QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
|
(I.R.S. EMPLOYER IDENTIFICATION NO.)
|
|
|
|
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
|
(ZIP CODE)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
|
|
|
☑
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
|
Emerging growth company
|
|
Item 1.
|
3
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
Item 2.
|
29
|
|
Item 3.
|
48
|
|
Item 4.
|
48 | |
PART II—OTHER INFORMATION
|
||
Item 1.
|
48 | |
Item 1A.
|
48
|
|
Item 5. |
Other Information |
48 |
Item 6.
|
49 | |
50 |
ITEM 1. |
FINANCIAL STATEMENTS.
|
September 30, 2023
|
December 31, 2022
|
|||||||
ASSETS
|
(unaudited)
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Patient accounts receivable, less allowance for credit
losses of $
|
|
|
||||||
Accounts receivable - other
|
|
|
||||||
Other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Fixed assets:
|
||||||||
Furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Fixed assets, gross
|
|
|
||||||
Less accumulated depreciation and amortization
|
|
|
||||||
Fixed assets, net
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Investment in unconsolidated affiliate |
||||||||
Goodwill
|
|
|
||||||
Other identifiable intangible assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST
|
||||||||
Current liabilities:
|
||||||||
Accounts payable - trade
|
$
|
|
$
|
|
||||
Accounts payable - due to seller of acquired business
|
||||||||
Accrued expenses
|
|
|
||||||
Current portion of operating lease liabilities
|
|
|
||||||
Current portion of term loan and notes payable
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Notes payable, net of current portion
|
|
|
||||||
Revolving facility
|
|
|
||||||
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
|
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30,2023
|
September 30, 2022
|
|||||||||||||
Net patient revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other revenue
|
|
|
|
|
||||||||||||
Net revenue
|
|
|
|
|
||||||||||||
Operating cost:
|
||||||||||||||||
Salaries and related costs
|
|
|
|
|
||||||||||||
Rent, supplies, contract labor and other
|
|
|
|
|
||||||||||||
Provision for credit losses
|
|
|
|
|
||||||||||||
Total operating cost
|
|
|
|
|
||||||||||||
Gross profit
|
|
|
|
|
||||||||||||
Corporate office costs
|
|
|
|
|
||||||||||||
Operating income
|
|
|
|
|
||||||||||||
Other (expense) income | ||||||||||||||||
Interest expense, debt and other
|
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Interest income
|
||||||||||||||||
Change in fair value of contingent earn-out consideration
|
||||||||||||||||
Change in revaluation of put-right liability |
( |
) | ( |
) | ||||||||||||
Equity in earnings of unconsolidated affiliate
|
||||||||||||||||
Relief Funds
|
||||||||||||||||
Other
|
|
|
|
|
||||||||||||
Total other (expense) income
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Income before taxes | ||||||||||||||||
Provision for income taxes
|
|
|
|
|
||||||||||||
Net income
|
|
|
|
|
||||||||||||
Less: Net income attributable to non-controlling interest:
|
||||||||||||||||
Redeemable non-controlling interest - temporary equity
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Non-controlling interest - permanent equity
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Net income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Basic and diluted earnings per share attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Shares used in computation - basic and diluted
|
|
|
|
|
||||||||||||
Dividends declared per common share
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other comprehensive loss
|
||||||||||||||||
Unrealized gain on cash flow hedge
|
|
|
|
|
||||||||||||
Tax effect at statutory rate (federal and state)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Comprehensive income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Comprehensive income attributable to non-controlling interest
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Comprehensive income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
Nine Months Ended
|
||||||||
September 30, 2023
|
September 30, 2022
|
|||||||
OPERATING ACTIVITIES
|
||||||||
Net income including non-controlling interest
|
$
|
|
$
|
|
||||
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
|
|
|
||||||
Change in deferred income taxes
|
|
|
||||||
Change in revaluation of put-right liability
|
( |
) | ||||||
Change in fair value of contingent earn-out consideration |
( |
) | ( |
) | ||||
Equity of earnings in unconsolidated affiliate
|
( |
) | ( |
) | ||||
Gain on sale of clinics and fixed assets
|
( |
) | ( |
) | ||||
Changes in operating assets and liabilities:
|
||||||||
Increase in patient accounts receivable
|
(
|
)
|
(
|
)
|
||||
Increase in accounts receivable - other
|
(
|
)
|
(
|
)
|
||||
Increase (decrease) in other current and long term assets
|
|
(
|
)
|
|||||
Decrease in accounts payable and accrued expenses
|
(
|
)
|
(
|
)
|
||||
Increase (decrease) 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, clinics and fixed assets
|
|
|
||||||
Proceeds on sale of non-controlling interest, permanent equity |
||||||||
Proceeds on sale of partnership interest - redeemable non-controlling interest, temporary equity
|
||||||||
Distributions from unconsolidated affiliate
|
||||||||
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 facility
|
|
|
||||||
Proceeds from term loan
|
||||||||
Proceeds from issuance of common stock pursuant to the secondary public offering, net of issuance costs
|
||||||||
Payments on revolving facility
|
(
|
)
|
(
|
)
|
||||
Principal payments on notes payable
|
(
|
)
|
(
|
)
|
||||
Payments on term loan
|
( |
) | ( |
) | ||||
Other
|
||||||||
Net cash provided by 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 receivable related to sale of redeemable non-controlling interest, temporary equity |
$ |
$ |
||||||
Notes payable related to the purchase of non-controlling interest, permanent equity
|
$ |
|
$ |
|
||||
Notes receivable related to the sale of non-controlling interest, permanent equity
|
$ |
$ |
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
Common Stock | Additional |
Accumulated Other
|
Retained | Treasury Stock |
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
For the three months ended September 30, 2023 | Shares | Amount |
Paid-In Capital
|
Comprehensive Gain
|
Earnings | Shares | Amount | Equity | Interests | Total | ||||||||||||||||||||||||||||||
Balance June 30, 2023
|
|
$
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Purchase of non-controlling interest
|
- | ( |
) | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
Sale of non-controlling interest |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Dividends paid to USPH shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Deferred taxes related to redeemable non-controlling interest - temporary equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
|
|||||||||||||||||||||||||||||
Issuance of common stock, pursuant to the secondary public offering, net of issuance costs
|
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other comprehensive gain
|
- |
|
|
-
|
|
|
|
|||||||||||||||||||||||||||||||||
Balance September 30, 2023
|
|
$
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U .S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
Common Stock
|
Additional |
Accumulated Other
|
Retained | Treasury Stock |
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
For the nine months ended September 30, 2023
|
Shares |
Amount
|
Paid-In Capital
|
Comprehensive Gain
|
Earnings | Shares | Amount | Equity | Interests | Total | ||||||||||||||||||||||||||||||
Balance December 31, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Purchase of non-controlling interest
|
- | ( |
) | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
Sale of non-controlling interest |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Dividends paid to USPH shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Deferred taxes related to redeemable non-controlling interest - temporary equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Issuance of common stock, pursuant to the secondary public offering, net of issuance costs
|
( |
) | ||||||||||||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other comprehensive gain
|
- |
|
|
- |
|
|
||||||||||||||||||||||||||||||||||
Balance September 30, 2023
|
|
$
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
Common Stock
|
Additional |
Accumulated Other
|
Retained |
Treasury Stock
|
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
For the three months ended September 30, 2022
|
Shares | Amount |
Paid-In Capital
|
Comprehensive Loss
|
Earnings | Shares | Amount | Equity | Interests | Total | ||||||||||||||||||||||||||||||
Balance June 30, 2022
|
|
$
|
|
$
|
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
|
- | - | ||||||||||||||||||||||||||||||||||||||
Purchase of partnership interests - non-controlling interest
|
- | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
Dividends payable to USPH shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Deferred taxes related to redeemable non-controlling interest - temporary equity
|
- | ( |
) | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other comprehensive loss
|
- | - | ||||||||||||||||||||||||||||||||||||||
Balance September 30, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
Common Stock
|
Additional |
Accumulated Other
|
Retained |
Treasury Stock
|
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
For the nine months ended September 30, 2022
|
Shares
|
Amount |
Paid-In Capital
|
Comprehensive Loss
|
Earnings | Shares |
Amount
|
Equity | Interests | Total | ||||||||||||||||||||||||||||||
Balance December 31, 2021
|
|
$
|
|
$
|
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
|
- | - | ||||||||||||||||||||||||||||||||||||||
Purchase of partnership interests - non-controlling interest
|
- | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
Dividends paid to USPH shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Deferred taxes related to redeemable non-controlling interest - temporary equity
|
- | ( |
) | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other comprehensive loss
|
||||||||||||||||||||||||||||||||||||||||
Balance September 30, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
1.
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|
Acquisition
|
Date
|
% Interest
Acquired
|
Number of
Clinics
|
||||||
September 2023 Acquisition 1 |
|
||||||||
September 2023 Acquisition 2 |
|
||||||||
July 2023 Acquisition |
|
||||||||
May 2023 Acquisition | |||||||||
February 2023 Acquisition | |||||||||
November 2022 Acquisition | |||||||||
October 2022 Acquisition | |||||||||
September 2022 Acquisition | |||||||||
August 2022 Acquisition | |||||||||
March 2022 Acquisition
|
|
|
|
●
|
Level 1 – Quoted prices in active markets for identical assets or
liabilities;
|
●
|
Level 2 – Quoted prices for similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and
|
●
|
Level 3 – Unobservable inputs in which there is little or no market data
which require the reporting entity to develop its own assumptions.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
(In thousands, except per share data) | ||||||||||||||||
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)
|
|
|
|
|
||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
Earnings per share (basic and diluted)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Shares used in computation:
|
||||||||||||||||
Basic and diluted earnings per share - weighted-average shares
|
|
|
|
|
Physical Therapy
|
||||
Operations
|
||||
(In thousands) | ||||
Cash paid, net of cash acquired
|
$
|
|
||
Seller note
|
|
|||
Deferred payments
|
||||
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 agreement
|
|
|||
Tradenames
|
|
|||
Goodwill
|
|
|||
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
|
(
|
)
|
||
$
|
|
Physical Therapy
|
||||
Operations
|
||||
(In thousands) |
||||
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)
|
(
|
)
|
||
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
Revenue related to: |
(In thousands) |
|||||||||||||||
Net patient revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other revenue
|
|
|
|
|
||||||||||||
Physical therapy operations
|
|
|
|
|
||||||||||||
Industrial injury prevention services
|
|
|
|
|
||||||||||||
Management contracts | ||||||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
1. |
Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals
(the “Selling Shareholders”) most of whom are physical therapists that work in the Therapy Practice and provide physical therapy services to patients.
|
2. |
In conjunction with the Acquisition, the Seller Entity contributes the Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one
hundred percent (
|
3. |
The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from
|
4. |
The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the
limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo.
|
5. |
As noted above, the Company does not purchase
|
6. |
In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial
term that ranges from
to |
7. |
The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities
based on other employees in similar capacities within NewCo, the Company and the industry.
|
8. |
The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete
agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing business activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the Selling
Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing business during the Non-Compete Term.
|
9. |
The Non-Compete Term commences as of the date of the Acquisition and expires on the later
of :
|
a. |
|
b. |
|
10. |
The Non-Compete Agreement applies to a restricted region which is a defined mile radius from the Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in
competing businesses or activities outside the defined mileage (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the
competing business or activities outside the defined mileage.
|
1. |
Put Right
|
a. |
In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified date (the “Specified Date”), the Seller Entity thereafter may have an
irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.
|
b. |
In the event that any Selling Shareholder is not employed by NewCo as of the Specified Date and the Company has not exercised its Call Right with respect to the Terminated Selling
Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter shall have the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller
Entity’s Interest at the purchase price described in “3” below.
|
c. |
In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the Specified Date, the Seller Entity shall have the Put Right, and upon the
exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.
|
2. |
Call Right
|
a. |
If any Selling Shareholder’s employment by NewCo is terminated prior to the Specified Date, the Company thereafter shall have an irrevocable right to purchase from Seller Entity the
Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below.
|
b. |
In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after Specified Date, the Company shall have the Call Right, and upon the exercise of
the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.
|
3. |
For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes,
depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo. NewCo’s earnings are distributed monthly based on available cash within NewCo. Therefore, the
undistributed earnings amount is small, if any.
|
4. |
The Purchase Price for the initial equity interest purchased by the Company is, in almost all cases, also based on the same specified multiple of the trailing twelve-month earnings that
is used in the Put Right and the Call Right noted above.
|
5. |
The Put Right and the Call Right do not have an expiration date, and the Seller Entity Interest is not required to be purchased by the Company or sold by the Seller Entity unless either
the Put Right or the Call Right is exercised.
|
6. |
The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire
ownership interest in the Seller Entity at the closing of the Acquisition.
|
1. |
Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual owners (the “Progressive Selling Shareholders”),
who work in and manage the Progressive business.
|
2. |
In conjunction with the acquisition, the 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 Progressive acquisition and expires on the later of:
|
a. |
|
b. |
|
8. |
The Progressive Non-Compete Agreement applies to the entire United States.
