ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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(STATE OR OTHER JURISDICTION OF INCORPORATION
OR ORGANIZATION) |
(I.R.S. EMPLOYER IDENTIFICATION NO.)
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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(ZIP CODE)
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Title of Each Class
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Trading Symbol
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Name of Each Exchange on Which Registered
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☑
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Accelerated filer
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☐
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Non-accelerated filer
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☐ (Do not check if a smaller reporting company)
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Smaller reporting company
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Emerging growth company
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DOCUMENT
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PART OF FORM 10-K
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Portions of Definitive Proxy Statement for the 2023 Annual Meeting of Shareholders
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Part III
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Page
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PART I
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Item 1.
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3
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Item 1A.
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13
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Item 1B.
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20
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Item 2.
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20
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Item 3.
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20
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Item 4.
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21
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PART II
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Item 5.
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21
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Item 6.
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22 |
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Item 7.
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23
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Item 7A.
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37
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Item 8.
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38
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46 | ||
Item 9.
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72
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Item 9A.
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72
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Item 9B.
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72
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Item 9C.
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72 |
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PART III
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Item 10.
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73
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Item 11.
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73
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Item 12.
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73
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Item 13.
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73
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Item 14.
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73
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PART IV
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Item 15.
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73
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Item 16.
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73
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79
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• |
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;
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• |
changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;
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• |
revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction;
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• |
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;
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• |
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;
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• |
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;
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• |
one of our acquisition agreements contains a Put Right related to a future purchase of a majority interest in a separate company;
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• |
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:
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• |
our debt and financial obligations could adversely affect our financial condition, our ability to obtain future financing and our ability to operate our business;
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• |
changes as the result of government enacted national healthcare reform;
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• |
business and regulatory conditions including federal and state regulations;
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• |
governmental and other third party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs;
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• |
revenue and earnings expectations;
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• |
legal actions, which could subject us to increased operating costs and uninsured liabilities;
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• |
general economic conditions, including but not limited to inflationary and recessionary periods;
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• |
our business depends on hiring, training, and retaining qualified employees
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• |
availability and cost of qualified physical therapists;
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• |
competitive environment in the industrial injury prevention services business, which could result in the termination or non-renewal of contractual service arrangements and other adverse financial
consequences for that service line;
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• |
acquisitions, and the successful integration of the operations of the acquired businesses;
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• |
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);
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• |
maintaining our information technology systems with adequate safeguards to protect against cyber-attacks;
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• |
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;
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• |
maintaining clients for which we perform management, industrial injury prevention related services, and other services, as a breach or termination of those contractual arrangements by such clients could
cause operating results to be less than expected;
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• |
maintaining adequate internal controls;
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• |
maintaining necessary insurance coverage;
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• |
availability, terms, and use of capital; and
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• |
weather and other seasonal factors.
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ITEM 1. |
BUSINESS.
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% Interest
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Number of
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|||||
Acquisition
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|
Date
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Acquired
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Clinics
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|||
November 2022 Acquisition
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|
November 30, 2022
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80%
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13
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|||
October 2022 Acquisition
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|
October 31, 2022
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60%
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14
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|||
September 2022 Acquisition
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|
September 30, 2022
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80%
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2
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|||
August 2022 Acquisition
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August 31, 2022
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70%
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6
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|||
March 2022 Acquisition
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|
March 31, 2022
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70%
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6
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|||
December 2021 Acquisition
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|
December 31, 2021
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75%
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3
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|||
November 2021 Acquisition
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November 30, 2021
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70%
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*
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|||
September 2021 Acquisition
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September 30, 2021
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100%
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*
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|||
June 2021 Acquisition
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June 30, 2021
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65%
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8
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|||
March 2021 Acquisition
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March 31, 2021
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70%
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6
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|||
November 2020 Acquisition
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November 30, 2020
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75%
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3
|
|||
September 2020 Acquisition
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September 30, 2020
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70%
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**
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|||
February 2020 Acquisition
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February 27, 2020
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65% ***
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4
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* |
Industrial injury prevention services business
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**
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The business includes six management contracts which have been in place for a number of years.As of the date acquired, the contracts had a remaining term of five years.
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*** |
The four clinics are in four separate partnerships. The Company's interest in the four partnerships range from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction.
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December 31, 2022
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December 31, 2021
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December 31, 2020
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||||||||||||||||||||||
Net Patient
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Net Patient
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Net Patient
|
||||||||||||||||||||||
Payor
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Revenue
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Percentage
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Revenue
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Percentage
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Revenue
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Percentage
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||||||||||||||||||
Managed Care Programs/ Commercial Health Insurance
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$
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215,822
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46.5
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%
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$
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209,129
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47.7
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%
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$
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177,877
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47.7
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%
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||||||||||||
Medicare/Medicaid
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174,401
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37.5
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%
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155,122
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35.4
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%
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118,030
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31.6
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%
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|||||||||||||||
Workers' Compensation Insurance
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45,010
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9.7
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%
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44,549
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10.2
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%
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48,628
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13.0
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%
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|||||||||||||||
Other
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29,357
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6.3
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%
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29,530
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6.7
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%
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28,805
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7.7
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%
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|||||||||||||||
Total
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$
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464,590
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100.0
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%
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$
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438,330
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100.0
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%
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$
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373,340
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100.0
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%
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ITEM 1A. |
RISK FACTORS.
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• |
require us to maintain a quarterly fixed charge coverage ratio and minimum working capital ratio;
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• |
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;
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• |
limit our future ability to refinance our indebtedness on terms acceptable to us or at all;
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• |
limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan; and
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• |
impose on us financial and operational restrictions.
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• |
facility and professional licensure/permits, including certificates of need;
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• |
conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral;
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• |
addition of facilities and services; and
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• |
coding, billing and payment for services.
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• |
refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from managed care payors;
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• |
state or federal agencies imposing fines, penalties and other sanctions on us;
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• |
temporary suspension of payment for new patients to the facility or agency;
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• |
decertification or exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks;
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• |
the imposition of a new Corporate Integrity Agreement;
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• |
damage to our reputation;
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• |
the revocation of a facility’s or agency’s license; and
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• |
loss of certain rights under, or termination of, our contracts with managed care payors.
|
• |
the difficulty and expense of integrating acquired personnel into our business;
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• |
the diversion of management’s time from existing operations;
|
• |
the potential loss of key employees of acquired companies;
|
• |
the difficulty of assignment and/or procurement of managed care contractual arrangements; and
|
• |
the assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities for failure to comply with healthcare regulations.
