is a lease at the inception of a contract.
Effective January 1, 2019, right- of-use assets and operating lease liabilities are included in the consolidated balance sheet. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease
liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the net present value of the fixed
lease payments over the lease term. The Company’s operating lease terms are generally five years or less. The Company’s lease terms
include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the
information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term.
In accordance with ASC 842, the Company records on its consolidated balance sheet leases with a term greater than 12 months. The Company has elected, in compliance with
current accounting standards, not to record leases with an initial term of 12 months or less in the consolidated balance sheet. ASC 842 requires the separation of the fixed lease components from the variable lease components. The Company has elected
the practical expedient to account for separate lease components of a contract as a single lease cost thus causing all fixed payments to be capitalized. Non-lease and variable cost components are not included in the measurement of the right-of-use
assets or operating lease liabilities. The Company also elected the package of practical expedients permitted within ASC 842, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment
amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage are not included in the right-of- use assets or operating lease liabilities. These are expensed as
incurred and recorded as variable lease expense.
For the three and six months ended June 30, 2022, the components of lease expense were as follows (in thousands):
*Sublease
income was immaterial
Lease cost is reflected in the consolidated statement of net income in the line item – rent, supplies, contract labor and other.
Supplemental information related to leases was as follows (in thousands):
The aggregate future lease payments for operating leases as of June 30,
2022 were as follows (in thousands):
Average lease terms and discount rates were as follows:
|
SEGMENT INFORMATION |
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SEGMENT INFORMATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION |
12. SEGMENT INFORMATION
The Company’s reportable segments include the physical therapy operations segment and the industrial injury prevention services segment. Also included in the physical
therapy operations segment are revenues from management contract services and other services which include services the Company provides on-site, such as schools for athletic trainers.
The Company evaluates performance of the segments based on gross profit. The Company has provided additional information regarding its reportable segments which contributes
to the understanding of the Company and provides useful information.
The following table summarizes selected financial data for the Company’s reportable segments.
|
INVESTMENT IN UNCONSOLIDATED AFFILIATE |
6 Months Ended |
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Jun. 30, 2022 | |
INVESTMENT IN UNCONSOLIDATED AFFILIATE [Abstract] | |
INVESTMENT IN UNCONSOLIDATED AFFILIATE |
13. INVESTMENT IN UNCONSOLIDATED
AFFILIATE
Through one of the subsidiaries, the Company has a 49%
joint venture interest in a company which provides physical therapy services for patients at hospitals. Since the Company is deemed to not have a controlling interest in the joint venture, the Company’s investment is accounted for using the equity
method of accounting. The investment balance of this joint venture as of June 30, 2022, is $12.3 million. For the six months ended June
30, 2022, the earnings amounted to$679 thousand and $548 thousand was distributed to the Company.
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COMMON STOCK |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
COMMON STOCK [Abstract] | |
COMMON STOCK |
14. COMMON STOCK
From September 2001 through December 31, 2008, the Board authorized the Company to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of the Company’s common stock. In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of its common stock (“March
2009 Authorization”). The Amended Credit Agreement permits share repurchases of up to $15,000,000, subject to compliance with covenants.
The Company is required to retire shares purchased under the March 2009 Authorization.
Under the March 2009 Authorization, the Company has purchased a total of 859,499
shares. There is no expiration date for the share repurchase program. There are currently an additional estimated 137,363 shares (based on
the closing price of $109.20 on June 30, 2022) that may be purchased from time to time in the open market or private transactions depending
on price, availability and the Company’s cash position. The Company did not purchase any shares of its common stock during the three
and six months ended June 30, 2022.
|
RECLASSIFICATION OF PRIOR PERIOD PRESENTATION |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
RECLASSIFICATION OF PRIOR PERIOD PRESENTATION [Abstract] | |
RECLASSIFICATION OF PRIOR PERIOD PRESENTATION |
15. RECLASSIFICATION OF PRIOR PERIOD
PRESENTATION
Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of
operations.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Cash Equivalents |
Cash Equivalents
The Company maintains its cash and cash equivalents at financial institutions. The Company considers all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. The combined account balances at several institutions typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related on
deposits in excess of FDIC insurance coverage. Management believes that the risk is not significant.
|
Long-Lived Assets |
Long-Lived Assets
Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for furniture
and equipment range from
to eight years and for purchased software from to seven years. Leasehold improvements are amortized over the shorter of the lease term or estimated useful lives of the assets, which is generally to five years.The Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances which indicate that
the amounts may be impaired. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
The Company did not note an impairment to long-lived assets during the three and six months ended June 30, 2022.
|
Goodwill |
Goodwill
Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over the
fair value of the acquired business assets, which include certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009,
from the purchase of some or all of a particular local management’s equity interest in an existing clinic. Effective January 1, 2009, if the purchase price of a
non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic
impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair
value if considered impaired. These events or conditions include but are not limited to: a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating or cash flow loss combined
with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these
events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite lived tradenames in conjunction with its annual goodwill impairment test.
The Company has a two operating segment business which is made up of various clinics within partnerships, and an industrial injury prevention services business. The partnerships are components of regions
and are aggregated to the operating segment level for the purpose of determining the Company’s reporting units when performing its annual goodwill impairment test. In 2021 and 2020, there were six regions. In addition to the six regions, the impairment analysis included a separate analysis for the industrial injury prevention services
business, as a separate reporting unit.
As part of the impairment analysis, the Company is first required to assess qualitatively if it can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, the Company is then required to complete a quantitative analysis of whether
a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that
affect the fair value or carrying amount of a reporting unit. The Company considers both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis.
An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting
unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit. The evaluation of goodwill in 2021 and 2020 did not result in any goodwill amounts that were deemed impaired.
As part of the annual assessment, the Company evaluated whether events or circumstances indicated that it was more likely than not that
the fair value of the reporting units were reduced below their carrying value as of December 31, 2021. As a result of the assessment, the Company determined that it was not more likely than not that goodwill and tradenames of the reporting
units were impaired as of December 31, 2021.
The Company will continue to monitor for any triggering events or other indicators of impairment.
|
Redeemable Non-Controlling Interest |
Redeemable Non-Controlling Interest
The non-controlling interests that are reflected as redeemable non-controlling interest in the consolidated financial statements consist of those that the owners and the
Company have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met.