|
9. |
The Progressive Put Right (as defined below) and the Progressive Call Right (as defined below) do not have an expiration date. The Progressive Operating Agreement contains provisions
for the redemption of the Progressive Selling Shareholder’s Interest, either at the option of the Company (the “Progressive Call Right”) or at the option of the Progressive Selling Shareholder (the “Progressive Put Right”) as follows:
|
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 Closing Date, the Progressive Selling Shareholder has the 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 Rights
|
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. 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.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
(In thousands) | ||||||||||||||||
Beginning balance
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Operating results allocated to redeemable non-controlling interest partners
|
|
|
|
|
||||||||||||
Distributions to redeemable non-controlling interest partners
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Changes in the fair value of redeemable non-controlling interest
|
|
|
|
|
||||||||||||
Purchases of redeemable non-controlling interest
|
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Acquired interest
|
|
|
|
|
||||||||||||
Sales of redeemable non-controlling interest - temporary equity
|
|
|
|
|
||||||||||||
Changes in notes receivable related to redeemable non-controlling interest - temporary equity
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||
Ending balance
|
$
|
|
$
|
|
$
|
|
$
|
|
Nine Months Ended
|
||||||||
|
September 30, 2023
|
September 30, 2022
|
||||||
|
(In thousands) | |||||||
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
|
|
|
||||||
|
$
|
|
$
|
|
Nine Months Ended
|
Year Ended
|
|||||||
September 30, 2023
|
December 31, 2022
|
|||||||
(In thousands) | ||||||||
Beginning balance
|
$
|
|
$
|
|
||||
Goodwill acquired
|
|
|
||||||
Goodwill adjustments for purchase price allocation of businesses acquired in prior year
|
|
(
|
)
|
|||||
Goodwill impairment |
( |
) | ||||||
Ending balance
|
$
|
|
$
|
|
September 30, 2023
|
December 31, 2022
|
|||||||
(In thousands) |
||||||||
Tradenames
|
$
|
|
$
|
|
||||
Customer and referral relationships, net of accumulated amortization of $
|
|
|
||||||
Non-compete agreements, net of accumulated amortization of $
|
|
|
||||||
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
Customer and referral relationships
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Non-compete agreements
|
|
|
|
|
||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
Customer and Referral Relationships
|
Non-Compete Agreements
|
||||||||||
(In thousands) |
|||||||||||
Years
|
Annual Amount
|
Years
|
Annual Amount
|
||||||||
Ending December 31,
|
Ending December 31,
|
||||||||||
2023 (excluding the nine months ended September 30, 2023)
|
$
|
|
2023 (excluding the nine months ended September 30, 2023)
|
$
|
|
||||||
2024
|
$
|
|
2024 |
$
|
|
||||||
2025
|
$
|
|
2025 |
$
|
|
||||||
2026
|
$
|
|
2026 |
$
|
|
||||||
2027
|
$
|
|
2027 |
$
|
|
||||||
Thereafter
|
$
|
|
2028
|
$
|
|
September 30, 2023
|
December 31, 2022
|
|||||||
(In thousands) |
||||||||
Salaries and related costs
|
$
|
|
$
|
|
||||
Credit balances due to patients and payors
|
|
|
||||||
Group health insurance claims
|
|
|
||||||
Closure costs
|
|
|
||||||
Contingency payable
|
|
|
||||||
Interest payable |
||||||||
Other property taxes payable |
||||||||
Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
|
September 30, 2023
|
December 31, 2022
|
||||||||||||||||||||||
|
Principal
Amount
|
Unamortized
discount and
debt issuance
cost
|
Net Debt
|
Principal
Amount
|
Unamortized
discount and
debt issuance
cost
|
Net Debt
|
||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
Term Facility
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Revolving Facilitiy
|
|
|
|
|
|
|
||||||||||||||||||
Other
|
|
|
|
|
|
|
||||||||||||||||||
Total debt
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Less: Current portion of long-term debt
|
|
|
|
|
|
|
||||||||||||||||||
Long-term debt, net of current portion
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
1)
|
Revolving Facility: $ |
2)
|
Term Facility: $
|
|
For the Three Months Ended
|
For the Nine Months Ended
|
||||||||||||||
|
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
||||||||||||
(In thousands)
|
||||||||||||||||
Net income
|
$ | $ | $ | $ | ||||||||||||
Other comprehensive loss
|
||||||||||||||||
Unrealized gain on cash flow hedge
|
|
|
|
|
||||||||||||
Tax effect at statutory rate (federal and state)
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Comprehensive income
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
|
September 30, 2023
|
September 30, 2022
|
||||||||||||
(In thousands) |
||||||||||||||||
Operating lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Short-term lease cost
|
|
|
|
|
||||||||||||
Variable lease cost
|
|
|
|
|
||||||||||||
Total lease cost *
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30,
2023
|
|
September 30,
2022
|
||||||||||||
(In thousands) |
||||||||||||||||
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
|
$
|
|
$
|
|
$
|
|
Fiscal Year
|
Amount
|
|||
(In thousands)
|
||||
2023 (excluding the nine months ended September 30, 2023)
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027 and therafter
|
|
|||
Total lease payments
|
$
|
|
||
Less: imputed interest
|
|
|||
Total operating lease liabilities
|
$
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2023
|
2022
|
2023
|
2022
|
|||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Net revenue:
|
||||||||||||||||
Physical therapy operations
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Industrial injury prevention services
|
|
|
|
|
||||||||||||
Total Company
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
||||||||||||||||
Gross profit:
|
||||||||||||||||
Physical therapy operations
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Industrial injury prevention services
|
|
|
|
|
||||||||||||
Total Company
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Total Assets: |
||||||||||||||||
Physical therapy operations
|
$ |
$ |
||||||||||||||
Industrial injury prevention services
|
||||||||||||||||
Total Company
|
$ |
$ |
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
• |
changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;
|
• |
the impact of future public health crises and epidemics/pandemics, such as was the case with the novel strain of COVID-19 and its variants;
|
• |
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 future vaccinations 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;
|
• |
some of our acquisition agreements contain contingent consideration, the value of which may impact future financial results;
|
• |
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;
|
• |
actual or perceived events involving banking volatility or limited liability, defaults or other adverse developments that affect the U.S. or international financial systems, may result in market wide
liquidity problems which could have a material and adverse impact on our available cash and results of operations;
|
• |
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, IIP, 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.
|
Acquisition
|
Date
|
% Interest
Acquired |
Number of
Clinics |
||||
September 2023 Acquisition 1
|
September 29, 2023
|
70%
|
4
|
||||
September 2023 Acquisition 2
|
September 29, 2023
|
70%
|
1
|
||||
July 2023 Acquisition
|
July 31, 2023
|
70%
|
7
|
||||
May 2023 Acquisition
|
May 31, 2023
|
45%
|
4
|
||||
February 2023 Acquisition
|
February 28, 2023
|
80%
|
1
|
||||
November 2022 Acquisition
|
November 30, 2022
|
80%
|
13
|
||||
October 2022 Acquisition
|
October 31, 2022
|
60%
|
14
|
||||
September 2022 Acquisition
|
September 30, 2022
|
80%
|
2
|
||||
August 2022 Acquisition
|
August 31, 2022
|
70%
|
6
|
||||
March 2022 Acquisition
|
March 31, 2022
|
70%
|
6
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
Number of clinics, beginning of period
|
656
|
608
|
640
|
591
|
||||||||||||
Additions (1)
|
19
|
8
|
40
|
33
|
||||||||||||
Closed or sold
|
(3
|
)
|
(2
|
)
|
(8
|
)
|
(10
|
)
|
||||||||
Number of clinics, end of period
|
672
|
614
|
672
|
614
|
(1) |
Includes clinics added through acquisitions.
|
• |
Mature clinics are clinics opened or acquired prior to January 1, 2022, and are still operating as of September 30, 2023.
|
• |
Net rate per patient visit is net patient revenue related to our physical therapy operations divided by total number of patient visits (defined below) during the
periods presented.
|
• |
Patient visits is the number of unique patient visits during the periods presented.
|
• |
Average visits per day per clinic is patient visits divided by the number of days in which normal business operations were conducted during the periods presented
and further divided by the average number of clinics in operation during the periods presented.
|
• |
2023 Third Quarter refers to the period three months ended September 30, 2023.
|
• |
2022 Third Quarter refers to the period three months ended September 30, 2022.
|
• |
2023 Nine Months refers to the period nine months ended September 30, 2023.
|
• |
2022 Nine Months refers to the period nine months ended September 30, 2022.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022
|
|||||||||||||
(In thousands, except per share data)
|
||||||||||||||||
Computation of earnings per share - USPH shareholders:
|
||||||||||||||||
Net income attributable to USPH shareholders
|
$
|
9,254
|
$
|
9,557
|
$
|
27,583
|
$
|
29,551
|
||||||||
Charges to retained earnings:
|
||||||||||||||||
Revaluation of redeemable non-controlling interest
|
(2,242
|
)
|
(196
|
)
|
(4,988
|
)
|
(193
|
)
|
||||||||
Tax effect at statutory rate (federal and state)
|
573
|
50
|
1,274
|
49
|
||||||||||||
$
|
7,585
|
$
|
9,411
|
$
|
23,869
|
$
|
29,407
|
|||||||||
Earnings per share (basic and diluted)
|
$
|
0.51
|
$
|
0.72
|
$
|
1.72
|
$
|
2.27
|
||||||||
Shares used in computation:
|
||||||||||||||||
Basic and diluted earnings per share - weighted-average shares
|
14,987
|
13,001
|
13,918
|
12,979
|
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
|
September 30, 2023
|
September 30, 2022
|
September 30, 2023
|
September 30, 2022*
|
||||||||||||
(In thousands, except per share data)
|
||||||||||||||||
Adjusted EBITDA
|
||||||||||||||||
Net income attributable to USPH shareholders
|
$
|
9,254
|
$
|
9,557
|
$
|
27,583
|
$
|
29,551
|
||||||||
Adjustments:
|
||||||||||||||||
Provision for income taxes
|
3,557
|
3,215
|
10,757
|
10,953
|
||||||||||||
Depreciation and amortization
|
3,966
|
3,652
|
11,582
|
10,950
|
||||||||||||
Interest expense, debt and other
|
2,101
|
2,013
|
7,293
|
3,540
|
||||||||||||
Equity-based awards compensation expense
|
1,859
|
1,802
|
5,451
|
5,462
|
||||||||||||
Change in revaluation of put-right liability
|
145
|
(785
|
)
|
344
|
(771
|
)
|
||||||||||
Change in fair value of contingent earn-out consideration
|
(187
|
)
|
(2,000
|
)
|
(197
|
)
|
(2,000
|
)
|
||||||||
Interest income
|
(1,673
|
)
|
-
|
(2,191
|
)
|
-
|
||||||||||
Other (income) expense
|
(78
|
)
|
(65
|
)
|
(305
|
)
|
(790
|
)
|
||||||||
Relief Funds
|
-
|
-
|
(467
|
)
|
-
|
|||||||||||
Allocation to non-controlling interests
|
(358
|
)
|
(402
|
)
|
(1,119
|
)
|
(1,098
|
)
|
||||||||
Adjusted EBITDA (a non-GAAP measure)
|
$
|
18,586
|
$
|
16,987
|
58,731
|
55,797
|
||||||||||
Operating Results
|
||||||||||||||||
Net income attributable to USPH shareholders
|
$
|
9,254
|
$
|
9,557
|
$
|
27,583
|
$
|
29,551
|
||||||||
Adjustments:
|
||||||||||||||||
Change in fair value of contingent earn-out consideration
|
(187
|
)
|
(2,000
|
)
|
(197
|
)
|
(2,000
|
)
|
||||||||
Change in revaluation of put-right liability
|
145
|
(785
|
)
|
344
|
(771
|
)
|
||||||||||
Relief Funds
|
-
|
-
|
(467
|
)
|
-
|
|||||||||||
Allocation to non-controlling interest
|
-
|
33
|
||||||||||||||
Tax effect at statutory rate (federal and state)
|
11
|
711
|
73
|
708
|
||||||||||||
Operating Results (a non-GAAP measure)
|
$
|
9,223
|
$
|
7,483
|
$
|
27,369
|
$
|
27,488
|
||||||||
Operating Results per share (a non-GAAP measure)
|
$
|
0.62
|
$
|
0.58
|
$
|
1.97
|
$
|
2.12
|
||||||||
Earnings per share
|
||||||||||||||||
Computation of earnings per share - USPH shareholders:
|
||||||||||||||||
Net income attributable to USPH shareholders
|
$
|
9,254
|
$
|
9,557
|
$
|
27,583
|
$
|
29,551
|
||||||||
Charges to retained earnings:
|
||||||||||||||||
Revaluation of redeemable non-controlling interest
|
(2,242
|
)
|
(196
|
)
|
(4,988
|
)
|
(193
|
)
|
||||||||
Tax effect at statutory rate (federal and state)
|
573
|
50
|
1,274
|
49
|
||||||||||||
$
|
7,585
|
$
|
9,411
|
$
|
23,869
|
$
|
29,407
|
|||||||||
Earnings per share (basic and diluted)
|
$
|
0.51
|
$
|
0.72
|
$
|
1.72
|
$
|
2.27
|
||||||||
Shares used in computation - basic and diluted
|
14,987
|
13,001
|
13,918
|
12,979
|
*
|
Revised to conform to current year presentation.
|
Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
(In thousands)
|
||||||||
Net revenue:
|
||||||||
Physical therapy operations
|
$
|
130,521
|
$
|
119,447
|
||||
Industrial injury prevention services
|
19,486
|
20,155
|
||||||
Total Company
|
$
|
150,007
|
$
|
139,602
|
||||
Gross profit:
|
||||||||
Physical therapy operations
|
$
|
23,505
|
$
|
22,379
|
||||
Industrial injury prevention services
|
4,424
|
4,405
|
||||||
Total Company
|
$
|
27,929
|
$
|
26,784
|
||||
Total Assets:
|
||||||||
Physical therapy operations
|
$
|
534,848
|
$
|
432,683
|
||||
Industrial injury prevention services
|
475,338
|
367,025
|
||||||
Total Company
|
$
|
1,010,186
|
$
|
799,708
|
Three Months Ended September 30,
|
Variance
|
|||||||||||||||
2023
|
2022
|
$ |
%
|
|||||||||||||
(In thousands, except percentages)
|
||||||||||||||||
Revenue related to:
|
||||||||||||||||
Mature Clinics (1)
|
$
|
111,943
|
$
|
111,598
|
$
|
345
|
0.3
|
%
|
||||||||
2023 clinic additions
|
3,598
|
-
|
3,598
|
*
|
(2)
|
|||||||||||
2022 clinic additions
|
11,674
|
3,899
|
7,775
|
*
|
(2)
|
|||||||||||
Clinics sold or closed (3)
|
28
|
1,213
|
(1,185
|
)
|
*
|
(2)
|
||||||||||
Net patient revenue from physical therapy operations
|
127,243
|
116,710
|
10,533
|
9.0
|
%
|
|||||||||||
Other revenue
|
889
|
753
|
136
|
18.1
|
%
|
|||||||||||
Physical therapy operations
|
128,132
|
117,463
|
10,669
|
9.1
|
%
|
|||||||||||
Industrial injury prevention services
|
19,486
|
20,155
|
(669
|
)
|
(3.3
|
)%
|
||||||||||
Management contracts
|
2,389
|
1,984
|
405
|
20.4
|
%
|
|||||||||||
$
|
150,007
|
$
|
139,602
|
$
|
10,405
|
7.5
|
%
|
(1)
|
See above for defined terms.
|
(2)
|
Not meaningful.
|
(3)
|
Revenue from closed clinics includes revenue from the eight and 16 clinics closed or sold during the nine months ended September 30, 2023 and the year ended December 31, 2022,
respectively.
|
Three Months Ended September 30,
|
Variance
|
|||||||||||||||
2023
|
2022
|
$ |
%
|
|||||||||||||
Operating costs related to:
|
(In thousands, except percentages)
|
|||||||||||||||
Mature Clinics (1)
|
$
|
91,822
|
$
|
90,811
|
$
|
1,011
|
1.1
|
%
|
||||||||
2023 Clinic additions
|
3,395
|
-
|
3,395
|
*
|
(2)
|
|||||||||||
2022 Clinic additions
|
9,665
|
3,482
|
6,183
|
*
|
(2)
|
|||||||||||
Clinics sold or closed (3)
|
137
|
1,238
|
(1,101
|
)
|
*
|
(2)
|
||||||||||
Physical therapy operations
|
105,019
|
95,531
|
9,488
|
9.9
|
%
|
|||||||||||
Industrial injury prevention services
|
15,062
|
15,750
|
(688
|
)
|
(4.4
|
)%
|
||||||||||
Management contracts
|
1,997
|
1,537
|
460
|
29.9
|
%
|
|||||||||||
$
|
122,078
|
$
|
112,818
|
$
|
9,260
|
8.2
|
%
|
(1)
|
See above for defined terms.
|
(2)
|
Not meaningful.
|
(3)
|
Operating costs from closed clinics include costs from the eight and 16 clinics closed or sold during the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively.
