10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM          TO         

COMMISSION FILE NUMBER 1-11151

U.S. PHYSICAL THERAPY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NEVADA	76-0364866
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

1300 WEST SAM HOUSTON PARKWAY SOUTH, SUITE 300, HOUSTON, TEXAS	77042
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)	(ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 297-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $.01 par value	USPH	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. Yes ☐ No ☑

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). Yes ☐ No ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No ☑

The aggregate market value of the shares of the registrant’s common stock held by non-affiliates of the registrant at June 30, 2023 was $1.1 billion based on the closing sale price reported on the NYSE for the registrant’s common stock on June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter. For purposes of this computation, all executive officers, directors and 5% or greater beneficial owners of the registrant were deemed to be affiliates. Such determination should not be deemed an admission that such executive officers, directors and beneficial owners are, in fact, affiliates of the registrant.

As of  February 29, 2024, the number of shares outstanding of the registrant’s common stock, par value $.01 per share, was: 15,068,426.

DOCUMENTS INCORPORATED BY REFERENCE

DOCUMENT	PART OF FORM 10-K
Portions of Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders	Part III

Table of Contents

		Page
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	24
Item 1C.	Cybersecurity	24
Item 2.	Properties	26
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	27
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Reserved	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	86
Item 9A.	Controls and Procedures	86
Item 9B.	Other Information	87
Item 9C.	Disclosure regarding Foreign Jurisdictions that Prevent Inspection	87
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	87
Item 11.	Executive Compensation	87
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	87
Item 13.	Certain Relationships and Related Transactions, and Director Independence	87
Item 14.	Principal Accountant Fees and Services	87
PART IV
Item 15.	Exhibits and Financial Statement Schedules	87
Item 16.	Form 10-K Summary	95
Signatures		96

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FORWARD-LOOKING STATEMENTS

We make statements in this report that are considered forward-looking statements within the meaning given such term under Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements contain forward-looking information relating to the financial condition, results of operations, plans, objectives, future performance and business of our Company. These statements (often using words such as “believes”, “expects”, “intends”, “plans”, “appear”, “should” and similar words) involve risks and uncertainties that could cause actual results to differ materially from those we project. Included among such statements, but not limited to, are those relating to opening clinics, availability of personnel and the insurance reimbursement environment. The forward-looking statements are based on our current views and assumptions, and actual results could differ materially from those anticipated in such forward-looking statements as a result of certain risks, uncertainties, and factors, which include, but are not limited to:

• changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;

• revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction;

• changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients;

• compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for failure to comply;

• competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs including the possible write-down or write-off of goodwill and other intangible assets;

• the impact of future public health crises and epidemics/pandemics, such as was the case with the novel strain of COVID-19 and its variants;

• 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;

• contingent consideration provisions in certain our acquisition agreements, 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 the 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;

• our ability to identify and complete acquisitions, and the successful integration of the operations of the acquired businesses;

• impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interest (minority interests);

• maintaining our information technology systems with adequate safeguards to protect against cyber-attacks;

• a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act;

• maintaining clients for which we perform management, industrial injury prevention related services, and other services, as a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected;

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• maintaining adequate internal controls;

• maintaining necessary insurance coverage;

• availability, terms, and use of capital; and

• weather and other seasonal factors.

Many factors are beyond our control. Given these uncertainties, you should not place undue reliance on our forward-looking statements. Please see the other sections of this report and our other periodic reports filed with the Securities and Exchange Commission (the “SEC”) for more information on these factors. Our forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as required by law, we are under no obligation to update any forward-looking statement, regardless of the reason the statement may no longer be accurate.

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PART I

ITEM 1. BUSINESS

GENERAL

U.S. Physical Therapy, Inc. and subsidiaries (collectively, “we”, “us”, “our” or the “Company”), operates its business through two reportable business segments. Our reportable segments consist of the physical therapy operations segment and the industrial injury prevention services segment. Through our subsidiaries, we operate outpatient physical therapy clinics that provide pre-and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurological-related injuries and rehabilitation of injured workers. We also have a majority interest in businesses which are leading providers of industrial injury prevention services (“IIP”). Services provided in this business include onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of the IIP services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors. These services are performed through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers (“ATCs”).

We were re-incorporated in April 1992 under the laws of the State of Nevada and have operating subsidiaries organized in various states in the form of limited partnerships, limited liability companies and wholly-owned corporations. This description of our business should be read in conjunction with our financial statements and the related notes contained in Item 8 in this Annual Report on Form 10-K.

Our principal executive offices are located at 1300 West Sam Houston Parkway South, Suite 300, Houston, Texas 77042. Our telephone number is (713) 297-7000. Our website is www.usph.com.

Acquisitions of Businesses and Interests

During the last three years, we completed the acquisitions of the following clinic practices and IIP businesses detailed below:

		% Interest	Number of
Acquisition	Date	Acquired	Clinics
October 2023 Acquisition	October 31, 2023	**	*
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
December 2021 Acquisition	December 31, 2021	75%	3
November 2021 Acquisition	November 30, 2021	70%	*
September 2021 Acquisition	September 30, 2021	100%	*
June 2021 Acquisition	June 30, 2021	65%	8
March 2021 Acquisition	March 31, 2021	70%	6

* IIP business

** On October 31, 2023, we concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business (“October 2023 Acquisition”).

Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing partnerships, and continue acquiring companies that provide or serve the Company’s industrial injury prevention services sector.

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On May 30, 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.

OUR OPERATING SEGMENTS

Physical Therapy Operations

Our physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which the Company generally owns a 1% general partnership interest in the Clinic Partnerships. The Company’s limited partnership interests generally range from 65% to 75% (a range of 10%-99%) in the Clinic Partnerships.  For the vast majority of the Clinic Partnerships, the managing healthcare practitioner is a physical therapist who owns the remaining limited partnership interest in the Clinic Partnership. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most of the clinics (hereinafter referred to as “Clinic Partnerships”). Generally, the therapist partners have no interest in the net losses of Clinic Partnerships, except to the extent of their capital accounts. Since we also develop satellite clinic facilities of existing clinics, most Clinic Partnerships consist of more than one clinic location. To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries, under profit sharing arrangements with therapists (hereinafter referred to as “Wholly-Owned Facilities”).

Our Clinics

We operated 671 clinics in 42 states on December 31, 2023. Our highest concentration of clinics is in the following states: Texas, Tennessee, Michigan, Virginia, Florida, Oregon, Maryland, Pennsylvania, Georgia, Missouri, Idaho, Arizona, South Carolina, Alabama and Connecticut. In addition to our 671 clinics, we also managed 43 physical therapy practices for unrelated physician groups and hospitals as of December 31, 2023.

The table below indicates historical information regarding our clinic counts.

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
Number of clinics, beginning of period		640			591			554
Additions		46			65			42
Closed or sold		(15	)		(16	)		(5	)
Number of clinics, end of period		671			640			591

Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 25 clinics occupying space in the range of over 7,000 square feet to 16,500 square feet. We attempt to lease ground level space for our patients’ ease of access to our clinics.

Each Clinic Partnership maintains an independent local identity, while at the same time enjoying the benefits of national purchasing, negotiated third-party payor contracts, centralized support services and management practices. Under a management agreement, the Company provides a variety of support services to each clinic, including supervision of site selection, construction, clinic design and equipment selection, establishment of accounting systems and billing procedures and training of office support personnel, processing of accounts payable, operational direction, auditing of regulatory compliance, payroll, benefits administration, accounting services, legal services, quality assurance and marketing support.