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ITEM 4. |
MINE SAFETY DISCLOSURES.
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ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
12/17 |
12/18 |
12/19 |
12/20 |
12/21 |
12/22 |
|
U.S. Physical Therapy, Inc | 100 |
142 |
158 |
167 |
132 |
112 |
NYSE Composite |
100 |
89 |
109 |
113 |
134 |
119 |
NYSE Healthcare Index |
100 |
107 |
127 |
141 |
171 |
165 |
ITEM 6. |
RESERVED.
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ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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|
% Interest
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Number of
|
|||||
Acquisition
|
|
Date
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Acquired
|
Clinics
|
|||
November 2022 Acquisition
|
|
November 30, 2022
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80%
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13
|
|||
October 2022 Acquisition
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October 31, 2022
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60%
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14
|
|||
September 2022 Acquisition
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|
September 30, 2022
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80%
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2
|
|||
August 2022 Acquisition
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|
August 31, 2022
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70%
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6
|
|||
March 2022 Acquisition
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|
March 31, 2022
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70%
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6
|
|||
December 2021 Acquisition
|
|
December 31, 2021
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75%
|
3
|
|||
November 2021 Acquisition
|
|
November 30, 2021
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70%
|
*
|
|||
September 2021 Acquisition
|
|
September 30, 2021
|
100%
|
*
|
|||
June 2021 Acquisition
|
|
June 30, 2021
|
65%
|
8
|
|||
March 2021 Acquisition
|
|
March 31, 2021
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70%
|
6
|
|||
November 2020 Acquisition
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|
November 30, 2020
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75%
|
3
|
|||
September 2020 Acquisition
|
|
September 30, 2020
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70%
|
**
|
|||
February 2020 Acquisition
|
|
February 27, 2020
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65% ***
|
4
|
*
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Industrial injury prevention services business
|
**
|
The business includes six management contracts which have been in place for a number of years. As of the date acquired, the contracts had a remaining term of five years.
|
***
|
The four clinics are in four separate partnerships. The Company's interest in the four partnerships range from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase
transaction.
|
|
Year Ended
|
|||||||||||
|
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
|||||||||
Net patient revenue
|
$
|
464,590
|
$
|
438,330
|
$
|
373,340
|
||||||
Other revenue
|
3,407
|
2,939
|
2,020
|
|||||||||
Net patient revenue from physical therapy operations
|
$
|
467,997
|
$
|
441,269
|
$
|
375,360
|
||||||
Revenue from management contracts
|
8,095
|
9,853
|
8,410
|
|||||||||
Revenue from industrial injury prevention services
|
77,052
|
43,900
|
39,199
|
|||||||||
Total revenue
|
$
|
553,144
|
$
|
495,022
|
$
|
422,969
|
December 31,
|
||||||||
2022
|
2021
|
|||||||
Gross patient accounts receivable
|
$
|
144,758
|
$
|
129,524
|
||||
Less contractual allowances
|
89,995
|
80,484
|
||||||
Subtotal - accounts receivable
|
54,763
|
49,040
|
||||||
Less allowance for credit losses
|
2,829
|
2,768
|
||||||
Net patient accounts receivable
|
$
|
51,934
|
$
|
46,272
|
December 31, 2022
|
December 31, 2021
|
|||||||||||||||||||||||
Current to
|
Current to
|
|||||||||||||||||||||||
Payor
|
120 Days
|
120+ Days
|
Total
|
120 Days
|
120+ Days
|
Total
|
||||||||||||||||||
Managed Care/ Commercial Plans
|
$
|
16,439
|
$
|
2,168
|
$
|
18,607
|
$
|
13,985
|
$
|
2,381
|
$
|
16,366
|
||||||||||||
Medicare/Medicaid
|
15,987
|
1,657
|
17,644
|
13,442
|
1,636
|
15,078
|
||||||||||||||||||
Workers Compensation*
|
5,996
|
1,341
|
7,337
|
5,600
|
1,312
|
6,912
|
||||||||||||||||||
Self-pay
|
4,048
|
3,338
|
7,386
|
4,371
|
3,316
|
7,687
|
||||||||||||||||||
Other**
|
1,463
|
2,326
|
3,789
|
1,168
|
1,829
|
2,997
|
||||||||||||||||||
Totals
|
$
|
43,933
|
$
|
10,830
|
$
|
54,763
|
$
|
38,566
|
$
|
10,474
|
$
|
49,040
|
*
|
Workers compensation is paid by state administrators or their designated agents.
|
**
|
Other includes primarily litigation claims and, to a lesser extent, vehicular insurance claims.