The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements. The redemption rights can be triggered by the owner or the
Company at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction,
typically
to five years,
as defined in the limited partnership agreement. The redemption rights are not automatic or mandatory (even upon death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been
satisfied.On the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under
the control of the Company, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption – Redeemable non-controlling interest – temporary equity. Then, in each reporting period thereafter until it
is purchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined in the respective limited partnership
agreement. As a result, the value of the non-controlling interest is not adjusted below its initial carrying value. The Company records any adjustments in the redemption value, net of tax, directly to retained earnings and the adjustments are not
reflected in the consolidated statements of income. Although the adjustments are not reflected in the consolidated statements of income, current accounting rules require that the Company reflects the adjustments, net of tax, in the earnings per
share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statements of net income. Management believes the redemption value (i.e.
the carrying amount) and fair value are the same.
|
Non-Controlling Interests |
Non-Controlling Interest
The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent equity in the
consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interest is included in consolidated net income on the face of the statements of net income. Changes in a parent
entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income when a
subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.
When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment
to additional paid-in capital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.
|
Revenue Recognition |
Revenue Recognition
Revenues are recognized in the period in which services are rendered. See Note 3- Revenue Recognition, for further discussion of revenue recognition.
|
Provision for Credit Losses |
Provision for Credit Losses
The Company determines provisions for credit losses based on the specific agings and payor classifications at
each clinic. The provision for credit losses is included in operating cost in the consolidated statements of net income. Net accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and
provisions for credit losses, includes only those amounts the Company estimates to be collectible.
|
Income Taxes |
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the
position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
settlement with the relevant tax authority.
The CARES Act includes changes to certain tax law related to net operating losses and the deductibility of
interest expense and depreciation. ASC 740, Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which
the legislation is enacted. The legislation had no effect on the Company’s deferred income taxes and current income taxes payable during the three and six months ended June 30,
2022.
The Company did not have any accrued interest or
penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the three and six months ended June 30, 2022. The Company records any interest or penalties, if required, in interest and other
expense, as appropriate.
|
Fair Value of Financial Instruments |
Fair Value of Financial Instruments
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy has been established that prioritizes
the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3
measurement).
The three levels of the fair value hierarchy
are as follows:
Level 1 – Quoted prices in active markets for
identical assets or liabilities;
Level 2 – Quoted prices for similar instruments
in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and
Level 3 – Unobservable inputs in which there is
little or no market data which require the reporting entity to develop its own assumptions.
The carrying amounts reported in the balance sheets for cash and cash equivalents, contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values
due to the short-term maturity of these financial instruments. The carrying amount of the debt under the Third Amended and Restated Credit Agreement (defined as “Credit Agreement” in Note 9) approximates the fair value. The interest rate on the
debt under the Third Amended and Restated Amended Credit Agreement is tied to the Secured Overnight Financing Rate (“SOFR”).
The redeemable non-controlling interest included on the consolidated balance sheets and the put right
associated with the potential future purchase of the separate company in the November 2021 acquisition (as described in Note 2) are both marked to fair value on a recurring basis using Level 3 inputs. The redemption value of redeemable
non-controlling interests approximates the fair value. The put right associated with the potential future purchase of the separate company in the November 2021 acquisition is determined using a Monte Carlo simulation model utilizing unobservable
inputs such as asset volatility and discount rates. The unobservable inputs in the valuation include asset volatility of 25% and a
discount rate of 10.49%. See Note 5 for the changes in the fair value of redeemable non-controlling interest. The put right increased $0.6 million for the three months ended June 30, 2022 and was valued at $3.5 million on June 30, 2022.
The valuations of the Company’s interest rate derivatives are measured as the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been
adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2 fair value measurement. The carrying and fair value of the Company’s interest rate derivative as of June 30, 2022, was $0.5 million, which is included in current liabilities in the Company’s consolidated balance sheet. See Note 10 for changes in the fair value of the
interest rate swap.
|
Segment Reporting |
Segment Reporting
Operating segments are components of an enterprise for which separate financial information is available
that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and industrial injury prevention services.
|
Use of Estimates |
Use of Estimates
In preparing the Company’s consolidated financial statements, management makes certain estimates and
assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames and other intangible assets, allocations of purchase price, provision for credit losses, tax provision and contractual allowances, that affect the amounts
reported in the consolidated financial statements and related disclosures. Actual results may differ from these estimates.
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Self-Insurance Program |
Self-Insurance Program
The Company utilizes a self-insurance plan for its employee group health insurance coverage administered by a third party. Predetermined loss limits have been arranged with
an insurance company to minimize the Company’s maximum liability and cash outlay. Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims. Management believes that the current accrued
amounts are sufficient to pay claims arising from self-insurance claims incurred through June 30, 2022.
|
Restricted Stock |
Restricted Stock
Restricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock
granted to employees lapse in equal annual installments on the following
anniversaries of the date of grant. For those shares granted
to directors, the restrictions will lapse in equal quarterly installments during the year after the date of grant. For those granted
to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant. Compensation
expense for grants of restricted stock is recognized based on the fair value per share on the date of grant amortized over the vesting period. The Company recognizes any forfeitures as they occur. The restricted stock issued is included in basic and
diluted shares for the earnings per share computation. |
Recently Adopted Accounting Guidance |
Recently Adopted Accounting Guidance
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income
Taxes (“ASU 2019-12”). The objective of ASU 2019-12 is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of
financial statements. The amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and early adoption was permitted. The Company adopted this pronouncement as of January 1, 2021. The adoption of ASU 2020-06 did not
have a material impact on the Company’s financial statements.
In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of
liabilities and equity, including convertible instruments and contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the
treasury stock method. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive,
regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy.
This pronouncement was effective for fiscal years, and for interim periods within those fiscal years,
beginning after December 15, 2021.The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The use of either the modified retrospective or
fully retrospective method of transition is permitted. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements.
Recently Issued Accounting Guidance
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects
of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market
transition from LIBOR and other interbank offered rates to alternative reference rates. The new guidance was effective upon issuance, and the Company has elected to apply the amendments prospectively through December 31, 2022. Borrowings under
the Third Amended and Restated Credit Agreement bear interest based on SOFR. The interest rate applicable to the Third Amended and Restated Credit Agreement is tied to SOFR.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions Within Physical Therapy Operations Segment |
During the 2021 year and the six months ended June 30, 2022, the Company completed the acquisitions of four
multi-clinic practices and two industrial injury prevention businesses as detailed below.