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We provide services at our clinics on an outpatient basis. Patients are usually treated for approximately one hour per day, two to three times a week, typically for two to six weeks. We generally charge for treatment on a per procedure basis. Medicare patients are charged based on prescribed time increments and Medicare billing standards. In addition, our clinics will develop, when appropriate, individual maintenance and self-management exercise programs to be continued after treatment. We continually assess the potential for developing new services and expanding the methods of providing our existing services in the most efficient manner while providing high quality patient care.

Therapists at our clinics initially perform a comprehensive evaluation of each patient, which is then followed by a treatment plan specific to the injury as prescribed by the patient’s physician. The treatment plan may include a number of procedures, including therapeutic exercise, manual therapy techniques, ultrasound, electrical stimulation, hot packs, iontophoresis, education on management of daily life skills and home exercise programs. A clinic’s business primarily comes from referrals by local physicians.

Patient Care Providers and Staffing

Typical minimum staff at a clinic consists of a licensed physical therapist and an office manager. As patient visits grow, staffing may also include additional physical therapists, occupational therapists, therapy assistants, aides, exercise physiologists, athletic trainers and office personnel. Therapy services are performed under the supervision of a licensed therapist.

We continue to seek to attract employment of physical therapists who have established relationships with physicians and other referral sources by offering these therapists a competitive salary and incentives based on the profitability of the clinic that they manage. For multi-site clinic practices in which a controlling interest is acquired by us, the prior owners typically continue as employees to manage the clinic operations, retaining a non-controlling ownership interest in the clinics and receiving a competitive salary for managing the clinic operations. In addition, we have developed satellite clinic facilities as part of existing Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operate more than one clinic location. In 2024, we intend to continue to acquire multi-clinic practices and to continue to develop outpatient physical therapy clinics as satellites in existing partnerships, along with increasing our patient volume through marketing and new programs.

Typically, each therapist partner or director, including those employed by Clinic Partnerships in which we acquired a majority interest, enters into a multi-year employment agreement for a term of up to five years with their Clinic Partnership. Each agreement typically provides for a covenant not to compete during the period of his or her employment and for up to two years thereafter. Under each employment agreement, the therapist partner receives a base salary and may receive a bonus based on the net revenues or profits generated by their Clinic Partnership or specific clinic. In the case of Clinic Partnerships, the therapist partner receives earnings distributions based upon their ownership interest. Upon termination of employment, we typically have the right to purchase the therapist’s partnership interest in Clinic Partnerships. For those Clinic Partnerships we created in connection with an acquisition, our partner also has the right to cause us to purchase their interest upon termination of their employment, generally after a set holding period.

In connection with most of our acquired clinics, in the event that a limited non-controlling interest partner’s employment ceases and certain requirements are met as detailed in the respective limited partnership agreements, we have a call right (the “Call Right”) and the selling entity or individual has a put right (the “Put Right”) with respect to the partner’s limited partnership interests. The Put Right and the Call Right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature. The purchase price of the partner’s limited partnership interest upon exercise of the Put Right or the Call Right is calculated at a predetermined multiple of earnings performance as detailed in the respective agreements.

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Sources of Revenue

Payor sources for physical therapy operations are primarily managed care programs, commercial health insurance, Medicare/Medicaid and workers’ compensation insurance. Commercial health insurance, Medicare and managed care programs generally provide coverage to patients utilizing our clinics after payment by the patients of normal deductibles and co-insurance payments. Workers’ compensation laws generally require employers to provide, directly or indirectly through insurance, costs of medical rehabilitation for their employees from work-related injuries and disabilities and, in some jurisdictions, mandatory vocational rehabilitation, usually without any deductibles, co-payments or cost sharing. Treatments for patients who are parties to personal injury cases are generally paid from the proceeds of settlements with insurance companies or from favorable judgments. If an unfavorable judgment is received, collection efforts are generally not pursued against the patient and the patient’s account is written-off against established reserves. Bad debt reserves relating to all receivable types are regularly reviewed and adjusted as appropriate.

The following table shows our payor mix for the periods presented.

	For the Year Ended
	December 31, 2023					December 31, 2022					December 31, 2021
	Net Patient					Net Patient					Net Patient
Payor	Revenue		Percentage			Revenue		Percentage			Revenue		Percentage
Managed Care Programs/	(In thousands, except percentages)
Commercial Health Insurance	$	244,470		47.5	%	$	215,822		46.5	%	$	209,129		47.7	%
Medicare/Medicaid		188,329		36.6	%		174,401		37.5	%		155,122		35.4	%
Workers' Compensation Insurance		48,834		9.5	%		45,010		9.7	%		44,549		10.2	%
Other		32,923		6.4	%		29,357		6.3	%		29,530		6.7	%
Total	$	514,556		100.0	%	$	464,590		100.0	%	$	438,330		100.0	%

Our physical therapy business depends to a significant extent on our relationships with commercial health insurers, health maintenance organizations, preferred provider organizations and workers’ compensation insurers. In some geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans to obtain payments. Failure to obtain or maintain these approvals would adversely affect financial results.

Medicare

During the year ended December 31, 2023, approximately 40.3% of our visits and 36.6% of our net patient revenue was from patients with Medicare or Medicaid program coverage. To receive Medicare reimbursement, a facility (Medicare Certified Rehabilitation Agency) or the individual therapist (Physical/Occupational Therapist in Private Practice) must meet applicable participation conditions set by the Department of Health and Human Services (“HHS”) relating to the type of facility, equipment, recordkeeping, personnel and standards of medical care, and also must comply with all state and local laws. HHS, through Centers for Medicare & Medicaid Services (“CMS”) and designated agencies, periodically inspects or surveys clinics/providers for approval and/or compliance.  Failure of our subsidiaries to obtain or maintain certifications as Medicare providers or failure to enroll as a group of physical/occupational therapists in a private practice could adversely affect financial results.

The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”).

In 2021 the MPFS established by Centers for Medicare and Medicaid Services (“CMS”) resulted in an approximate 3.5% decrease in the reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics, as compared to 2020. Since January 1, 2022, outpatient therapy services furnished in whole or part by a therapist assistant are paid at an amount equal to 85% of the payment amount otherwise applicable for the service.

For 2022, the MPFS Final Rule was to be an approximately 3.75% reduction to Medicare payments for physical/occupational therapy services. This was due to the expiration of the additional funding to the conversion factor provided by Congress in 2021 under the Consolidated Appropriations Act, 2021. However, this reduction was addressed in the Protecting Medicare and American Farmers from Sequester Cuts Act (“2021 Act”) signed into law on December 10, 2021. Based on various provisions in the 2021 Act, the Medicare rate reduction for 2022 was approximately 0.75%.

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In the 2023 MPFS Proposed Rule, CMS proposed a 4.5% reduction in the Physician Fee Schedule conversion factor. However, this reduction was later addressed in the Consolidated Appropriations Act, 2023 (“2023 Act”). The provisions of the 2023 Act increased the conversion factor by 2.5% for 2023 and by 1.25% for 2024, resulting in an overall reduction of approximately 2% in the 2023 Physician Fee Schedule conversion factor for 2023. In the 2024 MPFS Final Rule, CMS decreased the Physician Fee Schedule conversion factor by 3.39%, which is estimated to result in an approximately 3.5% reduction in reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics, as compared to 2023, unless these reductions are otherwise mitigated by further action of Congress.