|
2022 Year
|
Year ended December 31, 2022
|
2021 Year
|
Year ended December 31, 2021
|
Clinic Additions
|
Clinics opened or acquired during the year ended December 31, 2022 and 2021
|
2022 Clinic Additions
|
Clinics opened or acquired during the year ended December 31, 2022
|
2021 Clinic Additions
|
Clinics opened or acquired during the year ended December 31, 2021
|
Clinics Additions
|
Clinics opened or acquired during the year ended December 31, 2022 and 2021
|
Mature Clinics
|
Clinics opened or acquired prior to January 1, 2021 and are still operating
|
For the Years Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
Number of clinics at the end of period
|
640
|
591
|
||||||
Working Days
|
255
|
254
|
||||||
Average visits per day per clinic
|
28.7
|
29.1
|
||||||
Total patient visits
|
4,483,282
|
4,219,576
|
||||||
Net patient revenue per visit
|
$
|
103.63
|
$
|
103.88
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
Computation of earnings per share - USPH shareholders:
|
||||||||
Net income attributable to USPH shareholders
|
$
|
32,158
|
$
|
40,831
|
||||
Charges to retained earnings:
|
||||||||
Revaluation of redeemable non-controlling interest
|
(3,890
|
)
|
(13,011
|
)
|
||||
Tax effect at statutory rate (federal and state) of 25.55%
|
994
|
3,324
|
||||||
$
|
29,262
|
$
|
31,144
|
|||||
Earnings per share (basic and diluted)
|
$
|
2.25
|
$
|
2.41
|
Year Ended December 31,
|
||||||||
2022
|
2021*
|
|
||||||
Computation of earnings per share - USPH shareholders:
|
||||||||
Net income attributable to USPH shareholders
|
$
|
32,158
|
$
|
40,831
|
||||
Charges to retained earnings:
|
||||||||
Revaluation of redeemable non-controlling interest
|
(3,890
|
)
|
(13,011
|
)
|
||||
Tax effect at statutory rate (federal and state) of 25.55%
|
994
|
3,324
|
||||||
$
|
29,262
|
$
|
31,144
|
|||||
Earnings per share (basic and diluted)
|
$
|
2.25
|
$
|
2.41
|
||||
Adjustments:
|
||||||||
Goodwill impairment charge
|
9,112
|
-
|
||||||
Change in fair value of contingent earn-out consideration
|
(2,520
|
)
|
-
|
|||||
Change in revaluation of put-right liability
|
5
|
-
|
||||||
Expenses related to executive officer transitions
|
-
|
1,301
|
||||||
Relief Funds
|
-
|
(4,597
|
)
|
|||||
Settlement of a legal matter
|
-
|
2,635
|
||||||
Allocation to non-controlling interests
|
(2,734
|
)
|
676
|
|||||
Revaluation of redeemable non-controlling interest
|
3,890
|
13,011
|
||||||
Tax effect at statutory rate (federal and state)
|
(1,981
|
)
|
(3,328
|
)
|
||||
Operating Results (a non-GAAP measure)
|
$
|
35,034
|
$
|
40,842
|
||||
Relief Funds
|
-
|
4,597
|
||||||
Allocation to non-controlling interests
|
-
|
(715
|
)
|
|||||
Tax effect at statutory rate (federal and state) of 25.55%
|
-
|
(992
|
)
|
|||||
Operating Results (including Relief Funds) (a non-GAAP measure)
|
$
|
35,034
|
$
|
43,732
|
||||
Basic and diluted Operating Results per share (a non-GAAP measure)
|
||||||||
Including Relief Funds
|
$
|
2.70
|
$
|
3.39
|
||||
Excluding Relief Funds
|
$
|
2.70
|
$
|
3.17
|
||||
Shares used in computation - basic and diluted
|
12,985
|
12,898
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
*
|
||||||
Net income attributable to USPH shareholders
|
$
|
32,158
|
$
|
40,831
|
||||
Adjustments:
|
||||||||
Depreciation and amortization
|
14,743
|
11,591
|
||||||
Goodwill impairment
|
9,112
|
-
|
||||||
Change in fair value of contingent earn-out consideration
|
(2,520
|
)
|
-
|
|||||
Settlement of a legal matter
|
-
|
2,635
|
||||||
Other and interest income
|
(859
|
)
|
(199
|
)
|
||||
Change in revaluation of put-right liability
|
5
|
-
|
||||||
Interest expense - debt and other, net
|
5,779
|
942
|
||||||
Provision for income taxes
|
12,164
|
15,272
|
||||||
Equity-based awards compensation expense
|
7,264
|
7,867
|
||||||
Allocation to non-controlling interests
|
(4,185
|
)
|
(1,277
|
)
|
||||
Adjusted EBITDA (a non-GAAP measure)
|
73,661
|
77,662
|
||||||
|
||||||||
Relief Funds
|
$
|
-
|
$
|
(4,597
|
)
|
|||
Allocation to non-controlling interests
|
-
|
715
|
||||||
Adjusted EBITDA (excluding Relief Funds) (a non-GAAP measure)
|
$
|
73,661
|
$
|
73,780
|
*
|
Revised to conform to current year presentation.
|
For the Year Ended
|
||||||||
December 31, 2022
|
December 31, 2021
|
|||||||
Revenue related to Mature Clinics
|
$
|
421,806
|
$
|
420,093
|
||||
Revenue related to 2022 Clinic Additions
|
14,779
|
-
|
||||||
Revenue related to 2021 Clinic Additions
|
25,211
|
12,638
|
||||||
Revenue from clinics sold or closed in 2022
|
2,794
|
5,143
|
||||||
Revenue from clinics sold or closed in 2021
|
-
|
456
|
||||||
Net patient revenue from physical therapy operations
|
464,590
|
438,330
|
||||||
Other revenue
|
3,407
|
2,939
|
||||||
Revenue from physical therapy operations
|
467,997
|
441,269
|
||||||
Revenue from management contracts
|
8,095
|
9,853
|
||||||
Revenue from industrial injury prevention services
|
77,052
|
43,900
|
||||||
Total revenue
|
$
|
553,144
|
$
|
495,022
|
For the Year Ended
|
||||||||
December 31, 2022
|
December 31, 2021
|
|||||||
Operating cost related to Mature Clinics
|
$
|
337,606
|
$
|
320,882
|
||||
Operating cost related to 2022 Clinic Additions
|
12,425
|
74
|
||||||
Operating cost related to 2021 Clinic Additions
|
20,792
|
10,299
|
||||||
Operating cost related to clinics sold or closed in 2022
|
2,810
|
4,561
|
||||||
Operating cost related to clinics sold or closed in 2021
|
-
|
512
|
||||||
Operating cost related to physical therapy operations
|
373,633
|
336,328
|
||||||
Operating cost related to management contracts
|
6,402
|
8,306
|
||||||
Operating cost related to industrial injury prevention services
|
61,085
|
33,206
|
||||||
Total operating cost
|
$
|
441,120
|
$
|
377,840
|
For the Year Ended
|
||||||||
December 31, 2022
|
December 31, 2021
|
|||||||
Physical therapy operations
|
||||||||
Salaries and related costs related to Mature Clinics
|
$
|
243,131
|
$
|
233,951
|
||||
Salaries and related costs related to 2022 Clinic Additions
|
8,059
|
-
|
||||||
Salaries and related costs related to 2021 Clinic Additions
|
13,688
|
6,668
|
||||||
Salaries and related costs related to clinics sold or closed in 2022
|
1,848
|
3,073
|
||||||
Salaries and related costs related to clinics sold or closed in 2021
|
-
|
248
|
||||||
Salaries and related costs related to physical therapy operations
|
266,726
|
243,940
|
||||||
Salaries and related costs related to management contracts
|
5,634
|
7,316
|
||||||
Salaries and related costs related to industrial injury prevention services
|
46,831
|
27,213
|
||||||
Total salaries and related costs
|
$
|
319,191
|
$
|
278,469
|
For the Year Ended
|
||||||||
December 31, 2022
|
December 31, 2021
|
|||||||
Physical therapy operations
|
||||||||
Rent, supplies, contract labor and other costs related to Mature Clinics
|
$
|
89,534
|
$
|
81,750
|
||||