|
Three Months Ended September 30,
|
||||||||||||||||||||||||
2023
|
2022
|
Variance
|
||||||||||||||||||||||
$ |
Margin %
|
$ |
Margin %
|
$ |
%
|
|||||||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||||||||||
Physical therapy operations
|
$
|
23,113
|
18.0
|
%
|
$
|
21,932
|
18.7
|
%
|
$
|
1,181
|
5.4
|
%
|
||||||||||||
Industrial injury prevention services
|
4,424
|
22.7
|
%
|
4,405
|
21.9
|
%
|
19
|
0.4
|
%
|
|||||||||||||||
Management contracts
|
392
|
16.4
|
%
|
447
|
22.5
|
%
|
(55
|
)
|
(12.3
|
)%
|
||||||||||||||
Gross profit
|
$
|
27,929
|
18.6
|
%
|
$
|
26,784
|
19.2
|
%
|
$
|
1,145
|
4.3
|
%
|
• |
Interest expense, net of $0.9 million savings from the interest rate swap arrangement discussed in the “Liquidity and Capital Resources – Interest Rate Swap” section below, was $2.1 million
for the 2023 Third Quarter compared to $2.0 million in the 2022 Third Quarter. The interest rate on the Company’s credit facilities, net of the savings from the interest rate swap, was 4.9% for the 2023 Third Quarter, with an all-in
effective interest rate, including all associated costs, of 5.6%.
|
• |
Interest income from investing excess cash (proceeds from the secondary offering sale of our stock completed in May 2023) in a high-yield savings account was $1.7 million during the 2023 Third Quarter.
|
• |
We revalued contingent earn-out consideration related to acquisitions and recognized $0.2 million as income (a reduction in the related liability) in the 2023 Third Quarter compared to $2.0 million in the 2022 Third Quarter.
|
• |
The revaluation of a put-right liability resulted in $0.1 million of expense (an increase in the related liability) for the 2023 Third Quarter compared to $0.8 million of income for the 2022 Third Quarter. The put-right, which expires
in November 2026, relates to the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.
|
Three Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
(In thousands, except percentages)
|
||||||||
Income before taxes
|
$
|
15,779
|
$
|
16,036
|
||||
Less: Net income attributable to non-controlling interest:
|
||||||||
Redeemable non-controlling interest - temporary equity
|
(1,976
|
)
|
(2,037
|
)
|
||||
Non-controlling interest - permanent equity
|
(992
|
)
|
(1,227
|
)
|
||||
$
|
(2,968
|
)
|
$
|
(3,264
|
)
|
|||
Income before taxes less net income attributable to non-controlling interest
|
$
|
12,811
|
$
|
12,772
|
||||
Provision for income taxes
|
$
|
3,557
|
$
|
3,215
|
||||
Effective income tax rate
|
27.8
|
%
|
25.2
|
%
|
Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
(In thousands)
|
||||||||
Net revenue:
|
||||||||
Physical therapy operations
|
$
|
391,919
|
$
|
353,302
|
||||
Industrial injury prevention services
|
58,082
|
58,660
|
||||||
Total Company
|
$
|
450,001
|
$
|
411,962
|
||||
Gross profit:
|
||||||||
Physical therapy operations
|
$
|
78,815
|
$
|
71,513
|
||||
Industrial injury prevention services
|
12,178
|
12,680
|
||||||
Total Company
|
$
|
90,993
|
$
|
84,193
|
||||
Total Assets:
|
||||||||
Physical therapy operations
|
$
|
534,848
|
$
|
432,683
|
||||
Industrial injury prevention services
|
475,338
|
367,025
|
||||||
Total Company
|
$
|
1,010,186
|
$
|
799,708
|
Nine Months Ended September 30,
|
Variance
|
|||||||||||||||
2023
|
2022
|
$ |
|
%
|
||||||||||||
Revenue related to:
|
(In thousands, except percentages)
|
|||||||||||||||
Mature Clinics (1)
|
$
|
340,830
|
$
|
332,629
|
$
|
8,201
|
2.5
|
%
|
||||||||
2023 clinic additions
|
5,888
|
-
|
5,888
|
*
|
(2)
|
|||||||||||
2022 clinic additions
|
35,965
|
7,294
|
28,671
|
*
|
(2)
|
|||||||||||
Clinics sold or closed (3)
|
421
|
4,521
|
(4,100
|
)
|
*
|
(2) | ||||||||||
Net patient revenue from physical therapy operations
|
383,104
|
344,444
|
38,660
|
11.2
|
%
|
|||||||||||
Other revenue
|
2,479
|
2,523
|
(44
|
)
|
(1.7
|
)%
|
||||||||||
Physical therapy operations
|
385,583
|
346,967
|
38,616
|
11.1
|
%
|
|||||||||||
Industrial injury prevention services
|
58,082
|
58,660
|
(578
|
)
|
(1.0
|
)%
|
||||||||||
Management contracts
|
6,336
|
6,335
|
1
|
0.0
|
%
|
|||||||||||
$
|
450,001
|
$
|
411,962
|
$
|
38,039
|
9.2
|
%
|
(1) |
See defined terms above.
|
(2) |
Not meaningful.
|
(3) |
Revenue from closed clinics includes revenue from the eight and 16 clinics closed or sold during the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively.
|
Nine Months Ended September 30,
|
Variance
|
|||||||||||||||
2023
|
2022
|
$ |
%
|
|||||||||||||
Operating costs related to:
|
(In thousands, except percentages)
|
|||||||||||||||
Mature Clinics (1)
|
$
|
273,031
|
$
|
266,324
|
$
|
6,707
|
2.5
|
%
|
||||||||
2023 Clinic additions
|
5,701
|
-
|
5,701
|
*
|
(2)
|
|||||||||||
2022 Clinic additions
|
28,175
|
6,597
|
21,578
|
*
|
(2)
|
|||||||||||
Clinics sold or closed (3)
|
880
|
3,877
|
(2,997
|
)
|
*
|
(2)
|
||||||||||
Physical therapy operations
|
307,787
|
276,798
|
30,989
|
11.2
|
%
|
|||||||||||
Industrial injury prevention services
|
45,904
|
45,980
|
(76
|
)
|
(0.2
|
)%
|
||||||||||
Management contracts
|
5,317
|
4,991
|
326
|
6.5
|
%
|
|||||||||||
$
|
359,008
|
$
|
327,769
|
$
|
31,239
|
9.5
|
%
|
(1) |
See Glossary of Terms - Revenue Metrics for the definition.
|
(2) |
Not meaningful.
|
(3) |
Operating costs from closed clinics include costs from the eight and 16 clinics closed or sold during the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||
2023
|
2022
|
Variance
|
||||||||||||||||||||||
$ |
Margin %
|
$ |
Margin %
|
$ |
%
|
|||||||||||||||||||
(In thousands, except percentages)
|
||||||||||||||||||||||||
Physical therapy operations
|
$
|
77,796
|
20.2
|
%
|
$
|
70,169
|
20.2
|
%
|
$
|
7,627
|
10.9
|
%
|
||||||||||||
Industrial injury prevention services
|
12,178
|
21.0
|
%
|
12,680
|
21.6
|
%
|
(502
|
)
|
(4.0
|
)%
|
||||||||||||||
Management contracts
|
1,019
|
16.1
|
%
|
1,344
|
21.2
|
%
|
(325
|
)
|
(24.2
|
)%
|
||||||||||||||
Gross profit
|
$
|
90,993
|
20.2
|
%
|
$
|
84,193
|
20.4
|
%
|
$
|
6,800
|
8.1
|
%
|
• |
Interest expense, net of $2.3 million savings from the interest rate swap arrangement discussed in the “Balance Sheet and Cash Flow” section below, was $7.3 million for the 2023 Nine Months
compared to $3.5 million in the 2022 Nine Months. The increase in interest expense was primarily due to a higher effective interest rate and increased borrowings to fund acquisitions. The effective interest rate on the Company’s credit
facilities, net of the savings from the interest rate swap, was 5.1% for the 2023 Nine Months, with an all-in interest rate, including all associated costs, of 5.7%.
|
• |
Interest income from investing excess cash (proceeds from the secondary offering sale of our stock completed in May 2023) in high-yield savings account was $2.2 million during the 2023 Nine Months.
|
• |
We revalued contingent earn-out consideration related to acquisitions and recognized $0.2 million as income (a reduction in the related liability) in the 2023 Nine Months compared to $2.0 million in the 2022 Nine Months.
|
• |
The revaluation of a put-right liability resulted in $0.3 million of expense (an increase in the related liability) for the 2023 Nine Months compared to $0.8 million of income (a decrease in the related liability) for the 2022 Nine
Months. The put-right, which expires in November 2026, relates to the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.
|
• |
During the 2023 Nine Months, we recognized $0.5 million of income received under the Coronavirus Aid, Relief and Economic Security Act (“Relief Funds”). The Relief Funds were received in prior years but were subject to certain
compliance requirements which were met in the first quarter of 2023. We do not expect to receive or recognize any future Relief Funds. No such income was recognized in the 2022 Nine Months.
|
Nine Months Ended September 30,
|
||||||||
2023
|
2022
|
|||||||
(In thousands, except percentages)
|
||||||||
Income before taxes
|
$
|
49,270
|
$
|
51,011
|
||||
Less: net income attributable to non-controlling interest:
|
||||||||
Redeemable non-controlling interest - temporary equity
|
(7,616
|
)
|
(7,220
|
)
|
||||
Non-controlling interest - permanent equity
|
(3,314
|
)
|
(3,288
|
)
|
||||
$
|
(10,930
|
)
|
$
|
(10,508
|
)
|
|||
Income before taxes less net income attributable to non-controlling interest
|
$
|
38,340
|
$
|
40,503
|
||||
Provision for income taxes
|
$
|
10,757
|
$
|
10,952
|
||||
Percentage
|
28.1
|
%
|
27.0
|
%
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
ITEM 4. |
CONTROLS AND PROCEDURES.
|
ITEM 1. |
LEGAL PROCEEDINGS.
|
ITEM 1A. |
RISK FACTORS.
|
ITEM 6. |
EXHIBITS.
|
Exhibit
Number
|
Description
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
|
|
Certification Pursuant to 18 U.S.C 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith
|
U.S. PHYSICAL THERAPY, INC.
|
||
Date: November 8, 2023
|
By:
|
/s/ Carey Hendrickson |
Carey Hendrickson
|
||
Chief Financial Officer
|
||
(Principal financial and accounting officer)
|
1. |
I have reviewed this quarterly report on Form 10-Q of U.S. Physical Therapy, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Christopher Reading
|
|
Christopher Reading
|
|
|
President and Chief Executive Officer
|
Date: November 8, 2023
|
(Principal executive officer)
|
1. |
I have reviewed this quarterly report on Form 10-Q of U.S. Physical Therapy, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Carey Hendrickson
|
|
Carey Hendrickson
|
|
Chief Financial Officer
|
|
Date: November 8, 2023
|
(Principal financial and accounting officer)
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Christopher J. Reading
|
|
Christopher J. Reading
|
|
Chief Executive Officer
|
|
/s/ Carey Hendrickson
|
|
Carey Hendrickson
|
|
Chief Financial Officer
|
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Current assets: | ||
Allowance for credit losses, patient accounts receivable | $ 2,487 | $ 2,829 |
U.S. Physical Therapy, Inc. ("USPH") shareholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 500,000 | 500,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, shares issued (in shares) | 17,202,053 | 15,216,326 |
Treasury stock (in shares) | 2,214,737 | 2,214,737 |
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract] | ||||
Net income | $ 12,222 | $ 12,821 | $ 38,513 | $ 40,059 |
Other comprehensive loss | ||||
Unrealized gain on cash flow hedge | 1,276 | 6,473 | 2,340 | 5,942 |
Tax effect at statutory rate (federal and state) | (326) | (1,654) | (598) | (1,518) |
Comprehensive income | 13,172 | 17,640 | 40,255 | 44,483 |
Comprehensive income attributable to non-controlling interest | (2,968) | (3,264) | (10,930) | (10,508) |
Comprehensive income attributable to USPH shareholders | $ 10,204 | $ 14,376 | $ 29,325 | $ 33,975 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
Nature of Business
U.S. Physical Therapy, Inc. and its subsidiaries (the “Company”, “USPH”) operates its business through two reportable business
segments: (a) physical therapy operations segment, and (b) industrial injury prevention services (“IIP”) segment. The Company’s physical therapy operations consist of physical therapy and occupational therapy clinics that provide pre-and
post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries. Services provided by the IIP segment include onsite injury prevention and
rehabilitation, performance optimization and ergonomic assessments.
As of September 30, 2023, the Company operated 672 clinics in 42 states. The Company also manages physical therapy facilities for third parties, primarily hospitals and physicians, with 42 third-party facilities under management as of September 30, 2023.
During the nine months ended September 30, 2023, and for the year-ended
December 31, 2022, the Company completed the acquisitions of the following physical therapy practices.
* See Note 3 for additional information on the
acquisitions in the table.
In May 2023, the Company completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $90.00 per share. Upon completion of the offering, the Company received net proceeds of approximately $163.6
million, after deducting an underwriting discount of $8.6 million and recognizing related fees and expenses of $0.2 million. A portion of the net proceeds was used to repay the $35.0 million then outstanding under the Company’s credit facility while the remainder is expected to be used primarily for additional acquisitions.
During
the nine months ended September 30, 2023, the Company recognized $0.5 million of income received under the Coronavirus Aid, Relief and
Economic Security Act (“Relief Funds”). The Relief Funds were received in prior years but were subject to certain compliance requirements which were met in the first quarter of 2023. The Company does not expect to receive or recognize any future
Relief Funds.
Basis of Presentation
The accompanying unaudited
consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions for Form 10-Q. However, the
statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Management believes this report contains all necessary
adjustments (consisting only of normal recurring adjustments) to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented. These unaudited consolidated
financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and
Exchange Commission on February 28, 2023.
Interim results are not necessarily indicative of the results the Company expects for the entire year.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company. All significant
intercompany transactions have been eliminated.
Segment Reporting
Operating segments are components of an enterprise for which separate financial information is
available that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and IIP.
Use of Estimates
In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to,
goodwill impairment, tradenames and other intangible assets, allocations of purchase price, allowance for credit losses, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and
related disclosures. Actual results may differ from these estimates.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over
the fair value of the acquired business assets, which include certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009, from the purchase of some or all of a particular local
management’s equity interest in an existing clinic. Effective January 1, 2009, in accordance with applicable accounting standards, if the purchase price of a non-controlling
interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to
periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually or upon the occurrence of certain triggering events or conditions and are
written down to fair value, if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash
flow, loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these triggering events or conditions could significantly
impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite-lived tradenames in conjunction with our annual goodwill impairment test.
The Company operates its business through two
segments consisting of physical therapy operations and its IIP business. The reporting units within our physical therapy operations are comprised of six regions primarily based on each clinic’s location. In 2022 and 2023, the IIP business consisted of two reporting units.
As part of the impairment analysis, the Company is first required to assess qualitatively if it can
conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, it is then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In
evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. The
Company considers both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis. An impairment loss generally would be recognized when the carrying amount of the net assets of a
reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit.
For the nine months ended September 30, 2023,
no triggering events or indicators were identified that would require impairment assessments for such period. During the year ended December 31, 2022, the Company recorded a charge for goodwill impairment of $9.1 million related to one reporting unit in the IIP business acquired in November 2021 (the “IIP Acquisition”). The impairment is related to a change in the reporting unit’s current and projected operating income as well as various market inputs based on current
market conditions, including the higher interest rate environment. No impairment was recognized as a result of our annual assessment
of goodwill and tradenames for the other seven reporting units. The Company also noted no impairment to long-lived assets for all reporting units.