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ACQUISITIONS OF BUSINESSES (Tables) |
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS OF BUSINESSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preliminary Purchase Prices Allocation |
The
purchase price for the 2022 acquisition has been preliminarily allocated as follows (in thousands):
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REVENUE RECOGNITION (Tables) |
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue, Categories |
The following table details the revenue related to the various categories (in thousands):
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EARNINGS PER SHARE (Tables) |
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EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computations of Basic and Diluted Earnings Per Share |
In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest (see Note 5 – Redeemable Non-Controlling Interest), net of tax,
charged directly to retained earnings is included in the earnings per basic and diluted share calculation. The following table provides a detail of the basic and diluted earnings per share computation (in thousands, except per share data).
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REDEEMABLE NON-CONTROLLING INTEREST (Tables) |
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REDEEMABLE NON-CONTROLLING INTEREST [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest |
For the dates indicated, the following table
details the changes in the carrying amount (fair value) of the redeemable non-controlling interest (in thousands):
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Carrying Amount of (Fair Value) Redeemable Non-Controlling Interest |
The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interest (in thousands):
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GOODWILL (Tables) |
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amount of Goodwill |
The changes in the carrying amount of goodwill consisted of the following (in thousands):
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INTANGIBLE ASSETS, NET (Tables) |
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INTANGIBLE ASSETS, NET [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net |
Intangible assets, net as of June 30, 2022, and December 31, 2021 consisted of the following (in thousands):
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Amortization Expenses |
The following table details the amount of amortization expense recorded for intangible
assets for the three months ended June 30, 2022, and 2021 (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of Customer and Referral Relationships and Non Competition Agreements |
Based on the balance of referral relationships and non-compete agreements as of June 30, 2022, the expected
amount to be amortized in 2022 and thereafter by year is as follows (in thousands):
|
ACCRUED EXPENSES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses |
Accrued expenses as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
|
NOTES PAYABLE AND AMENDED CREDIT AGREEMENT (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE AND AMENDED CREDIT AGREEMENT [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Agreement and Notes Payable |
Amounts outstanding under the Amended Credit Agreement and Credit Agreement (as
defined above) and notes payable as of June 30, 2022 and
December 31, 2021 consisted of the following (in
thousands):
|
DERIVATIVE INSTRUMENTS (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impacts of Derivative Instruments on Consolidated Statements of Comprehensive Income |
The impacts of the Company’s derivative instruments on the accompanying
Consolidated Statements of Comprehensive Income for the three months and six months ended June 30, 2022 are presented in the table below (in thousands):
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying and Fair Value of Interest Rate Derivatives |
The carrying and fair value of the Company’s interest rate derivatives (included in
current liabilities) were as follows:
|
LEASES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Lease Expense |
For the three and six months ended June 30, 2022, the components of lease expense were as follows (in thousands):
*Sublease
income was immaterial
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information Related to Leases |
Supplemental information related to leases was as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future Lease Payments for Operating Leases |
The aggregate future lease payments for operating leases as of June 30,
2022 were as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average Lease Terms and Discount Rates |
Average lease terms and discount rates were as follows:
|
SEGMENT INFORMATION (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Financial Data for Reportable Segments |
The following table summarizes selected financial data for the Company’s reportable segments.
|
ACQUISITIONS OF BUSINESSES (Details) $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2022
USD ($)
Clinic
|
Dec. 31, 2021
USD ($)
|
Nov. 30, 2021
USD ($)
|
Sep. 30, 2021
USD ($)
|
Jun. 30, 2021
USD ($)
Clinic
|
Mar. 31, 2021
USD ($)
Clinic
|
Jul. 31, 2022
USD ($)
|
Jun. 30, 2022
USD ($)
Clinic
|
Mar. 31, 2022
USD ($)
|
Jun. 30, 2021
USD ($)
|
Jun. 30, 2022
USD ($)
Clinic
|
Jun. 30, 2021
USD ($)
|
Dec. 31, 2021
USD ($)
Clinic
|
||||||
Business Combination, Description [Abstract] | ||||||||||||||||||
Number of clinics | Clinic | 608 | |||||||||||||||||
Cash paid, net of cash acquired | $ 11,799 | $ 20,402 | ||||||||||||||||
Customer and Referral Relationships [Member] | ||||||||||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | ||||||||||||||||||
Estimated useful lives of acquired intangibles | 12 years | 13 years 9 months 18 days | ||||||||||||||||
Non-compete Agreements [Member] | ||||||||||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | ||||||||||||||||||