Rent, supplies, contract labor and other costs related to 2022 Clinic Additions
|
4,167
|
71
|
||||||
Rent, supplies, contract labor and other costs related to 2021 Clinic Additions
|
6,777
|
3,539
|
||||||
Rent, supplies, contract labor and other costs related to clinics sold or closed in 2022
|
868
|
1,422
|
||||||
Rent, supplies, contract labor and other costs related to clinics sold or closed in 2021
|
-
|
301
|
||||||
Total Physical therapy operations
|
101,346
|
87,083
|
||||||
Rent, supplies, contract labor and other costs related to physical therapy management contracts
|
768
|
990
|
||||||
Rent, supplies, contract labor and other costs related to industrial injury prevention services
|
14,267
|
5,993
|
||||||
Total rent, supplies, contract labor and other costs
|
$
|
116,381
|
$
|
94,066
|
For the Year Ended
|
||||||||
December 31, 2022
|
December 31, 2021
|
|||||||
|
||||||||
Physical therapy operations
|
$
|
94,364
|
$
|
104,941
|
||||
Management contracts
|
1,693
|
1,547
|
||||||
Industrial injury prevention services
|
15,967
|
10,694
|
||||||
Gross profit
|
$
|
112,024
|
$
|
117,182
|
For the Year Ended
|
||||||||
December 31, 2022
|
December 31, 2021
|
|||||||
Income before taxes
|
$
|
55,571
|
$
|
73,196
|
||||
Less: net income attributable to non-controlling interest:
|
||||||||
Redeemable non-controlling interest - temporary equity
|
(6,902
|
)
|
(11,358
|
)
|
||||
Non-controlling interest - permanent equity
|
(4,347
|
)
|
(5,735
|
)
|
||||
$
|
(11,249
|
)
|
$
|
(17,093
|
)
|
|||
Income before taxes less net income attributable to non-controlling interest
|
$
|
44,322
|
$
|
56,103
|
||||
Provision for income taxes
|
$
|
12,164
|
$
|
15,272
|
||||
Percentage
|
27.4
|
%
|
27.2
|
%
|
Total
|
2023
|
2024
|
2025
|
2026
|
2027
|
Thereafter
|
||||||||||||||||||||||
Credit Agreement
|
$
|
179,126
|
3,751
|
4,687
|
7,500
|
9,375
|
$
|
153,813
|
$
|
-
|
||||||||||||||||||
Notes Payable
|
6,430
|
4,516
|
1,914
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Interest Payable
|
292
|
221
|
71
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Employee Agreements
|
64,311
|
58,624
|
5,687
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Operating Leases
|
143,740
|
45,074
|
35,572
|
26,440
|
18,081
|
10,613
|
7,960
|
|||||||||||||||||||||
$
|
393,899
|
$
|
112,186
|
$
|
47,931
|
$
|
33,940
|
$
|
27,456
|
$
|
164,426
|
$
|
7,960
|
• |
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;
|
• |
one of our acquisition agreements contains a Put Right related to a future purchase of a majority interest in a separate company;
|
• |
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:
|
• |
our debt and financial obligations could adversely affect our financial condition, our ability to obtain future financing and our ability to operate our business;
|
• |
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;
|
• |
our business depends on hiring, training, and retaining qualified employees
|
• |
availability and cost of qualified physical therapists;
|
• |
competitive environment in the industrial injury prevention services business, which could result in the termination or non-renewal 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, industrial injury prevention related services, 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.
|
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
Reports of Independent Registered Public Accounting Firm—Grant Thornton LLP (PCAOB ID Number )
|
39
|
Audited Financial Statements:
|
|
41 | |
42 | |
43 |
|
44 |
|
45 |
|
46 |
•
|
We tested the design and operating effectiveness of controls relating to billing and cash collections, net rate trend analysis by clinic and cash
collections versus net revenue trend analysis.
|
•
|
For a sample of patient visits, we inspected and compared underlying documents for each transaction, which included gross billing rates and cash collected
(net revenue).
|
•
|
For a sample of patient visits, we traced gross billings and net revenue to net revenue recorded in the general ledger and to each report used in
determining and assessing the contractual adjustment calculation.
|
•
|
We compared cash collections to recorded net revenue over the twelve month period ended December 31, 2022 and again for the twelve month period ended in
the first month subsequent to period end, to identify whether there were unusual trends that would indicate that the usage of historical collection patterns would no longer be reasonable to predict future collection patterns.
|
•
|
We tested the design and operating effectiveness of controls over management’s review of the assumptions used to project future cash flows, the selection
of an appropriate discount rate, and valuation methodologies applied.
|
•
|
We utilized valuation specialists to evaluate:
|
o
|
The appropriateness of the methodologies applied,
|
o
|
the reasonableness of the discount rate, and
|
o
|
the qualifications of the third-party valuation specialist engaged by the Company based on their credentials and experience.
|
•
|
We assessed the reasonableness of assumptions applied by management in their future cash flows, including revenue growth rates, EBITDA, and EBITDA margins.
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
Board of Directors and Shareholders
U.S. Physical Therapy, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of
December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial
statements of the Company as of and for the year ended December 31, 2022, and our report dated February 28, 2023 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/
February 28, 2023
|
December 31, 2022
|
December 31, 2021
|
|||||||
ASSETS
|
||||||||
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 gain
|
||||||||
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
|
$
|
|
$
|
|
Year Ended
|
||||||||||||
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
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
|
|
|
|
|||||||||
Goodwill impairment |
||||||||||||
Corporate office costs
|
|
|
|
|||||||||
Operating income
|
|
|
|
|||||||||
Other income and expense
|
||||||||||||
Relief Funds
|
|
|
|
|||||||||
Gain on sale of partnership interest and clinics
|
|
|
|
|||||||||
Settlement of a legal matter
|
( |
) | ||||||||||
Resolution of a payor matter
|
||||||||||||
Change in fair value of contingent earn-out consideration
|
||||||||||||
Equity in earnings of unconsolidated affiliate
|
|
|
|
|||||||||
Interest and other income, net
|
|
|
|
|||||||||
Change in 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
|
$
|
|
$
|
|
$
|
|
Year Ended | ||||||||||||
|
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
|||||||||
Net income
|
$
|
|
$
|
|
$
|
|
||||||
Other comprehensive income
|
||||||||||||
Unrealized gain 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
|
$
|
|
$
|
|
$
|
|
U.S. Physical Therapy, Inc.