The Budget Control Act of 2011 increased the federal debt ceiling in connection with deficit reductions over the next ten years and requires automatic reductions in federal spending by approximately $1.2 trillion. Payments to Medicare providers are subject to these automatic spending reductions, subject to a 2% cap. The Bipartisan Budget Act of 2018 extended the 2% reductions to Medicare payments through fiscal year 2027. The CARES Act suspended the 2% payment reduction to Medicare payments for dates of service from May 1, 2020, through December 31, 2020, and the Consolidated Appropriations Act, 2021 further suspended the 2% payment reduction through March 2021. In April 2021, additional legislation was enacted that waived the 2% payment reduction for the remainder of calendar 2021. The 2021 Act included a three-month extension of the 2% sequester relief applied to all Medicare payments through March 2022, followed by three months of 1% sequester relief through June 30, 2022. Sequester relief ended on June 30, 2022.

Beginning in 2021, payments to individual therapists (Physical/Occupational Therapist in Private Practice) paid under the fee schedule may be subject to adjustment based on performance in the Merit Based Incentive Payment System (“MIPS”), which measures performance based on certain quality metrics, resource use, and meaningful use of electronic health records. Therapists eligible to participate in MIPS include only those therapists who are enrolled with Medicare as private practice providers and does not include therapists in facility-based providers, such as our clinics enrolled as certified rehabilitation agencies. Less than 3% of our therapist providers currently participate in MIPS. Under the MIPS requirements, a provider’s performance is assessed according to established performance standards each year and then is used to determine an adjustment factor that is applied to the professional’s payment for the corresponding payment year. The provider’s MIPS performance in 2021 determined the payment adjustment in 2023. For those therapist providers who actually participated in MIPS during 2020 and 2021, the resulting average payment adjustment in 2022 and 2023 was an increase of 1%.  The 2024 adjustment for those therapist providers who participated in MIPS during 2022 is expected to remain at an average increase of 1%.

Under the Middle-Class Tax Relief and Job Creation Act of 2012 (“MCTRA”), since October 1, 2012, patients who met or exceeded $3,700 in therapy expenditures during a calendar year have been subject to a manual medical review to determine whether applicable payment criteria are satisfied. The $3,700 threshold is applied to Physical Therapy and Speech Language Pathology Services; a separate $3,700 threshold is applied to the Occupational Therapy. The Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) directed CMS to modify the manual medical review process such that those reviews will no longer apply to all claims exceeding the $3,700 threshold and instead will be determined on a targeted basis based on a variety of factors that CMS considers appropriate.

The Bipartisan Budget Act of 2018 extended the targeted medical review indefinitely but reduces the threshold to $3,000 through December 31, 2027. For 2028, the threshold amount will be increased by the percentage increase in the Medicare Economic Index (“MEI”) for 2028 and in subsequent years the threshold amount will increase based on the corresponding percentage increase in the MEI for such subsequent year.

CMS adopted a multiple procedure payment reduction (“MPPR”) for therapy services in the final update to the MPFS for calendar year 2011. The MPPR applied to all outpatient therapy services paid under Medicare Part B — occupational therapy, physical therapy and speech-language pathology. Under the policy, the Medicare program pays 100% of the practice expense component of the Relative Value Unit (“RVU”) for the therapy procedure with the highest practice expense RVU, then reduces the payment for the practice expense component for the second and subsequent therapy procedures or units of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate sessions. In 2013, the practice expense component for the second and subsequent therapy service furnished during the same day for the same patient was reduced by 50%.

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Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare that sufficiently compensate us for our services or, in some instances, cover our operating costs. Limits on reimbursement rates or the scope of services being reimbursed could have a material adverse effect on our revenue, financial condition and results of operations. Additionally, any delay or default by the federal or state governments in making Medicare and/or Medicaid reimbursement payments could materially and, adversely, affect our business, financial condition and results of operations.

Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation. We believe that we are in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on our financial statements as of December 31, 2023. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program.

Marketing

We focus our marketing efforts primarily on physicians, including orthopedic surgeons, neurosurgeons, physiatrists, internal medicine physicians, podiatrists, occupational medicine physicians and general practitioners. In marketing to the physician community, we emphasize our commitment to quality patient care and regular communication with physicians regarding patient progress. We employ personnel to assist clinic directors in developing and implementing marketing plans for the physician community and to assist in establishing relationships with health maintenance organizations, preferred provider organizations, case managers and insurance companies.

Industrial Injury Prevention Services

Services provided in the IIP segment include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacity evaluations, and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors. Our Company performs these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and ATCs.

In March 2017, we acquired a 55% interest in an initial IIP business. On April 30, 2018, we acquired a 65% interest in another business in the IIP sector and then we combined the two businesses.  After the combination, we owned a 59.45% interest in the combined business, Briotix Health, Limited Partnership (“Briotix Health”). On April 11, 2019, we acquired 100% of a third provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offer employment testing, functional capacity evaluations and return-to-work services. It performs these services across a network in 45 states including onsite at eleven client locations. The business was then combined with Briotix Health increasing our ownership position in the partnership to approximately 76%. On September 30, 2021, we acquired a company that specializes in return-to-work and ergonomic services, among other offerings and contributed those assets to Briotix Health. On October 31, 2023, we made another acquisition and purchased 100% of an IIP business and contributed its assets to Briotix Health. As part of the October 2023 Acquisition, we also acquired a 55% interest in an ergonomics software business. Subsequent to the abovementioned acquisitions and the purchases and sales of the redeemable non-controlling interests of the limited partners, our ownership in Briotix Health is approximately 92%.

On November 30, 2021, we acquired an approximate 70% interest in another leading provider of IIP services. The founders and owners retained the remaining interest.

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Factors Influencing Demand for Physical Therapy Services

We believe that the following factors, among others, influence the growth of outpatient physical therapy services:

• Economic Benefits of Therapy Services – Purchasers and providers of healthcare services, such as insurance companies, health maintenance organizations, businesses, and industries, continuously seek cost savings for traditional healthcare services. We believe that our therapy services provide a cost-effective way to prevent short-term disabilities from becoming chronic conditions, to help avoid invasive procedures, to speed recovery from surgery and musculoskeletal injuries and eliminate or minimize the need for opioids.

• Earlier Hospital Discharge – Changes in health insurance reimbursement, both public and private, have encouraged the earlier discharge of patients to reduce costs. We believe that early hospital discharge practices foster greater demand for outpatient physical therapy services.

• Aging Population – In general, the elderly population has a greater incidence of disability compared to the population as a whole. As this segment of the population continues to grow, we believe that demand for rehabilitation services will expand.

REGULATION AND HEALTHCARE REFORM

Numerous federal, state and local regulations regulate healthcare services and those who provide them. Some states into which we may expand have laws requiring facilities employing health professionals and providing health-related services to be licensed and, in some cases, to be owned by licensed physical therapists. Our therapists and/or clinics, however, are required to be licensed, as determined by the state in which they provide services. Failure to obtain or maintain any required approvals or licenses could have a material adverse effect on our business, financial condition and results of operations.