Estimated useful lives of acquired intangibles | 5 years | 5 years 7 months 6 days | ||||||||||||||||
Physical Therapy Operations [Member] | ||||||||||||||||||
Business Combination, Description [Abstract] | ||||||||||||||||||
Contingent payment consideration | $ 837 | $ 837 | 837 | |||||||||||||||
Cash paid, net of cash acquired | 23,544 | |||||||||||||||||
Seller notes | 800 | 800 | 800 | |||||||||||||||
Contingent payments | 837 | 837 | 837 | |||||||||||||||
Other payable | 1,000 | 1,000 | 1,000 | |||||||||||||||
Seller put right | 0 | |||||||||||||||||
Total consideration | 26,181 | 26,181 | 26,181 | |||||||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | ||||||||||||||||||
Total current assets | 1,891 | 1,891 | 1,891 | |||||||||||||||
Total non-current assets | 7,014 | 7,014 | 7,014 | |||||||||||||||
Total liabilities | (8,399) | (8,399) | (8,399) | |||||||||||||||
Net tangible assets acquired | 506 | 506 | 506 | |||||||||||||||
Customer and referral relationships | 7,969 | 7,969 | 7,969 | |||||||||||||||
Non-compete agreements | 415 | 415 | 415 | |||||||||||||||
Tradenames | 2,144 | 2,144 | 2,144 | |||||||||||||||
Goodwill | 27,103 | 27,103 | 27,103 | |||||||||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interest) | (11,956) | (11,956) | (11,956) | |||||||||||||||
Total consideration | $ 26,181 | $ 26,181 | $ 26,181 | |||||||||||||||
Previous Owners [Member] | ||||||||||||||||||
Business Combination, Description [Abstract] | ||||||||||||||||||
Percentage of retained interest by previous owners | 35.00% | 30.00% | 35.00% | 35.00% | ||||||||||||||
Clinic Practice [Member] | ||||||||||||||||||
Business Combination, Description [Abstract] | ||||||||||||||||||
Percentage of interest acquired | 70.00% | 75.00% | 70.00% | 65.00% | 70.00% | 70.00% | 65.00% | 65.00% | 75.00% | |||||||||
Number of clinics | Clinic | 6 | 8 | 5 | 3 | ||||||||||||||
Percentage of interest retained by practice founder | 30.00% | 25.00% | 30.00% | 25.00% | ||||||||||||||
Aggregate purchase price for the acquisition | $ 11,500 | $ 3,600 | $ 10,700 | $ 11,600 | ||||||||||||||
Contingent payment consideration | $ 2,000 | |||||||||||||||||
Cash paid for acquisition | $ 11,200 | $ 3,400 | 8,600 | $ 11,300 | ||||||||||||||
Amount payable upon achievement of certain business criteria | $ 1,000 | $ 1,000 | $ 1,000 | |||||||||||||||
Payment made upon certain milestone fulfilled | $ 1,000 | |||||||||||||||||
Percentage of interest accrued | 3.50% | 3.25% | 3.25% | 3.25% | 3.50% | 3.25% | 3.25% | 3.25% | ||||||||||
Seller notes | $ 300 | $ 200 | $ 300 | $ 300 | $ 300 | $ 300 | $ 300 | $ 200 | ||||||||||
Contingent payments | 2,000 | |||||||||||||||||
Clinic Practice [Member] | Maximum [Member] | ||||||||||||||||||
Business Combination, Description [Abstract] | ||||||||||||||||||
Contingent payment consideration | 800 | 800 | 800 | |||||||||||||||
Contingent payments | 800 | 800 | 800 | |||||||||||||||
IIPS [Member] | ||||||||||||||||||
Business Combination, Description [Abstract] | ||||||||||||||||||
Number of clinics | Clinic | 2 | |||||||||||||||||
Aggregate purchase price for the acquisition | 65,200 | |||||||||||||||||
Contingent payment consideration | [1] | 2,520 | 2,520 | 2,520 | ||||||||||||||
Cash paid for acquisition | $ 60,700 | |||||||||||||||||
Percentage of interest accrued | 3.25% | |||||||||||||||||
Remaining contract term | 5 years | |||||||||||||||||
Initial fair value | $ 3,500 | $ 3,500 | $ 3,500 | $ 3,500 | ||||||||||||||
Cash paid, net of cash acquired | [1] | 63,193 | ||||||||||||||||
Seller notes | $ 1,000 | 1,250 | [1] | 1,250 | [1] | 1,250 | [1] | |||||||||||
Contingent payments | [1] | 2,520 | 2,520 | 2,520 | ||||||||||||||
Other payable | [1] | 0 | 0 | 0 | ||||||||||||||
Seller put right | [1] | 3,522 | ||||||||||||||||
Total consideration | [1] | 70,485 | 70,485 | 70,485 | ||||||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | ||||||||||||||||||
Total current assets | [1] | 5,588 | 5,588 | 5,588 | ||||||||||||||
Total non-current assets | [1] | 12,620 | 12,620 | 12,620 | ||||||||||||||
Total liabilities | [1] | (4,842) | (4,842) | (4,842) | ||||||||||||||
Net tangible assets acquired | [1] | 13,366 | 13,366 | 13,366 | ||||||||||||||
Customer and referral relationships | [1] | 21,127 | 21,127 | 21,127 | ||||||||||||||
Non-compete agreements | [1] | 500 | 500 | 500 | ||||||||||||||
Tradenames | [1] | 5,141 | 5,141 | 5,141 | ||||||||||||||
Goodwill | [1] | 58,257 | 58,257 | 58,257 | ||||||||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interest) | [1] | (27,906) | (27,906) | (27,906) | ||||||||||||||
Total consideration | [1] | 70,485 | 70,485 | 70,485 | ||||||||||||||
Return-to-work and Ergonomic Services [Member] | ||||||||||||||||||
Business Combination, Description [Abstract] | ||||||||||||||||||
Aggregate purchase price for the acquisition | $ 2,700 | |||||||||||||||||
Contingent payment consideration | 600 | |||||||||||||||||
Aggregate purchase price for the acquisition including contingent consideration | 3,300 | |||||||||||||||||
Cash paid for acquisition | $ 2,400 | |||||||||||||||||
Percentage of interest accrued | 3.25% | |||||||||||||||||
Seller notes | $ 300 | |||||||||||||||||
Contingent payments | $ 600 | |||||||||||||||||
Acquisitions [Member] | ||||||||||||||||||
Business Combination, Description [Abstract] | ||||||||||||||||||
Contingent payment consideration | 3,357 | 100 | 3,357 | 100 | 3,357 | |||||||||||||
Cash paid, net of cash acquired | 86,737 | 11,799 | ||||||||||||||||
Seller notes | 2,050 | 374 | 2,050 | 374 | 2,050 | |||||||||||||
Contingent payments | 3,357 | 100 | 3,357 | 100 | 3,357 | |||||||||||||
Other payable | 1,000 | 1,000 | 1,000 | |||||||||||||||
Seller put right | 3,522 | |||||||||||||||||
Total consideration | 96,666 | 12,273 | 96,666 | 12,273 | 96,666 | |||||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | ||||||||||||||||||
Total current assets | 7,479 | 466 | 7,479 | 466 | 7,479 | |||||||||||||