The
Company continues to monitor for any triggering events or other indicators of impairment.
Investment in unconsolidated affiliate
Investments in unconsolidated affiliates, in which the Company has less than a controlling interest, are accounted for under the equity method of accounting and, accordingly, are adjusted for capital contributions,
distributions and the Company’s equity in net earnings or loss of the respective joint venture.
Non-Controlling Interest
The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent
equity in the unaudited consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interest is included in consolidated net income on the face of the consolidated statements
of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain
or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.
When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally,
operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.
Redeemable Non-Controlling Interest
Redeemable non-controlling interest consist of those that the owners and the Company have certain redemption rights, whether currently exercisable or not, and which
currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met. The purchase price is derived at a predetermined formula based on a multiple of trailing
twelve months earnings performance as defined in the respective limited partnership agreements. The redemption rights can be triggered by the owner or the Company at such time as both of the following events have occurred: 1) termination of the
owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically
to five years, as defined in the limited partnership agreement. The redemption rights are not
automatic or mandatory (even upon death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been satisfied.On the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under
the control of the Company, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption – Redeemable non-controlling interest – temporary equity. Then, in each reporting period thereafter until it
is purchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined in the respective limited partnership
agreement. As a result, the value of the non-controlling interest is not adjusted below its initial carrying value. The Company records any adjustments in the redemption value directly to retained earnings and the adjustments are not reflected in
the unaudited consolidated statements of net income. Although the adjustments are not reflected in the unaudited consolidated statements of net income, current accounting rules require that the Company reflects the adjustments, net of tax, in the
earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the unaudited consolidated statements of net income. Management believes the
redemption value (i.e., the carrying amount) and fair value are the same.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the
position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
settlement with the relevant tax authority.
On August 16, 2022, Inflation Reduction Act of 2022 was enacted and signed into law and includes targeted
tax provisions. The Company has determined that these provisions will not have a material impact on the financial statements.
The Company did not have any accrued interest or
penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the three and nine months ended
September 30, 2023 and September 30, 2022. The Company records any interest or penalties, if required, in interest and other expense, as appropriate.
Fair Value of Financial Instruments
Fair value is defined as an exit price, representing the amount that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy has been established that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
The carrying amounts reported in the balance sheets for cash and cash equivalents, certain contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturity
of these financial instruments. The carrying amount of the debt under the Third Amended and Restated Credit Agreement (defined as “Credit Agreement” in Note 9) approximates its fair value due to the variable interest rate which is tied to the
Secured Overnight Financing Rate (“SOFR”).
In May 2022, the Company entered into an interest rate swap agreement, effective on June 30, 2022, with
Bank of America, N.A, which had a $150 million notional value, and a maturity date of June 30, 2027. The valuations of the Company’s interest rate derivative is measured as the present value of all expected future cash flows based on SOFR-based yield curves. The
primary inputs into the valuation of interest rate swaps are interest yield curves, interest rate volatility, and credit spreads. The interest rate swap is classified within Level 2 of the fair value hierarchy, since all significant inputs are
corroborated by market observable data. The fair value of the interest rate swap on September 30, 2023, was $7.7 million. The impact of
the interest rate swap on the accompanying unaudited consolidated statements of comprehensive income was an unrealized gain of $1.0
million, net of tax, for the three months ended September 30, 2023, and an unrealized gain of $1.7 million, net of tax for the nine
months ended September 30, 2023. See Note 10 for more information on the Company’s interest rate derivative.
The put right associated with the potential future purchase of the separate company in the IIP Acquisition
is marked to fair value on a recurring basis using Level 3 inputs. The fair value of the put right associated with the potential future purchase of a company is determined using a Monte Carlo simulation model utilizing unobservable inputs such as
asset volatility and discount rates. The unobservable inputs used in the valuation of the put right as of September 30, 2023 include asset volatility of 25.0% and a discount rate of 11.9%. The put right value increased $0.1 million for
the three months ended September 30, 2023 and $0.3 million for the nine months ended September 30, 2023. The put right was valued at $3.9 million on September 30, 2023 and $3.5 million on December 31, 2022.
On October 31, 2022, the Company acquired a 60% interest in a fourteen-clinic physical therapy practice. The
purchase price included additional contingent consideration to be paid at a later date based on performance of the business. There is no maximum payout. The additional contingent payment is determined using a Monte Carlo simulation model utilizing
unobservable inputs such as asset volatility and discount rates and is accordingly classified within Level 3 of the fair value hierarchy. The unobservable inputs used in the valuation of the contingent consideration as of September 30, 2023 include
asset volatility of 35% and a discount rate of 8.7%. The additional contingent consideration was valued at $8.1 million on September 30, 2023, and $8.3 million on December 31, 2022. The additional contingent consideration related to the October 2022 acquisition decreased $0.2 million for both the three months and nine months ended September 30, 2023.
Recently Adopted Accounting Guidance
In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity
(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and
contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the treasury stock method. Further, contracts which can be settled in
cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive, regardless of whether the entity or the counterparty can choose between
cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy. This pronouncement was effective for fiscal years, and for interim periods within those fiscal years, beginning after
December 15, 2021. The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The adoption of ASU 2020-06 did not have a material impact on
the Company’s financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU
provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to
alternative reference rates. The new guidance was effective upon issuance, and the Company has elected to apply the amendments prospectively through December 31, 2022. Borrowings under the Third Amended and Restated Credit Agreement bear interest
based on SOFR.
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EARNINGS PER SHARE |
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EARNINGS PER SHARE [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE |
2. EARNINGS PER SHARE
Basic and diluted earnings per share is computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares
and participating securities. The restricted stock the Company grants are participating securities containing non-forfeitable rights to receive dividends. Accordingly, any unvested restricted stock is included in the basic and diluted earnings per
share computation. Additionally, in accordance with current accounting guidance, the revaluation of redeemable non-controlling interest (see Note 5 Redeemable Non-Controlling Interest), net of tax, charged directly to retained earnings is included in
the earnings per basic and diluted share calculation.
The following table
provides a detail of the basic and diluted earnings per share computation.
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ACQUISITIONS OF BUSINESSES |
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ACQUISITIONS OF BUSINESSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS OF BUSINESSES |
3. ACQUISITIONS OF BUSINESSES
The Company’s strategy is to continue acquiring multi-clinic outpatient
physical therapy practices, to develop outpatient physical therapy clinics as satellites in existing partnerships and to continue acquiring companies that provide and serve the industrial injury prevention services sector. The consideration paid
for each acquisition is derived through arm’s length negotiations and funded through working capital, borrowings under the Company’s revolving credit facilities or proceeds from the recently completed secondary offering discussed in Note 1, Basis of Presentation and Significant Accounting Policies.
The purchase price plus the fair value of the non-controlling interest for the acquisitions after September 30, 2022 were allocated to the
fair value of the assets acquired, inclusive of identifiable intangible assets (i.e. tradenames, referral relationships and non-compete agreements) and liabilities assumed based on the estimated fair values at the acquisition date, with the amount
in excess of fair values being recorded as goodwill. The Company is in the process of completing its formal valuation analysis of the acquisitions, to identify and determine the fair value of tangible and identifiable intangible assets acquired and
the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates used on September 30, 2023, based on additional information obtained and completion of the valuation of the identifiable intangible
assets. Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies,
where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill. The Company does not expect the adjustments to be material. The Company continues to evaluate the components for the purchase
price allocations for other acquisitions in 2022 and 2023.
The results of operations of the acquisitions below have been included in the Company’s consolidated financial statements since their respective date of acquisition. Unaudited proforma consolidated financial information for the acquisitions have not been included, as the results, individually and in the aggregate, were not material to current operations. 2023 Acquisitions
On September 29, 2023, the Company acquired a 70%
equity interest in a four-clinic physical therapy practice. The owner of the practice retained 30% of the equity interests. The purchase price for the 70%
equity interest was approximately $6.0 million, of which $5.4 million was paid in cash, and $0.6 million was in the form of a note payable. The note accrues
interest at 5.0% per annum and the principal and interest are payable in two installments. The first payment of principal and interest of $0.3
million is due on January 31, 2024, and the second installment of $0.3 million is due on September 30, 2025.
In a separate transaction, on September 29, 2023, the Company acquired a 70%
equity interest in a
clinic physical therapy practice. The owner of the practice retained 30% of the equity interests. The purchase price for the 70%
equity interest was approximately $7.8 million, of which $7.4 million was paid in cash and $0.4 million is a deferred payment due on June 30, 2025.On July 31, 2023, the Company acquired a 70% equity interest in a five-clinic practice. The practice’s
owners retained a 30% equity interest. The purchase price for the 70% equity interest was approximately $2.1 million, of which $1.8 million was paid in cash and $0.3
million is a deferred payment due on June 30, 2025.
On May 31, 2023, the Company and a local partner together acquired a 75% interest in a four-clinic physical therapy practice. After the transaction, the Company’s ownership interest is 45%, the Company’s local partner’s ownership interest is 30%, and the practice’s pre-acquisition owners have a 25% ownership interest. The purchase price for the 75% equity interest was approximately $3.1 million, of which $1.7 million was paid in cash by the
Company, $1.1 million was paid in cash by the local partner, and $0.3 million was in the form of a note payable, (of which $0.2
million will be paid by the Company and $0.1 million will be paid by the local partner). The note will be paid on July 1, 2024. The
Company guaranteed the full payment of $0.3 million on its due date.
On February 28, 2023, the Company acquired an 80% interest in a one-clinic physical therapy practice. The practice’s owners retained 20% of the equity interests. The purchase price for the 80% equity interest was approximately $6.2 million, of which $5.8 million was paid in cash and $0.4 million in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and interest are payable on February 28, 2025.
The aggregate purchase price for the
2023 acquisitions has been preliminarily allocated as follows:
Total current assets primarily represent accounts receivable
while total non-current assets consist of fixed assets and equipment used in the practice.
For the acquisitions in 2023, the values assigned to the
customer and referral relationships and non-compete agreement are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 13.0 years. For the non-compete agreements, the weighted-average amortization period is 5.0 years. The values assigned to tradenames are tested annually for impairment.
2022 Acquisitions
On November 30, 2022, the Company acquired an 80% interest in a thirteen-clinic physical therapy practice. The practice’s owners retained 20% of the equity interests. The purchase price for the 80% equity interest was approximately $25.0 million, of which $24.2 million was paid in cash and $0.8 million in the form of a note payable. As part of the acquisition, the Company agreed to additional contingent consideration of up to $1.6 million if future operational objectives are met. The additional contingent consideration is currently valued at $1.6 million. The note accrues interest at 7.0% per annum and the principal and interest are payable on November 30, 2024. On October 31, 2022, the Company acquired a 60% interest in a fourteen-clinic physical therapy practice. The practice’s owners retained 40% of the equity interests. The purchase price for the 60% equity interest was approximately $19.5 million, with additional contingent consideration valued at $8.1 million on September 30, 2023, to be paid at a later date based on the performance of the business. There is no maximum payout. The estimate of this contingent consideration will continue to be marked at fair value based on the practice’s operational results and updated market inputs. On September 30, 2022, the Company acquired an 80% interest in a two-clinic physical therapy practice. The
practice’s owners retained 20% of the equity interests. The purchase price for the 80% equity interest was approximately $4.2 million, of which $3.9 million was paid in cash and $0.3
million in the form of a note payable. The note accrues interest at 5.5% per annum and the principal and interest are payable on
September 30, 2024.
On August 31, 2022, the Company acquired a 70% interest in a six-clinic physical therapy practice. The practice’s owners retained 30% of the equity interests. The purchase price for the 70% equity interest was approximately $3.5 million, of which $3.3 million was
paid in cash and $0.2 million in the form of a note payable. The note accrues interest at 5.5% per annum and the principal and interest are payable on August 31, 2024.
On March 31, 2022, the Company acquired a 70% interest in a six-clinic physical therapy practice. The practice’s owners retained 30% of the equity interests. The purchase price for the 70%
equity interest was approximately $11.5 million, of which $11.2 million was paid in cash and $0.3 million in the form of a note payable. The note accrues
interest at 3.5% per annum and the principal and interest are payable on March 31, 2024.
The purchase prices for the 2022 acquisitions have been preliminarily allocated as follows:
Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment used in the practice.
The purchase price plus the fair value of the non-controlling interests for the acquisitions in 2022 were allocated to the fair value of the assets acquired, inclusive
of identifiable intangible assets, (i.e. trade names, referral relationships and non-compete agreements) and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill.
For the acquisitions in 2022, the values assigned to the customer and referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.0 years. For non-compete agreements, the weighted-average amortization period is 5.0 years. The values assigned to tradenames are tested annually for impairment. |
REVENUE RECOGNITION |
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REVENUE RECOGNITION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION |
4. REVENUE RECOGNITION
Revenues are recognized in the period in which services are
rendered. Net patient revenue consists of revenues for physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventative care,
rehabilitation of injured workers and neurological-related injuries. Net patient revenue (patient revenues less estimated contractual adjustments – as described below) is recognized at the estimated net realizable amounts from third-party payors,
patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Separate contractual arrangements exist between
us and third-party payors (e.g. insurers, managed care programs, government programs, and workers’ compensation programs) which establish the amounts the third parties pay on behalf of the patients for covered services rendered. While these
agreements are not considered contracts with the customer, they are used for determining the transaction price for services provided to the patients covered by the third-party payors. The payor contracts do not indicate performance obligations for
us but indicate reimbursement rates for patients who are covered by those payors when the services are provided. At that time, we are obligated to provide services for the reimbursement rates stipulated in the payor contracts. The execution of the
contract alone does not indicate a performance obligation. For self-paying customers, the performance obligation exists when we provide the services at established rates. The difference between our established rate and the anticipated reimbursement
rate is accounted for as an offset to revenue—contractual allowance. The payment for the services rendered is due to the Company based on the respective payor contract. Typically, we receive payment within thirty to forty-five days of service.
Management contract revenue, which is included in other revenue in the consolidated statements of net income, is derived from contractual arrangements whereby the
Company manages a clinic owned by a third party. The Company does not have any ownership interest in these clinics. Typically, revenue is determined based on the number of visits conducted at the clinic and recognized at the point in time when
services are performed. Costs, typically salaries for our employees, are recorded when incurred. Management contract revenue is
typically due the month following the service provided.
Revenue from the IIP segment, which is
included in other revenue in the consolidated statements of net income, is derived from onsite services the Company provides to clients’ employees including injury prevention, rehabilitation, ergonomic assessments and performance optimization.
Revenue from the IIP segment is recognized when obligations under the terms of the contract are satisfied. Revenue is recognized at an amount equal to the consideration the Company expects to receive in exchange for providing injury prevention
services to its clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period. Payment for services rendered is typically within thirty days.
Additionally, other revenue includes services the Company provides on-site, such as schools, for physical or occupational therapy services, and fees from athletic
trainers. Contract terms and rates are agreed to in advance between the Company and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service. If the services are paid in advance,
revenue is recorded as a liability over the period of the agreement and recognized at the point in time, when the services are performed.
