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)
|