Total non-current assets | 19,634 | 2,655 | 19,634 | 2,655 | 19,634 | |||||||||||||
Total liabilities | (13,241) | (2,664) | (13,241) | (2,664) | (13,241) | |||||||||||||
Net tangible assets acquired | 13,872 | 457 | 13,872 | 457 | 13,872 | |||||||||||||
Customer and referral relationships | 29,096 | 3,742 | 29,096 | 3,742 | 29,096 | |||||||||||||
Non-compete agreements | 915 | 247 | 915 | 247 | 915 | |||||||||||||
Tradenames | 7,285 | 659 | 7,285 | 659 | 7,285 | |||||||||||||
Goodwill | 85,360 | 12,114 | 85,360 | 12,114 | 85,360 | |||||||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interest) | (39,862) | (4,946) | (39,862) | (4,946) | (39,862) | |||||||||||||
Total consideration | $ 96,666 | $ 12,273 | $ 96,666 | $ 12,273 | $ 96,666 | |||||||||||||
|
REVENUE RECOGNITION (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Apr. 14, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2024 |
Dec. 31, 2022 |
Jul. 07, 2022 |
Dec. 31, 2021 |
Dec. 10, 2021 |
Nov. 02, 2021 |
Feb. 09, 2018 |
Nov. 02, 2015 |
Apr. 01, 2013 |
|
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||||||||||||
Revenue related to the various categories | $ 140,656,000 | $ 126,928,000 | $ 272,360,000 | $ 239,296,000 | ||||||||||
Medicare Reimbursement [Abstract] | ||||||||||||||
Estimated percentage of decrease in payment | 3.50% | |||||||||||||
Percentage of reduction in Medicare payments for services performed by a physical or occupational therapist | 15.00% | |||||||||||||
Federal debt ceiling in connection with deficit reductions | 10 years | |||||||||||||
Reductions in federal spending | $ 1,200,000,000,000 | |||||||||||||
Medicare spending cut percentage | 2.00% | |||||||||||||
Expected reduction in Medicare spending percentage | 2.00% | 2.00% | 2.00% | 2.00% | 2.00% | |||||||||
Percentage of payment reduction waived through enacted legislation | 2.00% | |||||||||||||
Term for sequester relief applied to all Medicare payments | 3 months | |||||||||||||
Percentage of sequester relief applied to all Medicare payments through March 31, 2022 | 2.00% | |||||||||||||
Percentage of sequester relief applied to all Medicare payments through June 30, 2022 | 1.00% | |||||||||||||
Percentage of increase in payment adjustment for therapists participating in MIPS | 1.00% | |||||||||||||
Combined physical therapy/speech language pathology expenses | $ 3,700 | |||||||||||||
Reduction in combined physical therapy/speech language pathology expenses | $ 3,000 | |||||||||||||
Percentage of practice expense component | 100.00% | |||||||||||||
Percentage reduction for service | 50.00% | |||||||||||||
Percentage of payment for outpatient therapy services | 85.00% | |||||||||||||
Net patient revenue from Medicare accounts | $ 74,900,000 | 62,100,000 | ||||||||||||
CMS [Member] | ||||||||||||||
Medicare Reimbursement [Abstract] | ||||||||||||||
Estimated percentage of decrease in payment | 9.00% | |||||||||||||
Expected reduction in Medicare spending percentage | 3.75% | |||||||||||||
Minimum [Member] | ||||||||||||||
Contractual Allowances [Abstract] | ||||||||||||||
Difference between net revenues and corresponding cash collections, approximately of net revenues | 1.00% | |||||||||||||
Difference between actual aggregate contractual reserve and estimated contractual allowance reserve percentage | 1.00% | |||||||||||||
Maximum contractual allowance reserve estimate | 1.00% | |||||||||||||
Maximum [Member] | ||||||||||||||
Medicare Reimbursement [Abstract] | ||||||||||||||
Percentage of therapist providers participating in MIPS | 3.00% | |||||||||||||
Contractual Allowances [Abstract] | ||||||||||||||
Difference between net revenues and corresponding cash collections, approximately of net revenues | 1.50% | |||||||||||||
Difference between actual aggregate contractual reserve and estimated contractual allowance reserve percentage | 1.50% | |||||||||||||
Maximum contractual allowance reserve estimate | 1.50% | |||||||||||||
Forecast [Member] | ||||||||||||||
Medicare Reimbursement [Abstract] | ||||||||||||||
Expected reduction in Medicare spending percentage | 3.00% | 0.75% | ||||||||||||
Plan [Member] | CMS [Member] | ||||||||||||||
Medicare Reimbursement [Abstract] | ||||||||||||||
Expected reduction in Medicare spending percentage | 4.40% | |||||||||||||
From 2017 through 2019 [Member] | ||||||||||||||
Medicare Reimbursement [Abstract] | ||||||||||||||
Percentage of increase in Medicare payment rates | 0.50% | |||||||||||||
From 2020 through 2025 [Member] | ||||||||||||||
Medicare Reimbursement [Abstract] | ||||||||||||||
Percentage of increase in Medicare payment rates | 0.00% | |||||||||||||
Net Patient Revenue [Member] | ||||||||||||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||||||||||||
Revenue related to the various categories | $ 118,196,000 | 113,238,000 | $ 227,734,000 | 212,492,000 | ||||||||||
Other Revenue [Member] | ||||||||||||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||||||||||||
Revenue related to the various categories | 898,000 | 918,000 | 1,770,000 | 1,464,000 | ||||||||||
Physical Therapy Operations [Member] | ||||||||||||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||||||||||||
Revenue related to the various categories | 119,094,000 | 114,156,000 | 229,504,000 | 213,956,000 | ||||||||||
Management Contract [Member] | ||||||||||||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||||||||||||
Revenue related to the various categories | 2,125,000 | 2,739,000 | 4,351,000 | 5,297,000 | ||||||||||
Industrial Injury Prevention Services [Member] | ||||||||||||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||||||||||||
Revenue related to the various categories | $ 19,437,000 | $ 10,033,000 | $ 38,505,000 | $ 20,043,000 |
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Computation of earnings per share - USPH shareholders [Abstract] | ||||
Net income attributable to USPH shareholders | $ 11,195 | $ 12,436 | $ 19,994 | $ 20,609 |