The Company determines credit losses based on the specific aging and payor classifications at each
clinic. The provision for credit losses is included in clinic operating cost in the statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and provision
for credit losses, includes only those amounts the Company estimates to be collectible.
The following table details the revenue related to the various categories:
Contractual Allowances
Contractual allowances result from the differences between the rates charged for services performed and
expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third-party payors and managed care contracts are often complex and may include multiple
reimbursement mechanisms payable for the services provided in Company clinics. The Company estimates contractual allowances based on its interpretation of the applicable regulations, payor contracts and historical calculations. Each month the
Company estimates its contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and applies an appropriate contractual allowance reserve percentage to the gross accounts receivable
balances for each payor of the clinic. Based on the Company’s historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow the Company to provide the necessary detail and accuracy with
its collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from the Company’s estimates. Payor terms are periodically revised
necessitating continual review and assessment of the estimates made by management. The Company’s billing system does not capture the exact change in its contractual allowance reserve estimate from period to period in order to assess the accuracy
of its revenues and hence its contractual allowance reserves. Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, historically the
difference between net revenues and corresponding cash collections has generally reflected a difference within approximately 1.0% to 1.5%
of net revenue. Additionally, analysis of subsequent periods’ contractual write-offs on a payor basis reflects a difference within approximately 1.0% to 1.5%
between the actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated with the same period end balance. As a result, the Company believes that a change in the contractual
allowance reserve estimate would not likely be more than 1.0% to
1.5% on each balance sheet date.
A contract’s transaction price is allocated to each distinct performance obligation and recognized when, or as, the performance obligation is satisfied. To determine
the transaction price, the Company includes the effects of any variable consideration, such as the probability of collecting that amount. The Company applies established rates to the services provided, and adjusts for the terms of payor contracts,
as applicable. These contracted amounts are different from the Company’s established rates. The Company has established a “contractual allowance” for this difference. The allowance is based on the terms of payor contracts, historical and current
reimbursement information and current experience with the clinic and partners. The Company’s established rates less the contractual allowance is the revenue that is recognized in the period in which the service is rendered. This revenue is deemed
the transaction price and stated as “Net Patient Revenue” on the Company’s consolidated statements of income.
The Company’s performance obligations are satisfied at a point in time. After the clinic has provided
services and satisfied its obligation to the customer for the reimbursement rates stipulated in the payor contracts (i.e. the transaction price), the Company recognizes the revenue, net of contractual allowances, in the period in which the
services are rendered. The Company recognizes the full amount of revenue and reports the contractual allowances as a contra (or offset) revenue account to report a net revenue number based on the expected collections.
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REDEEMABLE NON-CONTROLLING INTEREST |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REDEEMABLE NON-CONTROLLING INTEREST [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REDEEMABLE NON-CONTROLLING INTEREST |
5. REDEEMABLE NON-CONTROLLING INTEREST
Since October 2017, when the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic business (referred to as “Therapy Practice”), these
Acquisitions occur in a series of steps which are described below.
The Partnership Agreement contains provisions for the redemption of the Seller Entity Interest, either at the option of the Company (the “Call Right”) or at the option
of the Seller Entity (the “Put Right”) as follows:
ProgressiveHealth
Acquisition
On November 30, 2021,
the Company acquired a majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest in certain subsidiaries (“Progressive Subsidiaries”) that operate in the IIP and therapy services businesses. The
Progressive transaction was completed in a series of steps which are described below.
Neither the Progressive Operating Agreement nor the Progressive Non-Compete Agreement contain any provision to escrow or “claw back” the equity interest in Progressive
NewCo held by the Progressive Selling Shareholders, in the event of a breach of the operating agreement or non-compete terms, or the management services agreement pursuant to which the Progressive Selling Shareholders perform services on behalf of
Progressive NewCo. The Company’s only recourse against the Progressive Selling Shareholder for breach of any of these agreements is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements
with a Progressive Selling Shareholder that would result in a forfeiture of the equity interest in Progressive NewCo held by a Progressive Selling Shareholder.
For both scenarios described above, an Employed Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the
Company’s purchase of its partnership interest in NewCo. The Employment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling
Shareholder, nor the Seller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms. More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, such Employed Selling Shareholder
does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest. The Company’s only recourse against the Employed Selling
Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements with an Employed Selling Shareholder that
would result in a forfeiture of the equity interest held in the Seller Entity or of the Seller Entity Interest.
Carrying Amounts of Redeemable Non-Controlling Interests
The following table
details the changes in the carrying amount (fair value) of the Company’s redeemable non-controlling interest:
The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interest:
|
GOODWILL |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL |
6. GOODWILL
The changes in the carrying amount of goodwill consisted of the following:
For the
three and nine months ended September 30, 2023 and 2022, no triggering events or indicators were identified that would require impairment assessments as of such periods. During the year ended December 31, 2022, the Company recorded a charge for
goodwill impairment of $9.1 million related to the IIP Acquisition in November 2021. The impairment was related to a change in the IIP
Acquisition’s current and projected operating income as well as various market inputs based on current market conditions, including the higher interest rate environment.
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INTANGIBLE ASSETS, NET |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET |
7. INTANGIBLE ASSETS, NET
Intangible assets, net consisted of the following:
Tradenames, customer and referral relationships and non-compete agreements are related to the businesses acquired. The value assigned to tradenames has an indefinite
life and is tested at least annually for impairment using the relief from royalty method in conjunction with the Company’s annual goodwill impairment test. The value assigned to customer and referral relationships is being amortized over their
respective estimated useful lives which range from 7 to 14 years. Non-compete agreements are amortized over the respective term of the agreements which range from 5
to 6 years.
The following table details the amount of amortization expense recorded for
intangible assets for the three and nine months ended September 30, 2023, and 2022:
Based on the balance of referral relationships and non-compete agreements as of September 30, 2023, the
expected amount to be amortized in 2023 and thereafter by year is as follows:
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ACCRUED EXPENSES |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES |
8. ACCRUED EXPENSES
Accrued expenses as of September 30, 2023, and December 31, 2022 consisted of the following:
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BORROWINGS |
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BORROWINGS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BORROWINGS |
9. BORROWINGS
Amounts outstanding under the Company’s Senior Credit Facilities (as defined below) and notes payable consisted of the following as of the dates indicated.
Senior Credit Facilities
On December 5, 2013, the Company entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility. This agreement was
amended and/or restated in August 2015, January 2016,
March 2017, November 2017, and January 2021. On June 17, 2022, the Company entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) among Bank
of America, N.A., as administrative agent (“Administrative Agent”) and the lenders from time-to-time party thereto.
The Credit Agreement, which matures on June 17, 2027, provides for loans in an aggregate principal amount of $325.0 million. Such loans were made available through the
following facilities (collectively, the “Senior Credit Facilities”):
The proceeds of the Revolving Facility shall be used by the Company for working capital and other general corporate purposes of the Company and
its subsidiaries, including to fund future acquisitions and invest in growth opportunities. The proceeds of the Term Facility were used by the Company to refinance the indebtedness outstanding under the Amended Credit Agreement, to pay fees and
expenses incurred in connection with the transactions involving the loan facilities, for working capital and other general corporate purposes of the Company and its subsidiaries.
The Company is permitted to increase the Revolving Facility and/or add one or more tranches of term loans in an aggregate amount not to exceed the sum of (i) $100 million plus (ii) an unlimited additional amount, provided that (in the case of clause (ii)), after giving effect to
such increases, the pro forma Consolidated Leverage Ratio (as defined in the Credit Agreement) would not exceed 2.0:1.0, and the aggregate amount of all incremental increases under the
Revolving Facility does not exceed $50,000,000.
The interest rates per annum applicable to the Senior Credit Facilities (other
than in respect of Swingline Loans) will be Term SOFR (as defined in the Credit Agreement) plus an applicable margin or, at the option of the Company, an alternate base rate plus an applicable margin. Each Swingline Loan shall bear interest at
the base rate plus the applicable margin. The applicable margin for Term SOFR borrowings ranges from 1.50% to 2.25%, and the applicable margin for alternate
base rate borrowings ranges from 0.50% to 1.25%, in each case, based on the Consolidated Leverage Ratio of the Company and its subsidiaries. Interest is payable at the
end of the selected interest period but no less frequently than quarterly and on the date of maturity.
The Company is also required to pay to the Administrative Agent, for the account
of each lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”). Such unused fee will range between 0.25% and 0.35% per annum and is also based on the Consolidated Leverage Ratio of the Company and
its subsidiaries. The Company may prepay and/or repay the revolving loans and the term loans, and/or terminate the revolving loan commitments, in whole or in part, at any time without premium or penalty, subject to certain conditions.
The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of
liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions,
thresholds and baskets. The Credit Agreement includes certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio, and the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement also
contains customary events of default.
The Company’s obligations under the Credit Agreement are guaranteed by its
wholly-owned material domestic subsidiaries (each, a “Guarantor”), and the obligations of the Company and any Guarantors are secured by a perfected first
priority security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions.
As of September 30, 2023, $145.3
million was outstanding on the Term Facility while none
was outstanding under the Revolving Facility resulting in $175.0 million of credit availability. As of September 30, 2023, the Company was in compliance with all of the covenants contained in the Credit Agreement.
The average effective interest rate, net of savings under the interest rate swap discussed in Note 10, Derivative Instruments, for borrowings under the Senior Credit Facilities was 5.6% and 5.7% in the three and nine
months ended September 30, 2023, respectively.
Notes Payable Related to
Acquisitions
The Company generally enters into various notes payable as a means of financing a portion of its acquisitions and purchasing of non-controlling interests. Notes
payable related to acquisitions amounted to a balance of $5.3 million as of September 30, 2023. In conjunction with acquisitions in the
nine months ended September 30, 2023, the Company entered into notes payable in the aggregate amount of $1.8 million. Aggregate
principal payments of $2.9 million related to these notes payable were paid in the nine months ended September 30, 2023. Of this
balance, $1.6 million is due later in 2023, $2.4 million is due in 2024 and $1.3 million is due in 2025. Interest accrues
in the range of 3.25% to 8.0%
per annum and is payable with each principal installment.
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DERIVATIVE INSTRUMENTS |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS |
10. DERIVATIVE INSTRUMENTS
The Company is
exposed to certain market risks in the ordinary course of business due to adverse changes in interest rates. The exposure to interest rate risk primarily results from the Company’s variable-rate borrowing. The Company may elect to use
derivative financial instruments to manage risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile and the Company’s risk
management activities do not eliminate these risks.
Interest Rate Swap
In May 2022, the Company entered into an interest rate swap agreement,
effective on June 30, 2022, with Bank of America, N.A, which had a $150 million notional value, and a maturity date of June 30, 2027. Beginning in July 2022, the Company receives 1-month SOFR, and pays a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis. The total interest rate in any period will also include an applicable margin based on the Company’s consolidated
leverage ratio. In connection with the swap, no cash was exchanged between the Company and the counterparty.
The Company designated its interest rate swap as a cash flow hedge and
structured it to be highly effective. Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income, net of tax.The
impact of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 are presented in the table below:
The valuations of the Company’s interest rate derivatives are measured as the
present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2
fair value measurement.
The fair value of the interest rate swap on September 30, 2023, was $7.7
million, of which $3.5 million has been included within Other current assets and $4.2 million has been included in Other assets, in the accompanying unaudited consolidated balance sheet. The fair value of the interest rate swap on December 31, 2022, was $5.4 million, of which $2.9 million was included in Other current assets and $2.5 million was included in Other assets in the accompanying audited consolidated balance sheet.
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LEASES |
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LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
11. LEASES
The Company has operating leases for its corporate offices and operating facilities. The Company determines if an arrangement is a lease at the inception of a contract.
The Company’s operating lease terms are generally five years or less. The Company’s lease terms include options to extend or terminate the
lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date
in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term.
The components of lease expense were as follows:
*Sublease income was immaterial.
Lease cost is reflected in the consolidated statement of net income in the line item – rent, supplies, contract labor and other.
Supplemental
information related to leases was as follows:
The aggregate future lease payments for operating leases as of September 30, 2023 were as follows:
Average lease terms and discount rates were as follows:
The weighted-average remaining operating lease term was 3.9 years and 4.2 years as of September 30, 2023 and September 30, 2022, respectively, while the average discount rate for operating leases was 3.8% and 2.7% over the same periods, respectively.
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SEGMENT INFORMATION |
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SEGMENT INFORMATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION |
12. SEGMENT INFORMATION
The Company’s reportable segments include the physical therapy operations segment and the IIP segment. Also included in the physical therapy operations segment are
revenues from management contract services and other services which include services the Company provides on-site, such as athletic trainers for schools.
The Company evaluates performance of the segments based on gross profit. The Company has provided additional information regarding its reportable segments which
contributes to the understanding of the Company and provides useful information.
The following table summarizes selected financial data for the Company’s reportable segments.
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INVESTMENT IN UNCONSOLIDATED AFFILIATE |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
INVESTMENT IN UNCONSOLIDATED AFFILIATE [Abstract] | |
INVESTMENT IN UNCONSOLIDATED AFFILIATE |
13. INVESTMENT IN UNCONSOLIDATED
AFFILIATE
Through one of its subsidiaries, the Company has a 49% joint venture
interest in a company which provides physical therapy services for patients at hospitals. Since the Company is deemed to not have a controlling interest in the company, the Company’s investment is accounted for using the equity method of
accounting. The investment balance of this joint venture as of September 30, 2023, is $12.3 million and the earnings amounted to $0.2 million and $0.8
million for the three and nine months ended September 30, 2023, respectively.
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SUBSEQUENT EVENTS |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
SUBSEQUENT EVENTS [Abstract] | |
SUBSEQUENT EVENTS |
14. SUBSEQUENT EVENTS
The Company’s Board of Directors declared a quarterly dividend of $0.43 per share payable on December 8, 2023, to shareholders of record on November 16, 2023.
On
October 31, 2023, the Company,
through one of its IIP subsidiaries, acquired an IIP services and ergonomics software business for approximately $4.0 million. The
Company’s IIP subsidiary purchased all of the IIP services business and 55% of the ergonomics software business.
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RECLASSIFICATION OF PRIOR PERIOD INFORMATION |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
RECLASSIFICATION OF PRIOR PERIOD INFORMATION [Abstract] | |
RECLASSIFICATION OF PRIOR PERIOD INFORMATION |
15. RECLASSIFICATION OF PRIOR PERIOD
INFORMATION
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of
operations.
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INSIDER TRADING ARRANGEMENTS |
3 Months Ended |
---|---|
Sep. 30, 2023 | |
Insider Trading Arrangements [Line Items] | |
Rule 10b5-1 Arrangement Adopted [Flag] | false |
Non-Rule 10b5-1 Arrangement Adopted [Flag] | false |
Rule 10b5-1 Arrangement Terminated [Flag] | false |
Non-Rule 10b5-1 Arrangement Terminated [Flag] | false |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business |
Nature of Business
U.S. Physical Therapy, Inc. and its subsidiaries (the “Company”, “USPH”) operates its business through two reportable business
segments: (a) physical therapy operations segment, and (b) industrial injury prevention services (“IIP”) segment. The Company’s physical therapy operations consist of physical therapy and occupational therapy clinics that provide pre-and
post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries. Services provided by the IIP segment include onsite injury prevention and
rehabilitation, performance optimization and ergonomic assessments.