Regulations Controlling Fraud and Abuse

Various federal and state laws regulate financial relationships involving providers of healthcare services. These laws include Section 1128B(b) of the Social Security Act (42 U.S. C. § 1320a-7b[b]) (the “Fraud and Abuse Law”), under which civil and criminal penalties can be imposed upon persons who, among other things, offer, solicit, pay or receive remuneration in return for (i) the referral of patients for the rendering of any item or service for which payment may be made, in whole or in part, by a Federal health care program (including Medicare and Medicaid); or (ii) purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, ordering any good, facility, service, or item for which payment may be made, in whole or in part, by a Federal health care program (including Medicare and Medicaid). We believe that our business procedures and business arrangements are in compliance with these provisions. However, the provisions are broadly written and the full extent of their specific application to specific facts and arrangements to which we are a party is uncertain and difficult to predict. In addition, several states have enacted state laws similar to the Fraud and Abuse Law, which may be more restrictive than the federal Fraud and Abuse Law.

The Office of the Inspector General (“OIG”) of HHS has issued regulations describing compensation financial arrangements that fall within a “Safe Harbor” and, therefore, are not viewed as illegal remuneration under the Fraud and Abuse Law. Failure to fall within a Safe Harbor does not mean that the Fraud and Abuse Law has been violated; however, the OIG has indicated that failure to fall within a Safe Harbor may subject an arrangement to increased scrutiny under a “facts and circumstances” test.

The OIG also has issued special fraud alerts and special advisory bulletins to remind the provider community of the importance and application of certain aspects of the Fraud and Abuse Law. One of the OIG special fraud alerts related to the rental of space in physician offices by persons or entities to which the physicians refer patients. The OIG’s stated concern in these arrangements is that rental payments may be disguised kickbacks to the physician-landlords to induce referrals. We rent clinic space for some of our clinics from referring physicians and have taken the steps that we believe are necessary to ensure that all leases comply to the extent possible and applicable, with the space rental Safe Harbor to the Fraud and Abuse Law.

One of the OIG’s special advisory bulletins addressed certain complex contractual arrangements for the provision of items and services. This special advisory bulletin identified several characteristics commonly exhibited by suspect arrangements, the existence of one or more of which could indicate a prohibited arrangement to the OIG.

Due to the nature of our business operations, some of our management service arrangements exhibit one or more of these characteristics. However, we believe we have taken steps regarding the structure of such arrangements as necessary to sufficiently distinguish them from these suspect ventures, and to comply with the requirements of the Fraud and Abuse Law. However, if the OIG believes we have entered into a prohibited contractual joint venture, it could have an adverse effect on our business, financial condition and results of operations.

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Although the business of managing physician-owned and hospital-owned physical therapy facilities is regulated by the Fraud and Abuse Law, the manner in which we contract with such facilities often falls outside the complete scope of available Safe Harbors. We believe our arrangements comply with the Fraud and Abuse Law, even though federal courts provide limited guidance as to the application of the Fraud and Abuse Law to these arrangements. If our management contracts are held to violate the Fraud and Abuse Law, it could have an adverse effect on our business, financial condition and results of operations.

Stark Law

Provisions of the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. § 1395nn) (the “Stark Law”) prohibit referrals by a physician of “designated health services” which are payable, in whole or in part, by Medicare or Medicaid, to an entity in which the physician or the physician’s immediate family member has an investment interest or other financial relationship, subject to several exceptions. Unlike the Fraud and Abuse Law, the Stark Law is a strict liability statute. Proof of intent to violate the Stark Law is not required. Physical therapy and occupational therapy services are among the “designated health services”. Further, the Stark Law has application to our management contracts with individual physicians and physician groups, as well as any other financial relationship between us and referring physicians, including medical advisor arrangements and any financial transaction resulting from a clinic acquisition. The Stark Law also prohibits billing for services rendered pursuant to a prohibited referral. Several states have enacted laws similar to the Stark Law. These state laws may cover all (not just Medicare and Medicaid) patients. As with the Fraud and Abuse Law, we consider the Stark Law in planning our clinics, establishing contractual and other arrangements with physicians, marketing and other activities, and believe that our operations are in compliance with the Stark Law. If we violate the Stark Law or any similar state laws, our financial results and operations could be adversely affected. Penalties for violations include denial of payment for the services, significant civil monetary penalties, and exclusion from the Medicare and Medicaid programs.

HIPAA

In an effort to further combat healthcare fraud and protect patient confidentially, Congress included several anti-fraud measures in the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). HIPAA created a source of funding for fraud control to coordinate federal, state and local healthcare law enforcement programs, conduct investigations, provide guidance to the healthcare industry concerning fraudulent healthcare practices, and establish a national data bank to receive and report final adverse actions. HIPAA also criminalized certain forms of health fraud against all public and private payors. Additionally, HIPAA mandates the adoption of standards regarding the exchange of healthcare information in an effort to ensure the privacy and electronic security of patient information and standards relating to the privacy of health information. Sanctions for failing to comply with HIPAA include criminal penalties and civil sanctions. In February of 2009, the American Recovery and Reinvestment Act of 2009 (“ARRA”) was signed into law. Title XIII of ARRA, the Health Information Technology for Economic and Clinical Health Act (“HITECH”), provided for substantial Medicare and Medicaid incentives for providers to adopt electronic health records (“EHRs”) and grants for the development of health information exchange (“HIE”). Recognizing that HIE and EHR systems will not be implemented unless the public can be assured that the privacy and security of patient information in such systems is protected, HITECH also significantly expanded the scope of the privacy and security requirements under HIPAA. Most notable are the mandatory breach notification requirements and a heightened enforcement scheme that includes increased penalties, and which now apply to business associates as well as to covered entities. In addition to HIPAA, a number of states have adopted laws and/or regulations applicable in the use and disclosure of individually identifiable health information that can be more stringent than comparable provisions under HIPAA.

We believe that our operations comply with applicable standards for privacy and security of protected healthcare information. We cannot predict what negative effect, if any, HIPAA/HITECH or any applicable state law or regulation will have on our business.

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Other Regulatory Factors

Political, economic and regulatory influences are fundamentally changing the healthcare industry in the United States. Congress, state legislatures and the private sector continue to review and assess alternative healthcare delivery and payment systems. Potential alternative approaches could include mandated basic healthcare benefits, controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, and price controls. Legislative debate is expected to continue in the future and market forces are expected to demand only modest increases or reduced costs. For instance, managed care entities are demanding lower reimbursement rates from healthcare providers and, in some cases, are requiring or encouraging providers to accept capitated payments that may not allow providers to cover their full costs or realize traditional levels of profitability. We cannot reasonably predict what impact the adoption of federal or state healthcare reform measures or future private sector reform may have on our business.

COMPETITION

The healthcare industry, including the physical therapy business and the industrial injury prevention services business, is highly competitive. The physical therapy business as well as the industrial injury prevention services business are both highly fragmented with no company having a significant market share nationally. We believe that we are one of the largest national outpatient physical therapy services providers.

Competitive factors affecting our business include quality of care, cost, treatment outcomes, convenience of location, and relationships with, and ability to meet the needs of, referral and payor sources. Our clinics compete, directly or indirectly, with many types of healthcare providers including the physical therapy departments of hospitals, private therapy clinics, physician-owned therapy clinics, and chiropractors. We may face more intense competition if consolidation of the therapy industry continues.