(Charges) credit to retained earnings [Abstract] | ||||
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 |
Net income attributable to common shareholders | $ 11,351 | $ 10,538 | $ 20,036 | $ 13,298 |
Earnings per share basic (in dollars per share) | $ 0.87 | $ 0.82 | $ 1.55 | $ 1.03 |
Earnings per share diluted (in dollars per share) | $ 0.87 | $ 0.82 | $ 1.55 | $ 1.03 |
Shares used in computation [Abstract] | ||||
Basic earnings per share - weighted-average shares (in shares) | 12,998 | 12,902 | 12,968 | 12,886 |
Diluted earnings per share - weighted-average shares (in shares) | 12,998 | 12,902 | 12,968 | 12,886 |
Federal statutory income tax rate | 25.55% | 25.55% | ||
State statutory income tax rate | 25.55% | 25.55% |
REDEEMABLE NON-CONTROLLING INTEREST (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Changes in Carrying Amount of Redeemable Non-Controlling Interests [Roll Forward] | ||||
Beginning balance | $ 155,262 | |||
Operating results allocated to redeemable non-controlling interest partners | $ 2,626 | $ 3,611 | 5,183 | $ 6,064 |
Ending balance | 151,400 | 151,400 | ||
Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest [Abstract] | ||||
Fair value | 151,400 | 151,400 | ||
Redeemable Non-Controlling Interest [Member] | ||||
Changes in Carrying Amount of Redeemable Non-Controlling Interests [Roll Forward] | ||||
Beginning balance | 158,008 | 138,924 | 155,262 | 132,340 |
Operating results allocated to redeemable non-controlling interest partners | 2,626 | 3,611 | 5,183 | 6,064 |
Distributions to redeemable non-controlling interest partners | (2,328) | (2,622) | (4,731) | (6,216) |
Changes in the fair value of redeemable non-controlling interest | (210) | 2,549 | (57) | 9,819 |
Purchases of redeemable non-controlling interest | (7,138) | (4,707) | (9,596) | (9,536) |
Acquired interest | 0 | 5,556 | 4,946 | 10,719 |
Sales of redeemable non-controlling interest - temporary equity | 2,187 | 0 | 2,187 | 319 |
Notes receivable related to sales of redeemable non-controlling interest - temporary equity | (1,843) | 0 | (1,843) | (287) |
Adjustments in notes receivable related to the sales of redeemable non-controlling interest - temporary equity | 98 | 26 | 49 | 115 |
Ending balance | 151,400 | 143,337 | 151,400 | 143,337 |
Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest [Abstract] | ||||
Contractual time period has lapsed but holder's employment has not terminated | 73,204 | 73,915 | 73,204 | 73,915 |
Contractual time period has not lapsed and holder's employment has not terminated | 78,196 | 69,422 | 78,196 | 69,422 |
Holder's employment has terminated and contractual time period has expired | 0 | 0 | 0 | 0 |
Holder's employment has terminated and contractual time period has not expired | 0 | 0 | 0 | 0 |
Fair value | $ 151,400 | $ 143,337 | $ 151,400 | $ 143,337 |
Therapy Practice [Member] | Minimum [Member] | ||||
Business Combination, Description [Abstract] | ||||
Business acquisition, percentage of limited partnership acquired | 50.00% | 50.00% | ||
Therapy Practice [Member] | Maximum [Member] | ||||
Business Combination, Description [Abstract] | ||||
Business acquisition, percentage of limited partnership acquired | 90.00% | 90.00% | ||
Therapy Practice [Member] | NewCo. [Member] | ||||
Business Combination, Description [Abstract] | ||||
Percentage of equity interest of subsidiary contributed for acquisition | 100.00% | 100.00% | ||
Business acquisition, percentage of general partnership interest acquired | 100.00% | 100.00% | ||
Business acquisition, consideration payable, term of note | 2 years | |||
Employment agreement renewal term | 1 year | |||
Non-Compete agreement term under condition of termination of employment of employed selling shareholder | 2 years | |||
Therapy Practice [Member] | NewCo. [Member] | Minimum [Member] | ||||
Business Combination, Description [Abstract] | ||||
Employment agreement term | 3 years | |||
Non-Compete agreement term regardless of whether the selling shareholder is employed | 5 years | |||
Therapy Practice [Member] | NewCo. [Member] | Maximum [Member] | ||||
Business Combination, Description [Abstract] | ||||
Employment agreement term | 5 years | |||
Non-Compete agreement term regardless of whether the selling shareholder is employed | 6 years | |||
ProgressiveHealth [Member] | NewCo. [Member] | ||||
Business Combination, Description [Abstract] | ||||
Percentage of equity interest of subsidiary contributed for acquisition | 100.00% | 100.00% | ||
Non-Compete agreement term under condition of termination of employment of employed selling shareholder | 2 years | |||
Non-Compete agreement term regardless of whether the selling shareholder is employed | 7 years | |||
Percentage of right to sell equity interest on each of the 4th and 5th anniversaries | 30.00% | 30.00% | ||
Percentage of right to sell equity interest on each of the 6th and 7th anniversaries | 10.00% | 10.00% |
GOODWILL (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Goodwill [Roll Forward] | ||
Beginning balance | $ 434,679 | $ 345,646 |
Goodwill acquired | 12,114 | 89,746 |
Goodwill adjustments for purchase price allocation of businesses acquired in prior year | (4,032) | (713) |
Ending balance | $ 442,761 | $ 434,679 |
INTANGIBLE ASSETS, NET - Intangible Assets, Net (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | $ 92,655 | $ 86,382 |
Tradenames [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | 39,838 | 38,790 |
Customer and Referral Relationships [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | 51,047 | 45,643 |
Accumulated amortization | $ 20,772 | 17,762 |
Customer and Referral Relationships [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 6 years | |
Customer and Referral Relationships [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 14 years | |
Non-compete Agreements [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | $ 1,770 | 1,949 |
Accumulated amortization | $ 6,717 | $ 6,450 |