|
||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional | Accumulated Other |
Retained | Treasury Stock | Total Shareholders’ | Non-Controlling | ||||||||||||||||||||||||||||||||||
Shares | Amount | Paid-In Capital | Comprehensive Loss |
Earnings | Shares | Amount | Equity | Interests | Total | |||||||||||||||||||||||||||||||
Balance January 1, 2020
|
|
$
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$ | $ | ||||||||||||||||||||||
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
|
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
Sale of non-controlling interest, net of purchases and tax
|
-
|
|
(
|
)
|
|
-
|
|
(
|
)
|
( |
) | |||||||||||||||||||||||||||||
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
|
-
|
|
|
|
-
|
|
|
|||||||||||||||||||||||||||||||||
Balance December 31, 2020
|
|
$
|
|
$
|
|
$ |
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$ | $ |
U.S. Physical Therapy, Inc.
|
||||||||||||||||||||||||||||||||||||||||
Common Stock
|
Additional
|
Accumulated Other |
Retained
|
Treasury Stock
|
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Paid-In Capital | Comprehensive Gain | Earnings |
Shares
|
Amount
|
Equity | Interests | Total | |||||||||||||||||||||||||||||||
Balance Jan 1, 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
|
-
|
|
(
|
)
|
|
-
|
|
(
|
)
|
( |
) | ( |
) | |||||||||||||||||||||||||||
Sale of non-controlling interest, net of purchases and tax
|
-
|
|
|
|
-
|
|
|
|
||||||||||||||||||||||||||||||||
Dividends paid to USPH 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 December 31, 2021
|
|
$
|
|
$
|
|
$ |
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$ | $ |
U.S. Physical Therapy, Inc.
|
||||||||||||||||||||||||||||||||||||||||
Common Stock
|
Additional
|
Accumulated Other |
Retained
|
Treasury Stock
|
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Paid-In Capital | Comprehensive Gain |
Earnings |
Shares
|
Amount
|
Equity | Interests | Total |
|||||||||||||||||||||||||||||||
Balance Jan 1, 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
|
-
|
|
(
|
)
|
|
-
|
|
(
|
)
|
( |
) | ( |
) | |||||||||||||||||||||||||||
Sale of non-controlling interest, net of purchases
|
-
|
|
|
|
-
|
|
|
|||||||||||||||||||||||||||||||||
Dividends paid to USPT 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 gain |
- | |||||||||||||||||||||||||||||||||||||||
Balance December 31, 2022
|
|
$
|
|
$
|
|
$ |
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$ | $ |
Year Ended
|
||||||||||||
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
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
|
|
|
(
|
)
|
||||||||
Gain on sale of partnership interest
|
|
|
(
|
)
|
||||||||
Derecognition (write-off) of goodwill - closed clinics
|
||||||||||||
Change in revaluation of put-right liability
|
||||||||||||
Change in fair value of contingent earn-out consideration
|
( |
) | ||||||||||
(Gain) loss on sale of clinics and fixed assets
|
( |
) | ||||||||||
Impairment of Goodwill
|
||||||||||||
Earnings in unconsolidated affiliate
|
( |
) | ( |
) | ||||||||
Other
|
(
|
)
|
(
|
)
|
|
|||||||
Changes in operating assets and liabilities:
|
||||||||||||
Increase in patient accounts receivable
|
(
|
)
|
(
|
)
|
|
|||||||
(Increase) decrease in accounts receivable - other
|
(
|
)
|
(
|
)
|
|
|||||||
(Decrease) increase in other assets
|
(
|
)
|
(
|
)
|
|
|||||||
(Decrease) Increase 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 sale of partnership interest - redeemable non-controlling interest
|
|
|
|
|||||||||
Sales of partnership interest, clinics and fixed assets
|
|
|
|
|||||||||
Distributions from unconsolidated affiliate
|
||||||||||||
Sale of non-controlling interest - permanent
|
||||||||||||
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
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Payments on term loan
|
( |
) | ||||||||||
Principal payments on notes payable
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
(Payment) receipt of Medicare Accelerated and Advance Funds
|
|
(
|
)
|
|
||||||||
Payment of deferred financing costs
|
( |
) | ||||||||||
Other
|
|
|
|
|||||||||
Net cash provided by (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
|
$
|
|
$
|
|
$
|
|
||||||
Notes payable related to purchase of redeemable non-controlling interest, temporary equity
|
$
|
|
$
|
|
$
|
|
||||||
Notes payable related to purchase of non-controlling interest, permanent equity
|
$
|
|
$
|
|
$
|
|
||||||
Notes receivable related to sale of partnership interest - redeemable non-controlling interest
|
$
|
|
$
|
|
$
|
|
||||||
Notes receivable related to sale of partnership interest
|
$
|
|
$
|
|
$
|
|
% Interest |
Number of |
|||||
Acquisition | Date | Acquired |
Clinics |
|||
November 2022 Acquisition
|
||||||
October 2022 Acquisition
|
||||||
September 2022 Acquisition
|
||||||
August 2022 Acquisition
|
||||||
March 2022 Acquisition
|
||||||
December 2021 Acquisition
|
|
|
|
|
|
|
November 2021 Acquisition
|
|
|
|
|
|
|
September 2021 Acquisition
|
|
|
|
|
|
|
June 2021 Acquisition
|
|
|
|
|
|
|
March 2021 Acquisition
|
|
|
|
|
|
|
November 2020 Acquisition
|
|
|
|
|
|
|
September 2020 Acquisition
|
|
|
|
|
|
|
February 2020 Acquisition
|
|
|
|
|
|
|
* |
|
** | |
*** | |
Year Ended
|
||||||||||||
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
Net patient revenue
|
$
|
|
$
|
|
$
|
|
||||||
Other revenue |
||||||||||||
Net patient revenue from physical therapy operations
|
||||||||||||
Revenue from management contracts
|
||||||||||||
Revenue from industrial injury prevention services
|
||||||||||||
Total revenue |
$
|
|
$
|
|
$
|
|
•
|
Level 1 - Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
|
•
|
Level 3 - Unobservable inputs based on the Company’s own assumptions.