As of September 30, 2023, the Company operated 672 clinics in 42 states. The Company also manages physical therapy facilities for third parties, primarily hospitals and physicians, with 42 third-party facilities under management as of September 30, 2023.
During the nine months ended September 30, 2023, and for the year-ended
December 31, 2022, the Company completed the acquisitions of the following physical therapy practices.
* See Note 3 for additional information on the
acquisitions in the table.
In May 2023, the Company completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $90.00 per share. Upon completion of the offering, the Company received net proceeds of approximately $163.6
million, after deducting an underwriting discount of $8.6 million and recognizing related fees and expenses of $0.2 million. A portion of the net proceeds was used to repay the $35.0 million then outstanding under the Company’s credit facility while the remainder is expected to be used primarily for additional acquisitions.
During
the nine months ended September 30, 2023, the Company recognized $0.5 million of income received under the Coronavirus Aid, Relief and
Economic Security Act (“Relief Funds”). The Relief Funds were received in prior years but were subject to certain compliance requirements which were met in the first quarter of 2023. The Company does not expect to receive or recognize any future
Relief Funds.
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Basis of Presentation |
Basis of Presentation
The accompanying unaudited
consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions for Form 10-Q. However, the
statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Management believes this report contains all necessary
adjustments (consisting only of normal recurring adjustments) to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented. These unaudited consolidated
financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and
Exchange Commission on February 28, 2023.
Interim results are not necessarily indicative of the results the Company expects for the entire year.
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Principles of Consolidation |
Principles of Consolidation
The consolidated financial statements include the accounts of the Company. All significant
intercompany transactions have been eliminated.
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Segment Reporting |
Segment Reporting
Operating segments are components of an enterprise for which separate financial information is
available that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and IIP.
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Use of Estimates |
Use of Estimates
In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to,
goodwill impairment, tradenames and other intangible assets, allocations of purchase price, allowance for credit losses, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and
related disclosures. Actual results may differ from these estimates.
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Goodwill and Other Indefinite-Lived Intangible Assets |
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over
the fair value of the acquired business assets, which include certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009, from the purchase of some or all of a particular local
management’s equity interest in an existing clinic. Effective January 1, 2009, in accordance with applicable accounting standards, if the purchase price of a non-controlling
interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to
periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually or upon the occurrence of certain triggering events or conditions and are
written down to fair value, if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash
flow, loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these triggering events or conditions could significantly
impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite-lived tradenames in conjunction with our annual goodwill impairment test.
The Company operates its business through two
segments consisting of physical therapy operations and its IIP business. The reporting units within our physical therapy operations are comprised of six regions primarily based on each clinic’s location. In 2022 and 2023, the IIP business consisted of two reporting units.
As part of the impairment analysis, the Company is first required to assess qualitatively if it can
conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, it is then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In
evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. The
Company considers both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis. An impairment loss generally would be recognized when the carrying amount of the net assets of a
reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit.
For the nine months ended September 30, 2023,
no triggering events or indicators were identified that would require impairment assessments for such period. During the year ended December 31, 2022, the Company recorded a charge for goodwill impairment of $9.1 million related to one reporting unit in the IIP business acquired in November 2021 (the “IIP Acquisition”). The impairment is related to a change in the reporting unit’s current and projected operating income as well as various market inputs based on current
market conditions, including the higher interest rate environment. No impairment was recognized as a result of our annual assessment
of goodwill and tradenames for the other seven reporting units. The Company also noted no impairment to long-lived assets for all reporting units.
The
Company continues to monitor for any triggering events or other indicators of impairment.
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Investment in Unconsolidated Affiliate |
Investment in unconsolidated affiliate
Investments in unconsolidated affiliates, in which the Company has less than a controlling interest, are accounted for under the equity method of accounting and, accordingly, are adjusted for capital contributions,
distributions and the Company’s equity in net earnings or loss of the respective joint venture.
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Non-Controlling Interest |
Non-Controlling Interest
The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent
equity in the unaudited consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interest is included in consolidated net income on the face of the consolidated statements
of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain
or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.
When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally,
operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.
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Redeemable Non-Controlling Interest |
Redeemable Non-Controlling Interest
Redeemable non-controlling interest consist of those that the owners and the Company have certain redemption rights, whether currently exercisable or not, and which
currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met. The purchase price is derived at a predetermined formula based on a multiple of trailing
twelve months earnings performance as defined in the respective limited partnership agreements. The redemption rights can be triggered by the owner or the Company at such time as both of the following events have occurred: 1) termination of the
owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically
to five years, as defined in the limited partnership agreement. The redemption rights are not
automatic or mandatory (even upon death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been satisfied.On the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under
the control of the Company, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption – Redeemable non-controlling interest – temporary equity. Then, in each reporting period thereafter until it
is purchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined in the respective limited partnership
agreement. As a result, the value of the non-controlling interest is not adjusted below its initial carrying value. The Company records any adjustments in the redemption value directly to retained earnings and the adjustments are not reflected in
the unaudited consolidated statements of net income. Although the adjustments are not reflected in the unaudited consolidated statements of net income, current accounting rules require that the Company reflects the adjustments, net of tax, in the
earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the unaudited consolidated statements of net income. Management believes the
redemption value (i.e., the carrying amount) and fair value are the same.
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Income Taxes |
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the
position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
settlement with the relevant tax authority.
On August 16, 2022, Inflation Reduction Act of 2022 was enacted and signed into law and includes targeted
tax provisions. The Company has determined that these provisions will not have a material impact on the financial statements.
The Company did not have any accrued interest or
penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the three and nine months ended
September 30, 2023 and September 30, 2022. The Company records any interest or penalties, if required, in interest and other expense, as appropriate.
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Fair Value of Financial Instruments |
Fair Value of Financial Instruments
Fair value is defined as an exit price, representing the amount that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy has been established that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
The carrying amounts reported in the balance sheets for cash and cash equivalents, certain contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturity
of these financial instruments. The carrying amount of the debt under the Third Amended and Restated Credit Agreement (defined as “Credit Agreement” in Note 9) approximates its fair value due to the variable interest rate which is tied to the
Secured Overnight Financing Rate (“SOFR”).
In May 2022, the Company entered into an interest rate swap agreement, effective on June 30, 2022, with
Bank of America, N.A, which had a $150 million notional value, and a maturity date of June 30, 2027. The valuations of the Company’s interest rate derivative is measured as the present value of all expected future cash flows based on SOFR-based yield curves. The
primary inputs into the valuation of interest rate swaps are interest yield curves, interest rate volatility, and credit spreads. The interest rate swap is classified within Level 2 of the fair value hierarchy, since all significant inputs are
corroborated by market observable data. The fair value of the interest rate swap on September 30, 2023, was $7.7 million. The impact of
the interest rate swap on the accompanying unaudited consolidated statements of comprehensive income was an unrealized gain of $1.0
million, net of tax, for the three months ended September 30, 2023, and an unrealized gain of $1.7 million, net of tax for the nine
months ended September 30, 2023. See Note 10 for more information on the Company’s interest rate derivative.
The put right associated with the potential future purchase of the separate company in the IIP Acquisition
is marked to fair value on a recurring basis using Level 3 inputs. The fair value of the put right associated with the potential future purchase of a company is determined using a Monte Carlo simulation model utilizing unobservable inputs such as
asset volatility and discount rates. The unobservable inputs used in the valuation of the put right as of September 30, 2023 include asset volatility of 25.0% and a discount rate of 11.9%. The put right value increased $0.1 million for
the three months ended September 30, 2023 and $0.3 million for the nine months ended September 30, 2023. The put right was valued at $3.9 million on September 30, 2023 and $3.5 million on December 31, 2022.
On October 31, 2022, the Company acquired a 60% interest in a fourteen-clinic physical therapy practice. The
purchase price included additional contingent consideration to be paid at a later date based on performance of the business. There is no maximum payout. The additional contingent payment is determined using a Monte Carlo simulation model utilizing
unobservable inputs such as asset volatility and discount rates and is accordingly classified within Level 3 of the fair value hierarchy. The unobservable inputs used in the valuation of the contingent consideration as of September 30, 2023 include
asset volatility of 35% and a discount rate of 8.7%. The additional contingent consideration was valued at $8.1 million on September 30, 2023, and $8.3 million on December 31, 2022. The additional contingent consideration related to the October 2022 acquisition decreased $0.2 million for both the three months and nine months ended September 30, 2023.
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Recently Adopted Accounting Guidance |
Recently Adopted Accounting Guidance
In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity
(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and
contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the treasury stock method. Further, contracts which can be settled in
cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive, regardless of whether the entity or the counterparty can choose between
cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy. This pronouncement was effective for fiscal years, and for interim periods within those fiscal years, beginning after
December 15, 2021. The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The adoption of ASU 2020-06 did not have a material impact on
the Company’s financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU
provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to
alternative reference rates. The new guidance was effective upon issuance, and the Company has elected to apply the amendments prospectively through December 31, 2022. Borrowings under the Third Amended and Restated Credit Agreement bear interest
based on SOFR.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions Within Physical Therapy Operations Segment |
During the nine months ended September 30, 2023, and for the year-ended
December 31, 2022, the Company completed the acquisitions of the following physical therapy practices.
* See Note 3 for additional information on the
acquisitions in the table.
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EARNINGS PER SHARE (Tables) |
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EARNINGS PER SHARE [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computations of Basic and Diluted Earnings Per Share |
The following table
provides a detail of the basic and diluted earnings per share computation.
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ACQUISITIONS OF BUSINESSES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS OF BUSINESSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase Price Allocation |
The aggregate purchase price for the
2023 acquisitions has been preliminarily allocated as follows:
The purchase prices for the 2022 acquisitions have been preliminarily allocated as follows:
|
REVENUE RECOGNITION (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue, Categories |
The following table details the revenue related to the various categories:
|
REDEEMABLE NON-CONTROLLING INTEREST (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REDEEMABLE NON-CONTROLLING INTEREST [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest |
The following table
details the changes in the carrying amount (fair value) of the Company’s redeemable non-controlling interest:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying Amount of (Fair Value) Redeemable Non-Controlling Interest |
The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interest:
|
GOODWILL (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amount of Goodwill |
The changes in the carrying amount of goodwill consisted of the following:
|
INTANGIBLE ASSETS, NET (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net |
Intangible assets, net consisted of the following:
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Amortization Expenses |
The following table details the amount of amortization expense recorded for
intangible assets for the three and nine months ended September 30, 2023, and 2022:
|
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Amortization of Customer and Referral Relationships and Non Competition Agreements |
Based on the balance of referral relationships and non-compete agreements as of September 30, 2023, the
expected amount to be amortized in 2023 and thereafter by year is as follows:
|
ACCRUED EXPENSES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses |
Accrued expenses as of September 30, 2023, and December 31, 2022 consisted of the following:
|
BORROWINGS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BORROWINGS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Credit Facilities and Notes Payable |
Amounts outstanding under the Company’s Senior Credit Facilities (as defined below) and notes payable consisted of the following as of the dates indicated.
|
DERIVATIVE INSTRUMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impacts of Derivative Instruments on Consolidated Statements of Comprehensive Income | The
impact of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 are presented in the table below:
|
LEASES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Lease Expense |
The components of lease expense were as follows:
*Sublease income was immaterial.
|
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Supplemental Information Related to Leases |
Supplemental
information related to leases was as follows:
|
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Future Lease Payments for Operating Leases |
The aggregate future lease payments for operating leases as of September 30, 2023 were as follows:
|
SEGMENT INFORMATION (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Financial Data for Reportable Segments |
The following table summarizes selected financial data for the Company’s reportable segments.