We believe that our partnership strategy provides us with a competitive advantage. Our clinics are partly owned by therapists who have developed exceptional reputations in their local communities and these therapist-owners oversee their respective clinic operations helping to ensure the success of the clinics.

ENFORCEMENT ENVIRONMENT

In recent years, federal and state governments have launched several initiatives aimed at uncovering behavior that violates the federal civil and criminal laws regarding false claims and fraudulent billing and coding practices. Such laws require providers to adhere to complex reimbursement requirements regarding proper billing and coding in order to be compensated for their services by government payors. Our compliance program requires adherence to applicable law and promotes reimbursement education and training; however, a determination that our clinics’ billing and coding practices are false or fraudulent could have a material adverse effect on us.

As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental inspections, reviews, audits and investigations to verify our compliance with these programs and applicable laws and regulations. Federal, state and private payors regularly conduct audits of billing and coding practices at our clinics. An adverse inspection, review, audit or investigation could result in refunding amounts we have been paid; fines penalties and/or revocation of billing privileges for the affected clinics; the imposition of a corporate integrity agreement; exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks; or damage to our reputation.

We and our clinics are subject to federal and state laws prohibiting entities and individuals from knowingly and willfully making claims to Medicare, Medicaid and other governmental programs and third-party payors that contain false or fraudulent information. The federal False Claims Act encourages private individuals to file suits on behalf of the government against healthcare providers such as us. As such suits are generally filed under seal with a court to allow the government adequate time to investigate and determine whether it will intervene in the action, the implicated healthcare providers often are unaware of the suit until the government has made its determination and the seal is lifted. Violations or alleged violations of such laws, and any related lawsuits, could result in (i) exclusion from participation in Medicare, Medicaid and other federal healthcare programs, or (ii) significant financial or criminal sanctions, resulting in the possibility of substantial financial penalties for small billing errors that are replicated in a large number of claims, as each individual claim could be deemed a separate violation. In addition, many states also have enacted similar statutes, which may include criminal penalties, substantial fines, and treble damages.

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COMPLIANCE PROGRAM

Our Compliance Program

Our ongoing success depends upon our reputation for quality service and ethical business practices. We operate in a highly regulated environment with many federal, state and local laws and regulations. We take a proactive interest in understanding and complying with the laws and regulations that apply to our business.

Our Board of Directors (the “Board”) has adopted a Code of Business Conduct and Ethics and a set of Corporate Governance Guidelines to clarify the ethical standards under which the Board and management carry out their duties. In addition, the Board has created a Compliance Committee of the Board (“Compliance Committee”) whose purpose is to assist the Board in discharging their oversight responsibilities with respect to compliance with federal and state laws and regulations relating to healthcare.

We have issued a Compliance Manual and created compliance training materials, hand-outs and an on-line testing program. These tools were prepared to ensure that every employee of our Company and subsidiaries has a clear understanding of our mutual commitment to high standards of professionalism, honesty, fairness and compliance with the law in conducting business. These standards are administered by our Chief Compliance Officer (“CCO”), who has the responsibility for the day-to-day oversight, administration and development of our compliance program. The CCO, internal and external counsel, management and the Compliance Committee review our policies and procedures for our compliance program from time to time in an effort to improve operations and to ensure compliance with requirements of standards, laws and regulations and to reflect the on-going compliance focus areas which have been identified by management, counsel or the Compliance Committee. We also have established systems for reporting potential violations, educating our employees, monitoring and auditing compliance and handling enforcement and discipline.

Committees

Our Compliance Committee, appointed by the Board, consists of four independent directors. The Compliance Committee has general oversight of our Company’s compliance with the legal and regulatory requirements regarding healthcare operations, as well as cybersecurity. The Compliance Committee relies on the expertise and knowledge of management, the CCO and other compliance and legal personnel. The CCO regularly communicates with the Chairman of the Compliance Committee. The Compliance Committee meets at least four times a year or more frequently as necessary to carry out its responsibilities and reports regularly to the Board regarding its actions and recommendations.

We also have an Internal Compliance Committee, which is comprised of Company leaders in the areas of operations, clinical services, finance, human resources, legal, information technology and credentialing. The Internal Compliance Committee has the responsibility for evaluating and assessing Company areas of risk relating to compliance with federal and state healthcare laws, and generally to assist the CCO. The Internal Compliance Committee meets at least four times a year or more frequently as necessary to carry out its responsibilities. In addition, management has appointed a team to address our Company’s compliance with HIPAA. The HIPAA team consists of a security officer and employees from our legal, information systems, finance, operations, compliance, business services and human resources departments. The team prepares assessments and makes recommendations regarding operational changes and/or new systems, if needed, to comply with HIPAA.

Each clinic certified as a Medicare Rehabilitation Agency has a formally appointed governing body composed of a member of our management and the director/administrator of the clinic. The governing body retains legal responsibility for the overall conduct of the clinic. The members confer regularly and discuss, among other issues, clinic compliance with applicable laws and regulations. In addition, there are Professional Advisory Committees which serve as Infection Control Committees. These committees meet in the facilities and function as advisors.

We have in place a Risk Management Committee consisting of, among others, the CCO, the Vice President of Human Resources, and other legal, compliance and operations personnel. This committee reviews and monitors all employee and patient incident reports and provides clinic personnel with actions to be taken in response to the reports.

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Reporting Violations

In order to facilitate our employees’ ability to report in confidence, anonymously and without retaliation any perceived improper work-related activities, accounting irregularities and other violations of our compliance program, we have set up an independent national compliance hotline. The compliance hotline is available to receive confidential reports of wrongdoing Monday through Friday (excluding holidays), 24 hours a day. The compliance hotline is staffed by experienced third party professionals trained to utilize utmost care and discretion in handling sensitive issues and confidential information. The information received is documented and forwarded timely to the CCO, who, together with the Compliance Committee, has the power and resources to investigate and resolve matters of improper conduct.

Educating Our Employees

We utilize numerous methods to train our employees in compliance related issues, including an online learning management system. All employees complete a comprehensive training program comprised of numerous modules relating to our business and proper practices when newly hired and annually thereafter. The directors/administrators also provide periodic “refresher” training for existing employees and one-on-one comprehensive training with new hires. The corporate compliance group responds to questions from clinic personnel and conducts frequent teleconference meetings, webinars and training sessions on a variety of compliance related topics.

When a clinic opens, we provide a package of compliance materials containing manuals and detailed instructions for meeting Medicare Conditions of Participation Standards and other compliance requirements. During follow up training with the director/administrator of the clinic, compliance department staff explain various details regarding requirements and compliance standards. Compliance staff will remain in contact with the director/administrator while the clinic is implementing compliance standards and will provide any assistance required. All new office managers receive training (including Medicare, regulatory and corporate compliance, insurance billing, charge entry and transaction posting and coding, daily, weekly and monthly accounting reports) from the training staff at the corporate office. The corporate compliance group will assist in continued compliance, including guidance to the clinic staff with regard to Medicare certifications, state survey requirements and responses to any inquiries from regulatory agencies.

Monitoring and Auditing Clinic Operational Compliance

We have in place audit programs and other procedures to monitor and audit clinic operational compliance with applicable policies and procedures. We employ internal auditors who, as part of their job responsibilities, conduct periodic audits of each clinic. Most clinics are audited at least once every 24 months and additional focused audits are performed as deemed necessary. During these audits, particular attention is given to compliance with Medicare and internal policies, Federal and state laws and regulations, third party payor requirements, and patient chart documentation, billing, reporting, record keeping, collections and contract procedures. The audits are conducted on site or remotely and include interviews with the employees involved in management, operations, billing and accounts receivable.