Non-compete Agreements [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 5 years | |
Non-compete Agreements [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 6 years |
INTANGIBLE ASSETS, NET - Amortization Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Amortization of Deferred Charges [Abstract] | ||||
Total amortization expenses | $ 1,459 | $ 916 | $ 3,278 | $ 1,738 |
Customer and Referral Relationships [Member] | ||||
Amortization of Deferred Charges [Abstract] | ||||
Total amortization expenses | 1,339 | 778 | 3,011 | 1,561 |
Non-compete Agreements [Member] | ||||
Amortization of Deferred Charges [Abstract] | ||||
Total amortization expenses | $ 120 | $ 138 | $ 267 | $ 177 |
INTANGIBLE ASSETS, NET - Amortization of Referral Relationships and Non-Competition Agreements (Details) $ in Thousands |
Jun. 30, 2022
USD ($)
|
---|---|
Customer and Referral Relationships [Member] | |
Finite-Lived Intangible Assets, Amortization Expense, Maturity [Abstract] | |
2022 (excluding the six months ended June 30, 2022) | $ 2,745 |
2023 | 5,393 |
2024 | 5,228 |
2025 | 5,084 |
2026 | 4,616 |
Thereafter | 27,981 |
Non-compete Agreements [Member] | |
Finite-Lived Intangible Assets, Amortization Expense, Maturity [Abstract] | |
2022 (excluding the six months ended June 30, 2022) | 267 |
2023 | 477 |
2024 | 421 |
2025 | 355 |
2026 | 216 |
Thereafter | $ 34 |
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
1 Months Ended | 12 Months Ended | |
---|---|---|---|
Jan. 31, 2022 |
Dec. 31, 2021 |
Jun. 30, 2022 |
|
Payables and Accruals [Abstract] | |||
Salaries and related costs | $ 23,569 | $ 19,524 | |
Credit balances due to patients and payors | 6,649 | 7,875 | |
Group health insurance claims | 1,984 | 2,038 | |
Closure costs | 498 | 285 | |
Federal taxes payable | 2,716 | 1,754 | |
Contingent payments related to acquisition | 1,000 | 1,000 | |
Settlement of a legal matter | 2,750 | 0 | |
Other | 6,539 | 8,770 | |
Total | 45,705 | $ 41,246 | |
Litigation [Abstract] | |||
Payment of settlement amount | $ 2,750 | ||
Amount of payments recorded as expense during the period | $ 2,600 |
NOTES PAYABLE AND AMENDED CREDIT AGREEMENT, Amended Credit Agreement and Credit Agreement (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Debt Instruments [Abstract] | ||
Principal amount | $ 155,696 | $ 118,417 |
Principal amount, current portion | 5,188 | 830 |
Principal amount, net of current portion | 150,508 | 117,587 |
Unamortized discount and debt issuance cost [Abstract] | ||
Unamortized discount and debt issuance cost | 2,027 | 0 |
Unamortized discount and debt issuance cost, current portion | 408 | 0 |
Unamortized discount and debt issuance cost, net of current portion | 1,619 | 0 |
Net debt [Abstract] | ||
Net debt | 153,669 | 118,417 |
Net debt, less current portion | 4,780 | 830 |
Net debt, net of current portion | 148,889 | 117,587 |
Revolving Facility [Member] | ||
Debt Instruments [Abstract] | ||
Principal amount | 0 | 114,000 |
Unamortized discount and debt issuance cost [Abstract] | ||
Unamortized discount and debt issuance cost | 0 | 0 |
Net debt [Abstract] | ||
Net debt | 0 | 114,000 |
Term Facility [Member] | ||
Debt Instruments [Abstract] | ||
Principal amount | 150,000 | 0 |
Unamortized discount and debt issuance cost [Abstract] | ||
Unamortized discount and debt issuance cost | 2,027 | 0 |
Net debt [Abstract] | ||
Net debt | 147,973 | 0 |
Other Debt [Member] | ||
Debt Instruments [Abstract] | ||
Principal amount | 5,696 | 4,417 |
Unamortized discount and debt issuance cost [Abstract] | ||
Unamortized discount and debt issuance cost | 0 | 0 |
Net debt [Abstract] | ||
Net debt | $ 5,696 | $ 4,417 |
NOTES PAYABLE AND AMENDED CREDIT AGREEMENT, Credit Facilities (Details) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
Dec. 05, 2013 |
|
Debt Instruments [Abstract] | |||
Aggregate amount of notes payable | $ 155,696,000 | $ 118,417,000 | |
Notes Payable [Member] | |||
Debt Instruments [Abstract] | |||
Aggregate amount of notes payable | 4,900,000 | ||
Aggregate principal payment due in 2022 | 800,000 | ||
Aggregate principal payment due in 2023 | $ 4,100,000 | ||
Notes Payable [Member] | Minimum [Member] | |||
Debt Instruments [Abstract] | |||
Average effective interest rate | 3.25% | ||
Notes Payable [Member] | Maximum [Member] | |||
Debt Instruments [Abstract] | |||
Average effective interest rate | 3.50% | ||
Term Facility [Member] | |||
Debt Instruments [Abstract] | |||
Revolving credit facility commitment | $ 150,000,000 | ||
Frequency of term facility | quarterly | ||
Interest rate on credit facility in first two years | 0.625% | ||
Interest rate on credit facility in third and fourth year | 1.25% | ||
Interest rate on credit facility in fifth year | 1.875% | ||
Aggregate amount of notes payable | $ 150,000,000 | 0 | |
Revolving Facility [Member] | |||
Debt Instruments [Abstract] | |||
Revolving credit facility commitment | $ 175,000,000 | $ 125,000,000.0 | |
Term of credit facility | 5 years | ||
Aggregate amount of notes payable | $ 0 | $ 114,000,000 | |
Revolving Facility [Member] | Minimum [Member] | |||
Debt Instruments [Abstract] | |||
Percentage of unused commitment fee | 0.25% | ||
Revolving Facility [Member] | Maximum [Member] | |||
Debt Instruments [Abstract] | |||
Increase on limit of credit facility | $ 50,000,000 | ||
Percentage of unused commitment fee | 0.35% | ||
Standby Letters of Credit [Member] | |||
Debt Instruments [Abstract] | |||
Revolving credit facility commitment | $ 12,000,000 | ||
Swingline Loans [Member] | |||
Debt Instruments [Abstract] | |||
Revolving credit facility commitment | $ 15,000,000 | ||
Swingline Loans [Member] | SOFR [Member] | Minimum [Member] | |||
Debt Instruments [Abstract] | |||
Applicable margin for SOFR borrowings rate | 1.50% | ||
Swingline Loans [Member] | SOFR [Member] | Maximum [Member] | |||
Debt Instruments [Abstract] | |||
Applicable margin for SOFR borrowings rate | 2.25% | ||