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, Segment Reporting (Details) |
9 Months Ended |
---|---|
Sep. 30, 2023
Segment
| |
Segment Reporting [Abstract] | |
Number of business segments | 2 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, Goodwill and Other Indefinite-Lived Intangible Assets (Details) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2023
USD ($)
ReportingUnit
Region
Segment
|
Dec. 31, 2022
USD ($)
ReportingUnit
|
|
Goodwill and Other Indefinite-Lived Intangible Assets [Abstract] | ||
Number of business segments | Segment | 2 | |
Number of regions | Region | 6 | |
Number of reporting units | ReportingUnit | 2 | 2 |
Goodwill impairment | $ 0 | $ 9,112 |
Impairment of long-lived assets | $ 0 | |
Industrial Injury Prevention Services [Member] | ||
Goodwill and Other Indefinite-Lived Intangible Assets [Abstract] | ||
Goodwill impairment | $ 9,100 | |
Other [Member] | ||
Goodwill and Other Indefinite-Lived Intangible Assets [Abstract] | ||
Number of reporting units | ReportingUnit | 7 | |
Impairment of goodwill and tradenames | $ 0 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, Redeemable Non-Controlling Interest (Details) |
9 Months Ended |
---|---|
Sep. 30, 2023 | |
Minimum [Member] | |
Redeemable Non-Controlling Interests [Abstract] | |
Redeemable non-controlling interest, redemption rights, commencement period | 3 years |
Maximum [Member] | |
Redeemable Non-Controlling Interests [Abstract] | |
Redeemable non-controlling interest, redemption rights, commencement period | 5 years |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Income Taxes [Abstract] | ||||
Accrued interest and penalties associated with any unrecognized tax benefits | $ 0 | $ 0 | $ 0 | $ 0 |
Unrecognized tax benefit | 0 | 0 | 0 | 0 |
Interest expense recognized | $ 0 | $ 0 | $ 0 | $ 0 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES, Fair Value of Financial Instruments (Details) $ in Millions |
3 Months Ended | 9 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2023
Clinic
|
May 31, 2023
Clinic
|
Feb. 28, 2023
Clinic
|
Nov. 30, 2022
Clinic
|
Oct. 31, 2022
USD ($)
Clinic
|
Sep. 30, 2022
Clinic
|
Aug. 31, 2022
Clinic
|
Mar. 31, 2022
Clinic
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2023
USD ($)
Clinic
|
Dec. 31, 2022
USD ($)
|
Jun. 30, 2022
USD ($)
|
|||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||
Increase in put right | $ 0.1 | $ 0.3 | ||||||||||||
Put right value | $ 3.9 | $ 3.9 | $ 3.5 | |||||||||||
Number of clinics | Clinic | 672 | |||||||||||||
Volatility [Member] | ||||||||||||||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||
Debt instrument, measurement input | 0.25 | 0.25 | ||||||||||||
Discount Rate [Member] | ||||||||||||||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||
Debt instrument, measurement input | 0.119 | 0.119 | ||||||||||||
Clinic Practice [Member] | ||||||||||||||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||
Percentage of interest acquired | 70.00% | 75.00% | 80.00% | 80.00% | 60.00% | 80.00% | 70.00% | 70.00% | ||||||
Number of clinics | Clinic | 5 | 4 | 1 | 13 | 14 | 2 | 6 | 6 | ||||||
Contingent payments | $ 8.1 | $ 8.1 | $ 8.1 | $ 8.3 | ||||||||||
Clinic Practice [Member] | Volatility [Member] | ||||||||||||||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||
Debt instrument, measurement input | 0.35 | 0.35 | ||||||||||||
Clinic Practice [Member] | Discount Rate [Member] | ||||||||||||||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||
Debt instrument, measurement input | 0.087 | 0.087 | ||||||||||||
October 2022 Acquisition [Member] | ||||||||||||||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||
Percentage of interest acquired | [1] | 60.00% | 60.00% | |||||||||||
Number of clinics | Clinic | 14 | |||||||||||||
Contingent consideration decreased | $ (0.2) | $ (0.2) | ||||||||||||
Interest Rate Swap [Member] | ||||||||||||||
Fair Value of Financial Instruments [Abstract] | ||||||||||||||
Notional value | $ 150.0 | |||||||||||||
Debt instrument, maturity date | Jun. 30, 2027 | |||||||||||||
Interest rate derivative | 7.7 | $ 7.7 | ||||||||||||
Unrealized gain from interest rate swap | $ 1.0 | $ 1.7 | ||||||||||||
|
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Computation of earnings per share - USPH shareholders [Abstract] | ||||
Net income attributable to USPH shareholders | $ 9,254 | $ 9,557 | $ 27,583 | $ 29,551 |
Charges to retained earnings [Abstract] | ||||
Revaluation of redeemable non-controlling interest | (2,242) | (196) | (4,988) | (193) |
Tax effect at statutory rate (federal and state) | 573 | 50 | 1,274 | 49 |
Net income attributable to common shareholders | $ 7,585 | $ 9,411 | $ 23,869 | $ 29,407 |
Earnings per share basic (in dollars per share) | $ 0.51 | $ 0.72 | $ 1.72 | $ 2.27 |
Earnings per share diluted (in dollars per share) | $ 0.51 | $ 0.72 | $ 1.72 | $ 2.27 |
Shares used in computation [Abstract] | ||||
Basic earnings per share - weighted-average shares (in shares) | 14,987 | 13,001 | 13,918 | 12,979 |
Diluted earnings per share - weighted-average shares (in shares) | 14,987 | 13,001 | 13,918 | 12,979 |
ACQUISITIONS OF BUSINESSES, 2023 Acquisitions (Details) $ in Thousands |
9 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 29, 2023
USD ($)
Installment
Clinic
|
Jul. 31, 2023
USD ($)
Clinic
|
May 31, 2023
USD ($)
Clinic
|
Feb. 28, 2023
USD ($)
Clinic
|
Nov. 30, 2022
USD ($)
Clinic
|
Oct. 31, 2022
USD ($)
Clinic
|
Sep. 30, 2022
USD ($)
Clinic
|
Aug. 31, 2022
USD ($)
Clinic
|
Mar. 31, 2022
USD ($)
Clinic
|
Sep. 30, 2023
USD ($)
Clinic
|
Dec. 31, 2022
USD ($)
|
|
Business Combination, Description [Abstract] | |||||||||||
Number of clinics | Clinic | 672 | ||||||||||
Acquisitions [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Deferred payments | $ 830 | ||||||||||
Contingent payments | 200 | $ 10,000 | |||||||||
Cash paid, net of cash acquired | 22,994 | ||||||||||
Seller note | 985 | 1,574 | |||||||||
Total consideration | 25,009 | 71,362 | |||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Total current assets | 566 | 1,433 | |||||||||
Total non-current assets | 2,307 | 7,619 | |||||||||
Total liabilities | (1,861) | (9,943) | |||||||||
Net tangible assets acquired | 1,012 | (891) | |||||||||
Customer and referral relationships | 6,819 | 18,741 | |||||||||
Non-compete agreement | 329 | 972 | |||||||||
Tradenames | 1,680 | 4,871 | |||||||||
Goodwill | 25,932 | 74,470 | |||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interest) | (10,763) | (26,801) | |||||||||
Total consideration | 25,009 | 71,362 | |||||||||
Clinic Practice [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 70.00% | 75.00% | 80.00% | 80.00% | 60.00% | 80.00% | 70.00% | 70.00% | |||
Number of clinics | Clinic | 5 | 4 | 1 | 13 | 14 | 2 | 6 | 6 | |||
Deferred payments | $ 300 | ||||||||||
Contingent payments | $ 8,100 | $ 8,100 | $ 8,300 | ||||||||
Percentage of ownership interest after the acquisition | 45.00% | ||||||||||
Percentage of ownership interest by local partner after the acquisition | 30.00% | ||||||||||
Percentage of interest retained by practice founder | 30.00% | 20.00% | 20.00% | 40.00% | 20.00% | 30.00% | 30.00% | ||||
Percentage of pre-acquisition interest retained by practice founder | 25.00% | ||||||||||
Aggregate purchase price for the acquisition | $ 2,100 | $ 3,100 | $ 6,200 | $ 25,000 | $ 19,500 | $ 4,200 | $ 3,500 | $ 11,500 | |||
Cash paid by local partner | 1,100 | ||||||||||
Seller note to be paid by entity | 200 | ||||||||||
Seller note to be paid by local partner | 100 | ||||||||||
Cash paid, net of cash acquired | $ 1,800 | 1,700 | 5,800 | 24,200 | 3,900 | 3,300 | 11,200 | ||||
Seller note | $ 300 | $ 400 | $ 800 | $ 300 | $ 200 | $ 300 | |||||
Percentage of interest accrued | 4.50% | 7.00% | 5.50% | 5.50% | 3.50% | ||||||
September 2023 Multi Clinic Practice Acquisition [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 70.00% | ||||||||||
Number of clinics | Clinic | 4 | ||||||||||
Percentage of interest retained by practice founder | 30.00% | ||||||||||
Aggregate purchase price for the acquisition | $ 6,000 | ||||||||||
Cash paid, net of cash acquired | $ 5,400 | ||||||||||
Number of installments of payment of consideration due | Installment | 2 | ||||||||||
Seller note | $ 600 | ||||||||||
Percentage of interest accrued | 5.00% | ||||||||||
September 2023 Multi Clinic Practice Acquisition [Member] | First Installment Due on January 31, 2024 [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Payment of principal and interest | $ 300 | ||||||||||
September 2023 Multi Clinic Practice Acquisition [Member] | Second Installment Due on September 30, 2025[Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Payment of principal and interest | $ 300 | ||||||||||
September 2023 Single Clinic Practice Acquisition [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 70.00% | ||||||||||
Number of clinics | Clinic | 1 | ||||||||||
Deferred payments | $ 400 | ||||||||||
Percentage of interest retained by practice founder | 30.00% | ||||||||||
Aggregate purchase price for the acquisition | $ 7,800 | ||||||||||
Cash paid, net of cash acquired | $ 7,400 |
ACQUISITIONS OF BUSINESSES, 2022 Acquisitions (Details) $ in Thousands |
9 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2023
USD ($)
Clinic
|
May 31, 2023
USD ($)
Clinic
|
Feb. 28, 2023
USD ($)
Clinic
|
Nov. 30, 2022
USD ($)
Clinic
|
Oct. 31, 2022
USD ($)
Clinic
|
Sep. 30, 2022
USD ($)
Clinic
|
Aug. 31, 2022
USD ($)
Clinic
|
Mar. 31, 2022
USD ($)
Clinic
|
Sep. 30, 2023
USD ($)
Clinic
|
Sep. 30, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
Business Combination, Description [Abstract] | |||||||||||
Number of clinics | Clinic | 672 | ||||||||||
Cash paid, net of cash acquired | $ 22,994 | $ 18,573 | |||||||||
Customer and Referral Relationships [Member] | |||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Estimated useful lives of acquired intangibles | 13 years | 12 years | |||||||||
Non-compete Agreements [Member] | |||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Estimated useful lives of acquired intangibles | 5 years | 5 years | |||||||||
Clinic Practice [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 70.00% | 75.00% | 80.00% | 80.00% | 60.00% | 80.00% | 70.00% | 70.00% | 80.00% | ||
Number of clinics | Clinic | 5 | 4 | 1 | 13 | 14 | 2 | 6 | 6 | |||
Percentage of interest retained by practice founder | 30.00% | 20.00% | 20.00% | 40.00% | 20.00% | 30.00% | 30.00% | 20.00% | |||
Aggregate purchase price for the acquisition | $ 2,100 | $ 3,100 | $ 6,200 | $ 25,000 | $ 19,500 | $ 4,200 | $ 3,500 | $ 11,500 | |||
Cash paid for acquisition | $ 1,800 | 1,700 | $ 5,800 | $ 24,200 | $ 3,900 | $ 3,300 | $ 11,200 | ||||
Percentage of interest accrued | 4.50% | 7.00% | 5.50% | 5.50% | 3.50% | 5.50% | |||||
Seller notes | $ 300 | $ 400 | $ 800 | $ 300 | $ 200 | $ 300 | $ 300 | ||||
Contingent payments | $ 8,100 | $ 8,100 | $ 8,300 | ||||||||
Clinic Practice [Member] | Maximum [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Contingent payments | $ 1,600 | ||||||||||
Acquisitions [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Cash paid for acquisition | 22,994 | ||||||||||
Cash paid, net of cash acquired | 59,788 | ||||||||||
Seller notes | 985 | 1,574 | |||||||||
Contingent payments | 200 | 10,000 | |||||||||
Total consideration | 25,009 | 71,362 | |||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Total current assets | 566 | 1,433 | |||||||||
Total non-current assets | 2,307 | 7,619 | |||||||||
Total liabilities | (1,861) | (9,943) | |||||||||
Net tangible assets acquired | 1,012 | (891) | |||||||||
Customer and referral relationships | 6,819 | 18,741 | |||||||||
Non-compete agreements | 329 | 972 | |||||||||
Tradenames | 1,680 | 4,871 | |||||||||
Goodwill | 25,932 | 74,470 | |||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interest) | (10,763) | (26,801) | |||||||||
Total consideration | $ 25,009 | $ 71,362 |
REVENUE RECOGNITION (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||
Revenue related to the various categories | $ 150,007 | $ 139,602 | $ 450,001 | $ 411,962 |
Minimum [Member] | ||||
Contractual Allowances [Abstract] | ||||
Difference between net revenues and corresponding cash collections, approximately of net revenues | 1.00% | |||
Difference between actual aggregate contractual reserve and estimated contractual allowance reserve percentage | 1.00% | |||
Maximum contractual allowance reserve estimate | 1.00% | |||
Maximum [Member] | ||||
Contractual Allowances [Abstract] | ||||
Difference between net revenues and corresponding cash collections, approximately of net revenues | 1.50% | |||
Difference between actual aggregate contractual reserve and estimated contractual allowance reserve percentage | 1.50% | |||
Maximum contractual allowance reserve estimate | 1.50% | |||
Net Patient Revenue [Member] | ||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||
Revenue related to the various categories | 127,243 | 116,710 | $ 383,104 | 344,444 |
Other Revenue [Member] | ||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||
Revenue related to the various categories | 889 | 753 | 2,479 | 2,523 |
Physical Therapy Operations [Member] | ||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||
Revenue related to the various categories | 128,132 | 117,463 | 385,583 | 346,967 |
Industrial Injury Prevention Services [Member] | ||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||
Revenue related to the various categories | 19,486 | 20,155 | 58,082 | 58,660 |
Management Contracts [Member] | ||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | ||||
Revenue related to the various categories | $ 2,389 | $ 1,984 | $ 6,336 | $ 6,335 |
REDEEMABLE NON-CONTROLLING INTEREST (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Changes in Carrying Amount of Redeemable Non-Controlling Interests [Roll Forward] | ||||
Beginning balance | $ 167,515 | |||
Operating results allocated to redeemable non-controlling interest partners | $ 1,976 | $ 2,037 | 7,616 | $ 7,220 |
Ending balance | 174,697 | 174,697 | ||
Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest [Abstract] | ||||
Fair value | 174,697 | 174,697 | ||
Redeemable Non-Controlling Interest [Member] | ||||
Changes in Carrying Amount of Redeemable Non-Controlling Interests [Roll Forward] | ||||
Beginning balance | 165,513 | 151,400 | 167,515 | 155,262 |
Operating results allocated to redeemable non-controlling interest partners | 1,976 | 2,037 | 7,616 | 7,220 |
Distributions to redeemable non-controlling interest partners | (2,405) | (3,038) | (8,742) | (7,770) |
Changes in the fair value of redeemable non-controlling interest | 2,242 | 196 | 4,988 | 193 |
Purchases of redeemable non-controlling interest | 0 | (5,574) | (8,821) | (15,170) |
Acquired interest | 6,465 | 2,552 | 10,358 | 7,498 |
Sales of redeemable non-controlling interest - temporary equity | 954 | 143 | 3,879 | 2,331 |
Changes in notes receivable related to redeemable non-controlling interest - temporary equity | (48) | 439 | (2,096) | (1,409) |
Ending balance | 174,697 | 148,155 | 174,697 | 148,155 |
Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest [Abstract] | ||||
Contractual time period has lapsed but holder's employment has not terminated | 75,026 | 74,002 | 75,026 | 74,002 |
Contractual time period has not lapsed and holder's employment has not terminated | 99,671 | 74,153 | 99,671 | 74,153 |
Holder's employment has terminated and contractual time period has expired | 0 | 0 | 0 | 0 |
Holder's employment has terminated and contractual time period has not expired | 0 | 0 | 0 | 0 |