|
Year Ended
|
||||||||||||
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
Computation of earnings per share - USPH shareholders:
|
||||||||||||
Net income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
||||||
Charges 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
|
|
|
|
% Interest |
Number of | |||||
Acquisition | Date | Acquired | Clinics |
|||
November 2022 Acquisition
|
|
|
|
|||
October 2022 Acquisition | ||||||
September 2022 Acquisition | ||||||
August 2022 Acquisition | ||||||
March 2022 Acquisition | ||||||
December 2021 Acquisition | ||||||
November 2021 Acquisition
|
|
|
|
|||
September 2021 Acquisition
|
|
|
|
|
||
June 2021 Acquisition
|
|
|
|
|||
March 2021 Acquisition | ||||||
November 2020 Acquisition | ||||||
September 2020 Acquisition | ||||||
February 2020 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
|
|
|||||||||||
IIP* | 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)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
$
|
|
$
|
|
$
|
|
Physical Therapy
Operations
|
||||
Cash paid, net of cash acquired
|
$
|
|
||
Seller note
|
|
|||
Total consideration
|
$
|
|
||
Estimated fair value of net tangible assets acquired:
|
||||
Total current assets
|
$
|
|
||
Total non-current assets
|
|
|||
Total liabilities
|
(
|
)
|
||
Net tangible assets acquired
|
$
|
|
||
Referral relationships
|
|
|||
Non-compete
|
|
|||
Tradename
|
|
|||
Goodwill
|
|
|||
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
|
(
|
)
|
||
$
|
|
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 Acquired Therapy Practice and provide physical therapy services to patients.
|
2. |
In conjunction with the Acquisition, the Seller Entity contributes the acquired 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 100% of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited
partnership interest in NewCo (“Seller Entity Interest”).
|
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 Therapy Practice 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 Therapy Practice 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 defined as a mileage radius from the Acquired Therapy Practice. That is, an Employed Selling
Shareholder is permitted to engage in competing Therapy Practicees or activities outside the designated geography (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 Therapy Practice or activities outside the designated geography.
|
1. |
Put Right
|
a. |
In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to the fifth anniversary of the Closing 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 fifth anniversary of the Closing 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 has 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 fifth anniversary of the Closing Date, the
Seller Entity has 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 fifth anniversary of the Closing Date, the Company thereafter has 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 the fifth anniversary of the Closing Date, the Company
has 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 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.
|
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 Progressive 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 Progressive Selling Shareholders a majority of the
membership interest in Progressive 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 Progressive Selling Shareholders also executed an operating agreement (the “Progressive Operating Agreement”) for Progressive NewCo that
sets forth the rights and obligations of the members of Progressive NewCo.
|
5. |
As noted above, the Company did not purchase
|
6. |
The Company and the Progressive Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”) which restricts the
Progressive Selling Shareholders from competing for a specified period of time (the “Progressive Non-Compete Term”).
|
7. |
The Progressive Non-Compete Term commences as of the date of the closing of the Progressive acquisition (the “Progressive Closing Date”) and expires on the later
of:
|
a. |
|
b. |
|
8. |
The Progressive Non-Compete Agreement applies to the entire United States.
|
1. |
Progressive Put Right
|
a. |
Each of the Progressive Selling Shareholders has the right to sell
|
b. |
In the event that any Progressive Selling Shareholder terminates his management relationship with Progressive NewCo for any reason on or after the seventh
anniversary of the Progressive Closing Date, the Progressive Selling Shareholder has the Progressive Put Right, and upon the exercise of the Progressive Put Right, the Progressive Selling Shareholder’s Interest shall be redeemed by the
Company at the purchase price described in “3” below.
|
2. |
Progressive Call Right
|
a. |
If any Progressive Selling Shareholder’s ceases to perform management services on behalf of Progressive NewCo, the Company thereafter shall have an
irrevocable right to purchase from such Progressive Selling Shareholder his Interest, in each case at the purchase price described in “3” below.
|
3. |
For the Progressive Put Right and the Progressive Call Right, the purchase price is derived from a formula based on a specified multiple of Progressive
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 Progressive NewCo (the “Progressive
Redemption Amount”). Progressive NewCo’s earnings are distributed monthly based on available cash within Progressive NewCo; therefore, the undistributed earnings amount is small, if any.
|
4. |
The Progressive 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 Progressive Put Right and the Progressive Call Right noted above.
|
5. |
The Progressive Put Right and the Progressive Call Right do not have an expiration date.
|
Year Ended
|
||||||||||||
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
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
|
|
|
|
|||||||||
Contributed Capital
|
|
|
||||||||||
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
|
$
|
|
$
|
|
$
|
|
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
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
|
|
|
|
|||||||||
$
|
|
$
|
|
$
|
|
Year Ended
|
Year Ended
|
|||||||
December 31, 2022 | December 31, 2021 | |||||||
Beginning balance
|
$
|
|
$
|
|
||||
Goodwill acquired
|
|
|
||||||
Goodwill adjustments for purchase price allocation of businesses acquired in prior year
|
(
|
)
|
(
|
)
|
||||
Goodwill impairment |
( |
) | ||||||
Ending balance
|
$
|
|
$
|
|
December 31, 2022
|
December 31, 2021
|
|||||||
Tradenames
|
$
|
|
$
|
|
||||
Customer and referral relationships, net of accumulated amortization of $
|
|
|
||||||
Non-compete agreements, net of accumulated amortization of $
|
|
|
||||||
$
|
|
$
|
|
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
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,
|
||||||
2023
|
$
|
|
2023
|
$
|
|
||
2024
|
$
|
|
2024
|
$
|
|
||
2025
|
$
|
|
2025
|
$
|
|
||
2026
|
$
|
|
2026
|
$
|
|
||
2027
|
$
|
|
2027
|
$
|
|
||
Thereafter
|
$
|
|
Thereafter
|
$
|
|
December 31, 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
|
$
|
|
$
|
|
December 31, 2022 |
December 31, 2021 |
|||||||||||||||||||||||
Principal
Amount
|
Unamortized
discount and
debt issuance
cost
|
Net Debt
|
Principal
Amount
|
Unamortized
discount and
debt issuancecost
|
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: $
|
11.