Formal audit reports are prepared and reviewed with corporate management and the Compliance Committee. Each clinic director/administrator receives a letter instructing them of any corrective measures required. Each clinic director/administrator then works with the compliance team and operations to ensure such corrective measures are achieved.

Handling Enforcement and Discipline

It is our policy that any employee who fails to comply with compliance program requirements or who negligently or deliberately fails to comply with known laws or regulations specifically addressed in our compliance program should be subject to disciplinary action up to and including discharge from employment. The Compliance Committee, compliance staff, human resources staff and management investigate violations of our compliance program and impose disciplinary action as considered appropriate.

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EMPLOYEES

As of December 31, 2023, we employed approximately 6,720 people nationwide, of which approximately 3,899 were full-time employees.  It is crucial that we continue to attract and retain top talent. To attract and retain talented employees, we strive to make our corporate office and all our practices and businesses a diverse and healthy workplace, with opportunities for our employees to receive continuing education, skill development, encouragement to grow and develop their career, all supported by competitive compensation, incentives, and benefits. Our clinical professionals are all licensed and a vast majority have advanced degrees. Our operational leadership teams have long-standing relationships with local and regional universities, professional affiliations, and other applicable sources that provide our practices with a talent pipeline.

We provide competitive compensation and benefits programs to help meet our employees’ needs in the practices and communities in which they serve. These programs (which can vary by practice and employment classification) include competitive base salaries, incentive compensation plans, a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, education assistance, mental health, and other employee assistance benefits.

We invest resources to develop the talent needed to support our business strategy. Resources include a multitude of training and development programs delivered internally and externally, online and instructor-led, and on-the-job learning formats.

We expect to continue adding personnel in the future as we focus on potential acquisition targets and organic growth opportunities.

AVAILABLE INFORMATION

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on our internet website at www.usph.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding our filings at http://www.sec.gov.

ITEM 1A. RISK FACTORS

Our business, operations and financial condition are subject to various risks. Some of these risks are described below, and readers of this Annual Report on Form 10-K should take such risks into account in evaluating our Company or making any decision to invest in us. This section does not describe all risks applicable to our Company, our industry or our business, and it is intended only as a summary of material factors affecting our business.

RISKS RELATED TO OUR BUSINESS AND OPERATIONS

Decreases in Medicare reimbursement rate may adversely affect our financial results.

The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). For services provided in 2024, we expect our reimbursement rates under the MPFS to be approximately 3.5% less than the applicable reimbursement rates during 2023.

Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation. The Company believes that the Company is in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on the Company’s financial statements as of December 31, 2023. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program. For the year ended December 31, 2023 and 2022, respectively, net patient revenues from Medicare were approximately $170.7 million and $154.9 million, respectively.

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Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare that sufficiently compensate us for our services or, in some instances, cover our operating costs. Limits on reimbursement rates or the scope of services being reimbursed could have a material adverse effect on our revenue, financial condition, and results of operations. Additionally, any delay or default by the federal or state governments in making Medicare and/or Medicaid reimbursement payments could materially and, adversely, affect our business, financial condition and results of operations.

Revenue we receive from Medicare and Medicaid is subject to potential retroactive reduction.

Payments we receive from Medicare and Medicaid can be retroactively adjusted after examination during the claims settlement process or as a result of post-payment audits. Payors may disallow our requests for reimbursement, or recoup amounts previously reimbursed, based on determinations by the payors or their third-party audit contractors that certain costs are not reimbursable because either adequate or additional documentation was not provided or because certain services were not covered or deemed to not be medically necessary. Significant adjustments, recoupments or repayments of our Medicare or Medicaid revenue, and the costs associated with complying with investigative audits by regulatory and governmental authorities, could adversely affect our financial condition and results of operations.

Additionally, from time to time we become aware, either based on information provided by third parties and/or the results of internal audits, of payments from payor sources that were either wholly or partially in excess of the amount that we should have been paid for the service provided. Overpayments may result from a variety of factors, including insufficient documentation supporting the services rendered or medical necessity of the services or other failures to document the satisfaction of the necessary conditions of payment. We are required by law in most instances to refund the full amount of the overpayment after becoming aware of it, and failure to do so within requisite time limits imposed by the law could lead to significant fines and penalties being imposed on us. Furthermore, our initial billing of and payments for services that are unsupported by the requisite documentation and satisfaction of any other conditions of payment, regardless of our awareness of the failure at the time of the billing or payment, could expose us to significant fines and penalties. We, and/or certain of our operating companies, could also be subject to exclusion from participation in the Medicare or Medicaid programs in some circumstances as well, in addition to any monetary or other fines, penalties or sanctions that we may incur under applicable federal and/or state law. Our repayment of any such amounts, as well as any fines, penalties or other sanctions that we may incur, could be significant and could have a material and adverse effect on our results of operations and financial condition.

From time to time, we are also involved in various external governmental investigations, audits and reviews. Reviews, audits and investigations of this sort can lead to government actions, which can result in the assessment of damages, civil or criminal fines or penalties, or other sanctions, including restrictions or changes in the way we conduct business, loss of licensure or exclusion from participation in government programs. Failure to comply with applicable laws, regulations and rules could have a material and adverse effect on our results of operations and financial condition. Furthermore, becoming subject to these governmental investigations, audits and reviews can also require us to incur significant legal and document production expenses as we cooperate with the government authorities, regardless of whether the particular investigation, audit or review leads to the identification of underlying issues.

We depend upon reimbursement by third-party payors.

Substantially all of our revenues are derived from private and governmental third-party payors. In 2023, approximately 63.4% of our revenues were derived collectively from managed care plans, commercial health insurers, workers’ compensation payors, and other private pay revenue sources while approximately 36.6% of our revenues were derived from Medicare and Medicaid. Initiatives undertaken by industry and government to contain healthcare costs affect the profitability of our clinics. These payors attempt to control healthcare costs by contracting with healthcare providers to obtain services on a discounted basis. We believe that this trend will continue and may limit reimbursement for healthcare services. If insurers or managed care companies from whom we receive substantial payments were to reduce the amounts they pay for services, our profit margins may decline, or we may lose patients if we choose not to renew our contracts with these insurers at lower rates. In addition, in certain geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans. Failure to obtain or maintain these approvals would adversely affect our financial results.

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In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program. See “Business—Sources of Revenue – Physical Therapy Services” in Item 1 for more information including changes to Medicare reimbursement. Additional reforms or other changes to these payment systems may be proposed or adopted, either by the U.S. Congress or by CMS, including bundled payments, outcomes-based payment methodologies and a shift away from traditional fee-for-service reimbursement. If revised regulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at our facilities could change. Some of these changes and proposed changes could adversely affect our business strategy, operations and financial results.

Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable patient information.