Fair value | $ 174,697 | $ 148,155 | $ 174,697 | $ 148,155 |
Therapy Practice [Member] | Minimum [Member] | ||||
Business Combination, Description [Abstract] | ||||
Business acquisition, percentage of limited partnership acquired | 50.00% | 50.00% | ||
Therapy Practice [Member] | Maximum [Member] | ||||
Business Combination, Description [Abstract] | ||||
Business acquisition, percentage of limited partnership acquired | 90.00% | 90.00% | ||
Therapy Practice [Member] | NewCo. [Member] | ||||
Business Combination, Description [Abstract] | ||||
Percentage of equity interest of subsidiary contributed for acquisition | 100.00% | 100.00% | ||
Business acquisition, percentage of general partnership interest acquired | 100.00% | 100.00% | ||
Business acquisition, consideration payable, term of note | 2 years | |||
Employment agreement renewal term | 1 year | |||
Non-Compete agreement term under condition of termination of employment of employed selling shareholder | 2 years | |||
Therapy Practice [Member] | NewCo. [Member] | Minimum [Member] | ||||
Business Combination, Description [Abstract] | ||||
Employment agreement term | 3 years | |||
Non-Compete agreement term regardless of whether the selling shareholder is employed | 5 years | |||
Therapy Practice [Member] | NewCo. [Member] | Maximum [Member] | ||||
Business Combination, Description [Abstract] | ||||
Employment agreement term | 5 years | |||
Non-Compete agreement term regardless of whether the selling shareholder is employed | 6 years | |||
ProgressiveHealth [Member] | NewCo. [Member] | ||||
Business Combination, Description [Abstract] | ||||
Percentage of equity interest of subsidiary contributed for acquisition | 100.00% | 100.00% | ||
Non-Compete agreement term under condition of termination of employment of employed selling shareholder | 2 years | |||
Non-Compete agreement term regardless of whether the selling shareholder is employed | 7 years | |||
Percentage of right to sell equity interest on each of the 4th and 5th anniversaries | 30.00% | 30.00% | ||
Percentage of right to sell equity interest on each of the 6th and 7th anniversaries | 10.00% | 10.00% |
GOODWILL (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
Goodwill [Roll Forward] | ||
Beginning balance | $ 494,101 | $ 434,679 |
Goodwill acquired | 25,932 | 72,674 |
Goodwill adjustments for purchase price allocation of businesses acquired in prior year | 2,874 | (4,140) |
Goodwill impairment | 0 | (9,112) |
Ending balance | $ 522,907 | $ 494,101 |
INTANGIBLE ASSETS, NET, Intangible Assets, Net (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | $ 112,112 | $ 108,755 |
Tradenames [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | 45,908 | 43,373 |
Customer and Referral Relationships [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | 64,210 | 63,238 |
Accumulated amortization | $ 28,708 | 23,736 |
Estimated useful life | 13 years | |
Customer and Referral Relationships [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 7 years | |
Customer and Referral Relationships [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 14 years | |
Non-compete Agreements [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | $ 1,994 | 2,144 |
Accumulated amortization | $ 7,449 | $ 6,999 |
Estimated useful life | 6 years | |
Non-compete Agreements [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 5 years | |
Non-compete Agreements [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 6 years |
INTANGIBLE ASSETS, NET, Amortization Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Amortization of Deferred Charges [Abstract] | ||||
Total amortization expenses | $ 1,817 | $ 1,533 | $ 5,422 | $ 4,811 |
Customer and Referral Relationships [Member] | ||||
Amortization of Deferred Charges [Abstract] | ||||
Total amortization expenses | 1,669 | 1,404 | 4,972 | 4,415 |
Non-compete Agreements [Member] | ||||
Amortization of Deferred Charges [Abstract] | ||||
Total amortization expenses | $ 148 | $ 129 | $ 450 | $ 396 |
INTANGIBLE ASSETS, NET, Amortization of Referral Relationships and Non-Competition Agreements (Details) $ in Thousands |
Sep. 30, 2023
USD ($)
|
---|---|
Customer and Referral Relationships [Member] | |
Finite-Lived Intangible Assets, Amortization Expense, Maturity [Abstract] | |
2023 (excluding the nine months ended September 30, 2023) | $ 1,780 |
2024 | 6,983 |
2025 | 6,839 |
2026 | 6,371 |
2027 | 6,207 |
Thereafter | 36,030 |
Non-compete Agreements [Member] | |
Finite-Lived Intangible Assets, Amortization Expense, Maturity [Abstract] | |
2023 (excluding the nine months ended September 30, 2023) | 159 |
2024 | 607 |
2025 | 541 |
2026 | 401 |
2027 | 234 |
2028 | $ 51 |
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Payables and Accruals [Abstract] | ||
Salaries and related costs | $ 17,650 | $ 22,912 |
Credit balances due to patients and payors | 8,183 | 8,094 |
Group health insurance claims | 2,671 | 1,666 |
Closure costs | 223 | 243 |
Contingency payable | 2,437 | 620 |
Interest payable | 272 | 0 |
Other property taxes payable | 494 | 0 |
Other | 3,916 | 3,878 |
Total | $ 35,846 | $ 37,413 |
BORROWINGS, Amended Credit Agreement and Credit Agreement (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
---|---|---|
Debt Instruments [Abstract] | ||
Principal amount | $ 150,638 | $ 185,555 |
Principal amount, current portion | 7,555 | 8,271 |
Principal amount, net of current portion | 143,083 | 177,284 |
Unamortized discount and debt issuance cost [Abstract] | ||
Unamortized discount and debt issuance cost | 1,587 | 1,861 |
Unamortized discount and debt issuance cost, current portion | 0 | 408 |
Unamortized discount and debt issuance cost, net of current portion | 1,587 | 1,453 |
Net debt [Abstract] | ||
Net debt | 149,051 | 183,694 |
Net debt, less current portion | 7,555 | 7,863 |
Net debt, net of current portion | 141,496 | 175,831 |
Revolving Facility [Member] | ||
Debt Instruments [Abstract] | ||
Principal amount | 0 | 31,000 |
Unamortized discount and debt issuance cost [Abstract] | ||
Unamortized discount and debt issuance cost | 0 | 0 |
Net debt [Abstract] | ||
Net debt | 0 | 31,000 |
Term Facility [Member] | ||
Debt Instruments [Abstract] | ||
Principal amount | 145,313 | 148,125 |
Unamortized discount and debt issuance cost [Abstract] | ||
Unamortized discount and debt issuance cost | 1,587 | 1,861 |
Net debt [Abstract] | ||
Net debt | 143,726 | 146,264 |
Other [Member] | ||
Debt Instruments [Abstract] | ||
Principal amount | 5,325 | 6,430 |
Unamortized discount and debt issuance cost [Abstract] | ||
Unamortized discount and debt issuance cost | 0 | 0 |
Net debt [Abstract] | ||
Net debt | $ 5,325 | $ 6,430 |
BORROWINGS, Credit Facilities (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
Dec. 05, 2013 |
|
Debt Instruments [Abstract] | |||||
Aggregate amount of notes payable | $ 150,638,000 | $ 150,638,000 | $ 185,555,000 | ||
Principal payments on notes payable | 2,874,000 | $ 496,000 | |||
Notes Payable Related to Acquisitions [Member] | |||||
Debt Instruments [Abstract] | |||||
Outstanding amount | 5,300,000 | 5,300,000 | |||
Aggregate amount of notes payable | 1,800,000 | 1,800,000 | |||
Principal payments on notes payable | 2,900,000 | ||||
Aggregate principal payment due in 2023 | 1,600,000 | 1,600,000 | |||
Aggregate principal payment due in 2024 | 2,400,000 | 2,400,000 | |||
Aggregate principal payment due in 2025 | 1,300,000 | $ 1,300,000 | |||
Notes Payable Related to Acquisitions [Member] | Minimum [Member] | |||||
Debt Instruments [Abstract] | |||||
Average effective interest rate | 3.25% | ||||
Notes Payable Related to Acquisitions [Member] | Maximum [Member] | |||||
Debt Instruments [Abstract] | |||||
Average effective interest rate | 8.00% | ||||
Term Facility [Member] | |||||
Debt Instruments [Abstract] | |||||
Revolving credit facility commitment | 150,000,000 | $ 150,000,000 | |||
Frequency of term facility | quarterly | ||||
Interest rate on credit facility in first two years | 0.625% | ||||
Interest rate on credit facility in third and fourth year | 1.25% | ||||
Interest rate on credit facility in fifth year | 1.875% | ||||
Outstanding amount | 145,300,000 | $ 145,300,000 | |||
Aggregate amount of notes payable | 145,313,000 | 145,313,000 | 148,125,000 | ||
Revolving Facility [Member] | |||||
Debt Instruments [Abstract] | |||||
Revolving credit facility commitment | 175,000,000 | $ 175,000,000 | $ 125,000,000 | ||
Term of credit facility | 5 years | ||||
Outstanding amount | 0 | $ 0 | |||
Aggregate amount of notes payable | 0 | $ 0 | $ 31,000,000 | ||
Revolving Facility [Member] | Minimum [Member] | |||||
Debt Instruments [Abstract] | |||||
Percentage of unused commitment fee | 0.25% | ||||
Revolving Facility [Member] | Maximum [Member] | |||||
Debt Instruments [Abstract] | |||||
Increase on limit of credit facility | $ 50,000,000 | ||||
Percentage of unused commitment fee | 0.35% | ||||
Standby Letters of Credit [Member] | |||||
Debt Instruments [Abstract] | |||||
Revolving credit facility commitment | 12,000,000 | $ 12,000,000 | |||
Swingline Loans [Member] | |||||
Debt Instruments [Abstract] | |||||
Revolving credit facility commitment | $ 15,000,000 | $ 15,000,000 | |||
Swingline Loans [Member] | SOFR [Member] | Minimum [Member] | |||||
Debt Instruments [Abstract] | |||||
Applicable margin for SOFR borrowings rate | 1.50% | 1.50% | |||
Swingline Loans [Member] | SOFR [Member] | Maximum [Member] | |||||
Debt Instruments [Abstract] | |||||
Applicable margin for SOFR borrowings rate | 2.25% | 2.25% | |||
Swingline Loans [Member] | Alternate Base Rate [Member] | Minimum [Member] | |||||
Debt Instruments [Abstract] | |||||
Spread on variable rate | 0.50% | ||||
Swingline Loans [Member] | Alternate Base Rate [Member] | Maximum [Member] | |||||
Debt Instruments [Abstract] | |||||
Spread on variable rate | 1.25% | ||||
Senior Credit Facility [Member] | |||||
Debt Instruments [Abstract] | |||||
Debt instrument, maturity date | Jun. 17, 2027 | ||||
Aggregate principal amount | $ 325,000,000 | $ 325,000,000 | |||
Increase on limit of credit facility | $ 100,000,000 | ||||
Leverage ratio | 2 | ||||
Remaining revolving credit outstanding | $ 175,000,000 | $ 175,000,000 | |||
Interest rate | 5.60% | 5.70% |
DERIVATIVE INSTRUMENTS (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|---|
Jul. 31, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
Jun. 30, 2022 |
|
Derivative Instrument, Consolidated Statements of Comprehensive Income [Abstract] | |||||||
Net income | $ 12,222 | $ 12,821 | $ 38,513 | $ 40,059 | |||
Other comprehensive loss [Abstract] | |||||||
Unrealized gain on cash flow hedge | 1,276 | 6,473 | 2,340 | 5,942 | |||
Tax effect at statutory rate (federal and state) | (326) | (1,654) | (598) | (1,518) | |||
Comprehensive income | 13,172 | $ 17,640 | $ 40,255 | $ 44,483 | |||
Interest Rate Swap [Member] | |||||||
Derivative Instruments [Abstract] | |||||||
Notional value | $ 150,000 | ||||||
Debt instrument, maturity date | Jun. 30, 2027 | ||||||
Carrying and Fair Value of Interest Rate Derivatives [Abstract] | |||||||
Interest rate derivative | 7,700 | $ 7,700 | $ 5,400 | ||||
Interest Rate Swap [Member] | Other Current Assets [Member] | |||||||
Carrying and Fair Value of Interest Rate Derivatives [Abstract] | |||||||
Interest rate derivative | 3,500 | 3,500 | 2,900 | ||||
Interest Rate Swap [Member] | Other Assets [Member] | |||||||
Carrying and Fair Value of Interest Rate Derivatives [Abstract] | |||||||
Interest rate derivative | $ 4,200 | $ 4,200 | $ 2,500 | ||||
Interest Rate Swap [Member] | SOFR [Member] | |||||||
Derivative Instruments [Abstract] | |||||||
Term of variable rate | 1 month | ||||||
Debt instrument, fixed rate of interest | 2.815% |
LEASES (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|||
Components of Lease Expense [Abstract] | ||||||
Operating lease cost | $ 9,725 | $ 8,870 | $ 28,500 | $ 25,974 | ||
Short-term lease cost | 292 | 210 | 851 | 790 | ||
Variable lease cost | 2,281 | 1,913 | 6,785 | 5,839 | ||
Total lease cost | [1] | 12,298 | 10,993 | 36,136 | 32,603 | |
Supplemental Information Related to Leases [Abstract] | ||||||
Cash paid for amounts included in the measurement of operating lease liabilities | 10,007 | 9,139 | 29,418 | 26,697 | ||
Right-of-use assets obtained in exchange for new operating lease liabilities | 10,188 | $ 8,011 | 26,407 | $ 29,618 | ||
Future Lease Payments for Operating Leases [Abstract] | ||||||
2023 (excluding the nine months ended September 30, 2023) | 9,946 | 9,946 | ||||
2024 | 36,216 | 36,216 | ||||
2025 | 28,184 | 28,184 | ||||
2026 | 20,552 | 20,552 | ||||
2027 and thereafter | 24,877 | 24,877 | ||||
Total lease payments | 119,775 | 119,775 | ||||
Less: imputed interest | 8,445 | 8,445 | ||||
Total operating lease liabilities | $ 111,330 | $ 111,330 | ||||
Weighted Average Remaining Lease Term [Abstract] | ||||||
Weighted-average remaining lease term - Operating leases | 3 years 10 months 24 days | 4 years 2 months 12 days | 3 years 10 months 24 days | 4 years 2 months 12 days | ||
Weighted Average Discount Rate [Abstract] | ||||||
Weighted-average discount rate - Operating leases | 3.80% | 2.70% | 3.80% | 2.70% | ||
Maximum [Member] | ||||||
Operating Lease [Abstract] | ||||||
Lease term | 5 years | 5 years | ||||
|
SEGMENT INFORMATION (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
Segment Information [Abstract] | |||||
Net revenue | $ 150,007 | $ 139,602 | $ 450,001 | $ 411,962 | |
Gross profit | 27,929 | 26,784 | 90,993 | 84,193 | |
Total assets | 1,010,186 | 799,708 | 1,010,186 | 799,708 | $ 858,154 |
Reportable Segments [Member] | Physical Therapy Operations [Member] | |||||
Segment Information [Abstract] | |||||
Net revenue | 130,521 | 119,447 | 391,919 | 353,302 | |
Gross profit | 23,505 | 22,379 | 78,815 | 71,513 | |
Total assets | 534,848 | 432,683 | 534,848 | 432,683 | |
Reportable Segments [Member] | Industrial Injury Prevention Services [Member] | |||||
Segment Information [Abstract] | |||||
Net revenue | 19,486 | 20,155 | 58,082 | 58,660 | |
Gross profit | 4,424 | 4,405 | 12,178 | 12,680 | |
Total assets | $ 475,338 | $ 367,025 | $ 475,338 | $ 367,025 |
INVESTMENT IN UNCONSOLIDATED AFFILIATE (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2023 |
Dec. 31, 2022 |
|
Investments in Unconsolidated Affiliate [Abstract] | |||
Investment in unconsolidated affiliate | $ 12,256 | $ 12,256 | $ 12,131 |
Joint Venture Interest [Member] | |||
Investments in Unconsolidated Affiliate [Abstract] | |||
Percentage of ownership in joint venture interest | 49.00% | 49.00% | |
Investment in unconsolidated affiliate | $ 12,300 | $ 12,300 | |
Distribution received from investment in unconsolidated affiliate | $ 200 | $ 800 |
SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Dec. 08, 2023 |
Oct. 31, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
Business Combination, Description [Abstract] | ||||||
Dividends declared per common share (in dollars per share) | $ 0.43 | $ 0.41 | $ 1.29 | $ 1.23 | ||
Subsequent Event [Member] | ||||||
Business Combination, Description [Abstract] | ||||||
Dividends declared per common share (in dollars per share) | $ 0.43 | |||||
Dividend payable | Dec. 08, 2023 | |||||
Dividend recorded | Nov. 16, 2023 | |||||
Subsequent Event [Member] | Ergonomics Software Business [Member] | ||||||
Business Combination, Description [Abstract] | ||||||
Percentage of interest acquired | 55.00% | |||||
Subsequent Event [Member] | IIP and Ergonomics Software Business [Member] | ||||||
Business Combination, Description [Abstract] | ||||||
Purchase price of acquisition | $ 4.0 |
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