|
Derivative Instruments
|
For the Year Ended |
||||||||
December 31, 2022 | December 31, 2021 | |||||||
Net income
|
$
|
|
$
|
|
||||
Other comprehensive loss
|
||||||||
Unrealized gain 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
|
$
|
|
$
|
|
December 31, 2022
|
December 31, 2021
|
|||||||
Interest rate swap:
|
||||||||
Other current assets
|
$
|
|
$
|
|
||||
Other assets
|
$
|
|
$ |
Year Ended
|
||||||||||||
December 31, 2022 |
December 31, 2021
|
December 31, 2020
|
||||||||||
Operating lease cost
|
$ |
$
|
|
$
|
|
|||||||
Short-term lease cost
|
|
|
||||||||||
Variable lease cost
|
|
|
||||||||||
Total lease cost*
|
$ |
$
|
|
$
|
|
*
|
|
Year Ended
|
||||||||||||
December 31, 2022
|
December 31, 2021
|
December 31, 2020 | ||||||||||
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
|
|||
2023 |
$
|
|||
2024 |
||||
2025 |
||||
2026 |
||||
2027 and thereafter
|
||||
Total lease payments
|
$
|
|||
Less: imputed interest
|
||||
Total operating lease liabilities
|
$
|
Year Ended
|
||||||||||||
December 31, 2022
|
December 31, 2021
|
December 31, 2020 |
||||||||||
Weighted-average remaining lease term - Operating leases
|
||||||||||||
Weighted-average discount rate - Operating leases
|
% | % | % |
December 31, 2022
|
December 31, 2021
|
|||||||
Deferred tax assets:
|
||||||||
Compensation
|
$
|
|
$
|
|
||||
Allowance for credit losses
|
|
|
||||||
Lease obligations - including closed clinics
|
|
|
||||||
Deferred tax assets
|
$
|
|
$
|
|
||||
Deferred tax liabilities:
|
||||||||
Depreciation and amortization
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Operating lease right-of-use assets
|
(
|
)
|
(
|
)
|
||||
Gain on cash flow hedge
|
( |
) | ||||||
Other
|
(
|
)
|
(
|
)
|
||||
Deferred tax liabilities
|
(
|
)
|
(
|
)
|
||||
Net deferred tax liability
|
$
|
(
|
)
|
$
|
(
|
)
|
December 31, 2022
|
December 31, 2021
|
December 31, 2020 | ||||||||||||||||||||||
U. S. tax at statutory rate
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||||||
State income taxes, net of federal benefit
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
Shortfall (excess) equity compensation deduction
|
|
|
%
|
(
|
)
|
-
|
%
|
(
|
)
|
|
%
|
|||||||||||||
Non-deductible expenses
|
|
|
%
|
|
|
%
|
|
|
%
|
|||||||||||||||
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
|
%
|
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
Current:
|
||||||||||||
Federal
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
State
|
|
|
|
|||||||||
Total current
|
(
|
)
|
|
|
||||||||
Deferred:
|
||||||||||||
Federal
|
|
|
(
|
)
|
||||||||
State
|
|
|
(
|
)
|
||||||||
Total deferred
|
|
|
(
|
)
|
||||||||
Total income tax provision
|
$
|
|
$
|
|
$
|
|
Year Ended |
||||||||||||
December 31, 2022
|
December 31, 2021
|
December 31, 2020
|
||||||||||
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
|
$
|
|
$
|
|
$
|
|
|
Restricted
|
Outstanding
|
Stock Options
|
Stock Options
|
Shares Available
|
|||||||||||||||||||
Authorized | Stock Issued | Stock Options | Exercised | Exercisable | for Grant | |||||||||||||||||||
Equity Plans
|
||||||||||||||||||||||||
Amended 1999 Plan
|
|
|
|
|
|
|
||||||||||||||||||
Amended 2003 Plan
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
Weighted Average Fair
|
||||
Year Granted | Number of Shares | Value Per Share | ||||
2022
|
|
$
|
|
|||
2021
|
|
$
|
|
|||
2020
|
|
$
|
|
|
|
Weighted Average Fair
|
||||
Year Cancelled | Number of Shares | Value Per Share | ||||
2022
|
|
$
|
|
|||
2021
|
|
$
|
|
|||
2020
|
|
$
|
|
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
|
ITEM 9A. |
CONTROLS AND PROCEDURES.
|
• |
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company;
|
• |
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
|
• |
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on the financial statements.
|
ITEM 9B. |
OTHER INFORMATION.
|
ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTION
|
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
ITEM 11. |
EXECUTIVE COMPENSATION.
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|
ITEM 14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
(a) |
Documents filed as a part of this report:
|
1. |
Financial Statements. Reference is made to the Index to Financial
Statements and Related Information under Item 8 in Part II hereof, where these documents are listed.
|
2. |
Financial Statement Schedules. See page 85 for Schedule II — Valuation and Qualifying Accounts. All other schedules
are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial
statements or notes thereto.
|
3. |
Exhibits. The exhibits listed in List of Exhibits on the next page
are filed or incorporated by reference as part of this report.
|
ITEM 16. |
Form 10-K Summary
|
Number
|
|
Description
|
|
Articles of Incorporation of the Company [filed as an exhibit to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 and incorporated herein by reference].
|
|
|
||
|
Amendment to the Articles of Incorporation of the Company [filed as an exhibit to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 and incorporated herein by reference].
|
|
|
||
3.3
|
|
Bylaws of the Company, as amended [filed as an exhibit to the Company’s Form 10-KSB for the year ended December 31, 1993 and incorporated herein by reference—Commission File Number—1-11151].
|
|
||
|
Description of Company Securities [filed herewith the Company’s Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020.]
|
|
|
||
|
1999 Employee Stock Option Plan (as amended and restated May 20, 2008) [incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 17,
2008].
|
|
|
||
|
U.S. Physical Therapy, Inc. 2003 Stock Incentive Plan, (as amended and restated effective March 26, 2016) [incorporated herein by reference to Appendix A to the Company's Definitive Proxy Statement on
Schedule 14A filed with the SEC on April 7, 2016.]
|
|
|
Form of Restricted Stock Agreement [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2016].