HIPAA required the HHS to adopt standards to protect the privacy and security of individually identifiable health-related information. The department released final regulations containing privacy standards in 2000 and published revisions to the final regulations in 2002. The privacy regulations extensively regulate the use and disclosure of individually identifiable health-related information. The regulations also provide patients with significant rights related to understanding and controlling how their health information is used or disclosed. The security regulations require healthcare providers to implement administrative, physical and technical practices to protect the security of individually identifiable health information that is maintained or transmitted electronically. HITECH, which was signed into law in 2009, enhanced the privacy, security and enforcement provisions of HIPAA by, among other things establishing security breach notification requirements, allowing enforcement of HIPAA by state attorneys general, and increasing penalties for HIPAA violations. Violations of HIPAA or HITECH could result in civil or criminal penalties.

In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information. State statutes and regulations vary from state to state. Lawsuits, including class actions and action by state attorneys general, directed at companies that have experienced a privacy or security breach also can occur.

We have established policies and procedures in an effort to ensure compliance with these privacy related requirements. However, if there is a breach, we may be subject to various penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals.

We are subject to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus (“COVID-19”).

Our operations expose us to risks associated with public health crises and epidemics/pandemics, such as COVID-19 that has spread globally. A public health crisis may lead to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty. A future public health crisis could have an adverse impact on our operations and supply chains, including a temporary loss of physical therapists and other employees who are infected or quarantined for a period of time, an increase in cancellations of physical therapy patient appointments and a decline in the scheduling of new or additional patient appointments.

We expect the federal and state governments to continue their efforts to contain growth in Medicaid expenditures, which could adversely affect our revenue and profitability.

Medicaid spending has increased rapidly in recent years, becoming a significant component of state budgets. This, combined with slower state revenue growth, has led both the federal government and many states to institute measures aimed at controlling the growth of Medicaid spending, and in some instances reducing aggregate Medicaid spending. We expect these state and federal efforts to continue for the foreseeable future. Furthermore, not all of the states in which we operate, most notably Texas, have elected to expand Medicaid as part of federal healthcare reform legislation. There can be no assurance that the program, on the current terms or otherwise, will continue for any particular period of time beyond the foreseeable future. If Medicaid reimbursement rates are reduced or fail to increase as quickly as our costs, or if there are changes in the rules governing the Medicaid program that are disadvantageous to our businesses, our business and results of operations could be materially and adversely affected.

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As a result of increased post-payment reviews of claims we submit to Medicare for our services, we may incur additional costs and may be required to repay amounts already paid to us.

We are subject to regular post-payment inquiries, investigations, and audits of the claims we submit to Medicare for payment for our services. These post-payment reviews have increased as a result of government cost-containment initiatives. These additional post-payment reviews may require us to incur additional costs to respond to requests for records and to pursue the reversal of payment denials, and ultimately may require us to refund amounts paid to us by Medicare that are determined to have been overpaid.

For a further description of this and other laws and regulations involving governmental reimbursements, see “Business—Sources of Revenue” and “—Regulation and Healthcare Reform” in Item 1.

An economic downturn, state budget pressures, sustained unemployment and continued deficit spending by the federal government may result in a reduction in reimbursement and covered services.

An economic downturn, including the consequences of a pandemic, such as COVID-19, could have a detrimental effect on our revenues. Historically, state budget pressures have translated into reductions in state spending. Given that Medicaid outlays are a significant component of state budgets, we can expect continuing cost containment pressures on Medicaid outlays for our services in the states in which we operate. In addition, an economic downturn, coupled with sustained unemployment, may also impact the number of enrollees in managed care programs as well as the profitability of managed care companies, which could result in reduced reimbursement rates.

The existing federal deficit, as well as deficit spending by federal and state governments as the result of adverse developments in the economy or other reasons, can lead to continuing pressure to reduce governmental expenditures for other purposes, including government-funded programs in which we participate, such as Medicare and Medicaid. Such actions in turn may adversely affect our results of operations.

We may be required to comply with a put right in one of our acquisition agreements, related to a potential future purchase of a majority interest in a separate company.

One of our acquisition agreements includes a put right for the potential future purchase of a majority interest in a separate company at a purchase price which is derived based on a specified multiple of the separate company’s historical earnings. The exercise of the put right is outside of our control.  In the event the put right is triggered, we are required to purchase the aforementioned equity interest at a calculated purchase price. The resulting purchase price may be greater than the fair value of such equity interests at the time, and we may or may not have the capital necessary to satisfy such contractual purchase obligation, in which case we could be in breach.

Our debt and financial obligations could adversely affect our financial condition, our ability to obtain future financing, and our ability to operate our business.

We have outstanding debt obligations that could adversely affect our financial condition and limit our ability to successfully implement our business strategy. Furthermore, from time to time, we may need additional financing to support our business and pursue our business strategy, including strategic acquisitions. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors. We cannot provide assurances that additional financing will be available to us on favorable terms when required, or at all.

Our loan agreements contain certain restrictions and requirements that among other things:

• require us to maintain a quarterly fixed charge coverage ratio and minimum working capital ratio;

• limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions, to fund growth or for general corporate purposes;

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• limit our future ability to refinance our indebtedness on terms acceptable to us or at all;

• limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan; and

• impose on us financial and operational restrictions.

Our ability to meet our debt service obligations will depend on our future performance, which will be affected by the other risk factors described herein. If we do not generate enough cash flow to pay our debt service obligations, we may be required to refinance all or part of our existing debt, sell our assets, borrow more money or raise equity. There is no guarantee that we will be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all.

If we fail to satisfy our debt service obligations or the other restrictions and requirements in our loan agreements, we could be in default. Unless cured or waived, a default would permit lenders to accelerate the maturity of the debt under the credit agreement and to foreclose upon the collateral securing the debt.

Our outstanding loans bear interest at variable rates. In response to the variable rates, we entered into an interest rate swap agreement.  We are exposed to certain market risks during the ordinary course of business due to adverse changes in interest rates. The exposure to interest rate risk primarily results from our variable-rate borrowing. Fluctuations in interest rates can be volatile and the Company’s risk management activities do not eliminate these risks.  In May 2022, we entered into an interest rate swap agreement to manage these risks.  While intended to reduce the effects of fluctuations in these prices and rates, these transactions may limit our potential gains or expose us to losses. If our counterparties to such transactions or the sponsors fail to honor their obligations due to financial distress, we would be exposed to potential losses or the inability to recover anticipated gains from these transactions.

Some of our acquisition agreements contain contingent consideration, the value of which may impact future financial results.

Some of our acquisition agreements include contingent earn-out consideration, the fair value of which is estimated as of the acquisition date based on the present value of the expected contingent payments as determined using weighted probabilities of possible future payments. These fair value estimates contain unobservable inputs and estimates that could materially differ from the actual future results and we cannot predict the ultimate result. The fair value of the contingent earn-out consideration could increase or decrease, as applicable. Changes in the fair value of contingent earn-outs will be reflected in our results of operations in the period in which they are recognized, the amount of which may be material and could cause volatility in our operating results.

Impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interests (minority interests).

As described in Note 6 to our financial statements included in Item 8, the redeemable non-controlling interests in our partnerships are held by our partners. Upon the occurrence of certain events, such as retirement or other termination of employment, partners from acquired partnerships may have the right to exercise a “put” to cause us to purchase their redeemable non-controlling interests. Depending on the amount and timing of the exercise of any “put” rights, the funds required could have an adverse impact on our capital structure.

Healthcare reform legislation may affect our business.