Swingline Loans [Member] | Alternate Base Rate [Member] | Minimum [Member] | |||
Debt Instruments [Abstract] | |||
Spread on variable rate | 0.50% | ||
Swingline Loans [Member] | Alternate Base Rate [Member] | Maximum [Member] | |||
Debt Instruments [Abstract] | |||
Spread on variable rate | 1.25% | ||
Senior Credit Facility [Member] | |||
Debt Instruments [Abstract] | |||
Debt instrument, maturity date | Jun. 17, 2027 | ||
Aggregate principal amount | $ 325,000,000 | ||
Increase on limit of credit facility | $ 100,000,000 | ||
Leverage ratio | 2.0 | ||
Outstanding amount | $ 150,000,000.0 | ||
Remaining revolving credit outstanding | $ 175,000,000.0 |
DERIVATIVE INSTRUMENTS (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|---|
Jul. 31, 2022 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Derivative Instrument, Consolidated Statements of Comprehensive Income [Abstract] | |||||
Unrealized loss on cash flow hedge | $ (531) | $ 0 | $ (531) | $ 0 | |
Tax effect at statutory rate (federal and state) of 25.55% | 136 | 0 | 136 | 0 | |
Other Comprehensive loss | $ (395) | $ (395) | |||
Federal statutory income tax rate | 25.55% | 25.55% | |||
State statutory income tax rate | 25.55% | 25.55% | |||
Interest Rate Swap [Member] | |||||
Derivative Instruments [Abstract] | |||||
Notional value | $ 150,000 | $ 150,000 | |||
Debt instrument, maturity date | Jun. 30, 2027 | ||||
Derivative Instrument, Consolidated Statements of Comprehensive Income [Abstract] | |||||
Unrealized loss on cash flow hedge | (531) | 0 | $ (531) | 0 | |
Tax effect at statutory rate (federal and state) of 25.55% | 136 | 0 | 136 | 0 | |
Other Comprehensive loss | $ (395) | 0 | $ (395) | 0 | |
Federal statutory income tax rate | 25.55% | 25.55% | |||
State statutory income tax rate | 25.55% | 25.55% | |||
Carrying and Fair Value of Interest Rate Derivatives [Abstract] | |||||
Interest rate swap | $ (531) | $ 0 | $ (531) | $ 0 | |
Interest Rate Swap [Member] | SOFR [Member] | Subsequent Event [Member] | |||||
Derivative Instruments [Abstract] | |||||
Term of variable rate | 1 month | ||||
Debt instrument, fixed rate of interest | 2.815% |
LEASES (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|||
Components of Lease Expense [Abstract] | ||||||
Operating lease cost | $ 8,700 | $ 7,895 | $ 17,104 | $ 15,624 | ||
Short-term lease cost | 259 | 361 | 580 | 729 | ||
Variable lease cost | 1,994 | 1,628 | 3,926 | 3,239 | ||
Total lease cost | [1] | 10,953 | 9,884 | 21,610 | 19,592 | |
Supplemental Information Related to Leases [Abstract] | ||||||
Cash paid for amounts included in the measurement of operating lease liabilities | 8,940 | 8,258 | 17,557 | 16,370 | ||
Right-of-use assets obtained in exchange for new operating lease liabilities | 15,595 | $ 12,976 | 21,606 | $ 20,873 | ||
Future Lease Payments for Operating Leases [Abstract] | ||||||
2022 (excluding the six months ended June 30, 2022) | 17,829 | 17,829 | ||||
2023 | 31,725 | 31,725 | ||||
2024 | 25,292 | 25,292 | ||||
2025 | 18,060 | 18,060 | ||||
2026 | 11,613 | 11,613 | ||||
2027 and thereafter | 11,135 | 11,135 | ||||
Total lease payments | 115,654 | 115,654 | ||||
Less: imputed interest | 5,795 | 5,795 | ||||
Total operating lease liabilities | $ 109,859 | $ 109,859 | ||||
Average Lease Terms and Discount Rates [Abstract] | ||||||
Weighted-average remaining lease term - Operating leases | 4 years 2 months 8 days | 4 years 1 month 9 days | 4 years 2 months 8 days | 4 years 1 month 9 days | ||
Weighted-average discount rate - Operating leases | 2.48% | 3.00% | 2.48% | 3.00% | ||
Maximum [Member] | ||||||
Operating Lease [Abstract] | ||||||
Lease term | 5 years | 5 years | ||||
|
SEGMENT INFORMATION (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
Segment Information [Abstract] | |||||
Net operating revenue | $ 140,656 | $ 126,928 | $ 272,360 | $ 239,296 | |
Gross profit | 30,821 | 34,304 | 57,409 | 60,200 | |
Total assets | 796,444 | 749,426 | 796,444 | 749,426 | $ 749,426 |
Reportable Segments [Member] | Physical Therapy Operations [Member] | |||||
Segment Information [Abstract] | |||||
Net operating revenue | 121,219 | 116,895 | 233,855 | 219,253 | |
Gross profit | 26,698 | 31,761 | 49,135 | 54,935 | |
Total assets | 414,172 | 545,449 | 414,172 | 545,449 | |
Reportable Segments [Member] | Industrial Injury Prevention Services [Member] | |||||
Segment Information [Abstract] | |||||
Net operating revenue | 19,437 | 10,033 | 38,505 | 20,043 | |
Gross profit | 4,123 | 2,543 | 8,274 | 5,265 | |
Total assets | $ 382,272 | $ 203,977 | $ 382,272 | $ 203,977 |
INVESTMENT IN UNCONSOLIDATED AFFILIATE (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
Investments in Unconsolidated Affiliate [Abstract] | |||||
Investment in unconsolidated affiliate | $ 12,346 | $ 12,346 | $ 12,215 | ||
Earnings from investment in unconsolidated affiliate | $ 340 | $ 0 | $ 679 | $ 0 | |
Joint Venture Interest [Member] | |||||
Investments in Unconsolidated Affiliate [Abstract] | |||||
Percentage of ownership in joint venture interest | 49.00% | 49.00% | |||
Investment in unconsolidated affiliate | $ 12,300 | $ 12,300 | |||
Earnings from investment in unconsolidated affiliate | 679 | ||||
Distribution received from investment in unconsolidated affiliate | $ 548 |
COMMON STOCK (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | |
---|---|---|---|---|
Mar. 31, 2009 |
Jun. 30, 2022 |
Jun. 30, 2022 |
Dec. 31, 2008 |
|
Class of Treasury Stock [Abstract] | ||||
Total purchased shares (in shares) | 859,499 | 0 | 0 | |
Additional estimated shares (in shares) | 137,363 | |||
Closing price (in dollars per share) | $ 109.20 | $ 109.20 | ||
Maximum [Member] | ||||
Class of Treasury Stock [Abstract] | ||||
Common stock authorized by the Board of Directors (in shares) | 1,200,000 | 2,250,000 | ||
Percentage of repurchase of common stock | 10.00% | |||
Bank credit agreement to permit share repurchases of common stock | $ 15,000,000 |
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