|
Number
|
|
Description
|
|
||
|
Second Amended and Restated Credit Agreement dated as of November 10, 2017 among U.S. Physical Therapy, Inc., as the borrower, and Bank of America, N.A., as Administrative Agent and Swingline Lender and L/C
Issuer, and The Lenders Party hereto (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 14, 2017).
|
|
|
||
|
Second Amended and Restated Employment Agreement by and between the Company and Christopher J. Reading dated effective February 9, 2016 [incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed with the SEC on February 12, 2016].
|
|
|
||
|
Employment Agreement commencing on March 1, 2018 by and between the Company and Graham Reeve [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on
March 7, 2018].
|
|
|
||
|
Objective Long-Term Incentive Plan for Senior Management [incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.]
|
|
|
||
|
Discretionary Long-Term Incentive Plan for Senior Management [incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.]
|
|
|
||
|
Third Amended and Restated Employment Agreement by and between the Company and Christopher J. Reading dated effective May 21, 2019 [incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed with the SEC on May 22, 2019]
|
Number
|
|
Description
|
|
||
|
Amended & Restated Employment Agreement commencing by and between the Company and Graham Reeve dated effective May 21, 2019 [incorporated by reference to Exhibit 10.4 to the Company’s Current Report on
Form 8-K filed with the SEC on March 22, 2019]
|
|
|
||
|
Restricted Stock Agreement [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 22, 2019]
|
|
|
||
|
U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.1 to the Company Current Report on Form 8-K
filed with the SEC on March 6, 2020].
|
|
|
Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Christopher Reading [incorporated by reference to Exhibit 10.3 to the Company Current Report on Form 8-K
filed with the SEC on March 26, 2020].
|
|
|
||
|
Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Graham Reeve [incorporated by reference to Exhibit 10.4 to the Company Current Report on Form 8-K filed
with the SEC on March 26, 2020].
|
|
|
||
|
U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.1 to the Company Current Report on Form 8-K
filed with the SEC on March 6, 2020].
|
|
|
||
|
U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.2 to the Company Current Report on Form
8-K filed with the SEC on March 6, 2020].
|
|
|
||
|
Employment Agreement entered into as of November 9, 2020 by and between U.S. Physical Therapy and Carey Hendrickson [incorporated by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed
with the SEC on September 23, 2020.]
|
|
|
||
|
Employment Agreement by and between the Company and Eric Williams entered into on December 3, 2020 and commencing as of July 1, 2021 [filed by reference to Exhibit 10.1 to
the Company Current Report on Form 8-K filed with the SEC on December 7, 2020.]
|
|
|
First Amendment to Second Amended and Restated Credit Agreement [filed by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on February 4, 2021.]
|
|
|
||
U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2021, effective March 17, 2021 [incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by
U.S. Physical Therapy, Inc. on March 16, 2022]
|
||
U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2021, effective March 17, 2021 [incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K
filed by U.S. Physical Therapy, Inc. on March 16, 2022]
|
||
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]
|
||
Employment Agreement by and between the Company and Rick Binstein entered into on March 23, 2022 [incorporated by reference to Exhibit 10.1 to the Company Current
Report on Form 8-K filed with the SEC on March 23, 2022]
|
||
U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by
U.S. Physical Therapy, Inc. on March 14, 2022]
|
||
U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K
filed by U.S. Physical Therapy, Inc. on March 14, 2022]
|
||
U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.3 of the Current Report on Form 8-K filed by U.S.
Physical Therapy, Inc. on March 14, 2022]
|
||
U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.4 of the Current Report on Form 8-K filed by U.S.
Physical Therapy, Inc. on March 14, 2022]
|
Number
|
|
Description
|
|
Subsidiaries of the Registrant
|
|
|
||
|
Consent of Independent Registered Public Accounting Firm—Grant Thornton LLP
|
|
|
||
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
||
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
||
|
Certification of Periodic Report of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 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
|
+ |
Management contract or compensatory plan or arrangement.
|
Balance at
Beginning of Period
|
Additions Charged
to Costs and Expenses
|
Additions Charged
to Other Accounts
|
Deductions
|
Balance at
End of Period
|
||||||||||||||||
YEAR ENDED DECEMBER 31, 2022:
|
||||||||||||||||||||
Reserves and allowances deducted from asset accounts:
|
||||||||||||||||||||
Allowance for credit losses(1)
|
$
|
|
$
|
|
|
$
|
|
(2)
|
$
|
|
||||||||||
YEAR ENDED DECEMBER 31, 2021:
|
||||||||||||||||||||
Reserves and allowances deducted from asset accounts:
|
||||||||||||||||||||
Allowance for credit losses
|
$
|
|
$
|
|
|
$
|
|
(2)
|
$
|
|
||||||||||
YEAR ENDED DECEMBER 31, 2020:
|
||||||||||||||||||||
Reserves and allowances deducted from asset accounts:
|
||||||||||||||||||||
Allowance for credit losses
|
$
|
|
$
|
|
|
$
|
|
(2)
|
$
|
|
(1) |
|
(2) |
|
* |
All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial
statements or notes thereto.
|
U.S. PHYSICAL THERAPY, INC.
|
||
(Registrant)
|
||
By:
|
/s/ Carey Hendrickson
|
|
Carey Hendrickson
Chief Financial Officer
|
||
(Principal Financial Officer and Principal Accounting Officer)
|
/s/ Chris J. Reading
|
Chief Executive Officer, President and Director
(Principal Executive Officer)
|
February 28, 2023
|
Chris J. Reading
|
||
/s/ Edward L. Kuntz
|
Chairman of the Board
|
February 28, 2023
|
Edward L. Kuntz
|
||
/s/ Mark J. Brookner
|
Director
|
February 28, 2023
|
Mark J. Brookner
|
||
/s/ Harry S. Chapman
|
Director
|
February 28, 2023
|
Harry S. Chapman
|
||
/s/ Bernard A. Harris
|
Director
|
February 28, 2023
|
Dr. Bernard A. Harris, Jr.
|
||
/s/ Kathleen A. Gilmartin
|
Director
|
February 28, 2023
|
Kathleen A. Gilmartin
|
||
/s/ Anne Motsenbocker
|
Director
|
February 28, 2023
|
Anne Motsenbocker
|
||
/s/ Reginald E. Swanson
|
Director
|
February 28, 2023
|
Reginald E. Swanson
|
||
/s/ Clayton K. Trier
|
Director
|
February 28, 2023
|
Clayton K. Trier
|