In recent years, many legislative proposals have been introduced or proposed in Congress and in some state legislatures that would affect major changes in the healthcare system, either nationally or at the state level. At the federal level, Congress has continued to propose or consider healthcare budgets that substantially reduce payments under the Medicare programs. See “Business—Our Operating Segments – Physical Therapy Operations-Sources of Revenue” in Item 1 for more information. The ultimate content, timing or effect of any healthcare reform legislation and the impact of potential legislation on us is uncertain and difficult, if not impossible, to predict. That impact may be material to our business, financial condition or results of operations.

Our operations are subject to extensive regulation.

The healthcare industry is subject to extensive federal, state and local laws and regulations relating to:

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• facility and professional licensure/permits, including certificates of need;

• conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral;

• addition of facilities and services; and

• coding, billing and payment for services.

In recent years, there have been heightened coordinated civil and criminal enforcement efforts by both federal and state government agencies relating to the healthcare industry. We believe we are in substantial compliance with all laws, but differing interpretations or enforcement of these laws and regulations could subject our current practices to allegations of impropriety or illegality or could require us to make changes in our methods of operations, facilities, equipment, personnel, services and capital expenditure programs and increase our operating expenses. If we fail to comply with these extensive laws and government regulations, we could become ineligible to receive government program reimbursement, suffer civil or criminal penalties or be required to make significant changes to our operations. In addition, we could be forced to expend considerable resources responding to an investigation or other enforcement action under these laws or regulations. For a more complete description of certain of these laws and regulations, see “Business—Regulation and Healthcare Reform” and “Business—Compliance Program” in Item 1.

Both federal and state regulatory agencies inspect, survey, and audit our facilities to review our compliance with these laws and regulations. While our facilities intend to comply with the existing licensing, Medicare certification requirements and accreditation standards, there can be no assurance that these regulatory authorities will determine that all applicable requirements are fully met at any given time. A determination by any of these regulatory authorities that a facility is not in compliance with these requirements could lead to the imposition of requirements that the facility takes corrective action, assessment of fines and penalties, or loss of licensure or Medicare certification of accreditation. These consequences could have an adverse effect on us.

Our operations are subject to investigations, legal actions and proceedings that could result in an adverse impact on our business and financial position.

Healthcare providers are subject to investigations, legal actions and proceedings, as well as lawsuits under the qui tam provisions of the federal False Claims Act, based on claims that the provider failed to comply with applicable laws and regulations that govern coding and the submission of claims for services provided to Medicare patients, among other things. These matters can involve significant costs, monetary damages and penalties. We have been subject to these proceedings in the past, and future proceedings could result in an adverse impact on our business and financial results.

We face inspections, reviews, audits and investigations under federal and state government programs and contracts. These audits could have adverse findings that may negatively affect our business.

As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental inspections, reviews, audits and investigations to verify our compliance with these programs and applicable laws and regulations. Managed care payors may also reserve the right to conduct audits. An adverse inspection, review, audit or investigation could result in:

• refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from managed care payors;

• state or federal agencies imposing fines, penalties and other sanctions on us;

• temporary suspension of payment for new patients to the facility or agency;

• decertification or exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks;

• the imposition of a new Corporate Integrity Agreement;

• damage to our reputation;

• the revocation of a facility’s or agency’s license; and

• loss of certain rights under, or termination of, our contracts with managed care payors.

If adverse inspections, reviews, audits or investigations occur and any of the results noted above occur, it could have a material adverse effect on our business and operating results.

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In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.

Some states prohibit the “corporate practice of therapy” that restricts business corporations from providing physical therapy services through the direct employment of therapist physicians or from exercising control over medical decisions by therapists. The laws relating to corporate practice vary from state to state and are not fully developed in each state in which we have facilities. Typically, however, professional corporations owned and controlled by licensed professionals are exempt from corporate practice restrictions and may employ therapists to furnish professional services. Those professional corporations may be managed by business corporations, such as the Company.

Some states also prohibit entities from engaging in certain financial arrangements, such as fee-splitting, with physicians or therapists. The laws relating to fee-splitting also vary from state to state and are not fully developed. Generally, these laws restrict business arrangements that involve a physician or therapist sharing medical fees with a referral source, but in some states, these laws have been interpreted to extend to management agreements between physicians or therapists and business entities under some circumstances.

We believe that our current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws. However, there can be no assurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices. If a court or regulatory body determines that we have violated these laws or if new laws are introduced that would render our arrangements illegal, we could be subject to civil or criminal penalties, our contracts could be found legally invalid and unenforceable (in whole or in part), or we could be required to restructure our contractual arrangements with our affiliated physicians and other licensed providers.

We may be adversely affected by a security breach, such as a cyber-attack, which may cause a violation of HIPAA or HITECH and subject us to potential legal and reputational harm.

In the normal course of business, our information technology systems hold sensitive patient information including patient demographic data and other protected health information, which is subject to HIPAA and HITECH. We also contract with third-party vendors to maintain and store our patients’ individually identifiable health information. Numerous state and federal laws and regulations address privacy and information security concerns resulting from our access to our patient’s and employee’s personal information.

Our information technology systems and those of our vendors that process, maintain, and transmit such data are subject to computer viruses, cyber-attacks, or breaches. We adhere to policies and procedures designed to ensure compliance with HIPAA and other privacy and information security laws and require our third-party vendors to do so as well. If, however, we or our third-party vendors experience a breach, loss, or other compromise of unsecured protected health information or other personal information, such an event could result in significant civil and criminal penalties, lawsuits, reputational harm, and increased costs to us, any of which could have a material adverse effect on our financial condition and results of operations.

Furthermore, while our information technology systems, and those of our third-party vendors, are maintained with safeguards protecting against cyber-attacks. A cyber-attack that bypasses our information technology security systems, or those of our third-party vendors, could result in a material adverse effect on our business, financial condition, results of operations, or cash flows. In addition, our future results could be adversely affected due to the theft, destruction, loss, misappropriation, or release of protected health information, other confidential data or proprietary business information, operational or business delays resulting from the disruption of information technology systems and subsequent mitigation activities, or regulatory action taken as a result of such incident. We provide our employees with training and regular reminders on important measures they can take to prevent breaches. We routinely identify attempts to gain unauthorized access to our systems. However, given the rapidly evolving nature and proliferation of cyber threats, there can be no assurance our training and network security measures or other controls will detect, prevent, or remediate security or data breaches in a timely manner or otherwise prevent unauthorized access to, damage to, or interruption of our systems and operations. Accordingly, we may be vulnerable to losses associated with the improper functioning, security breach, or unavailability of our information systems as well as any systems used in acquired operations.

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We depend upon the cultivation and maintenance of relationships with the physicians in our markets.

Our success is dependent upon referrals from physicians in the communities our clinics serve and our ability to maintain good relations with these physicians and other referral sources. Physicians referring patients to our clinics are free to refer their patients to other therapy providers or to their own physician owned therapy practice. If we are unable to successfully cultivate and maintain strong relationships with physicians and other referral sources, our business may decrease, and our net operating revenues may decline.

Our business depends upon hiring, training, and retaining qualified employees.

Our workforce costs represent our largest operating expense, and our ability to meet our labor needs while controlling labor costs is subject to numerous external factors, including market pressures with respect to prevailing wage rates and unemployment levels. We compete with rehabilitation companies and other businesses for many of our clinical and non-clinical employees, and turnover in these positions can lead to increased training and retention costs, particularly in a competitive labor market. We cannot be assured that we can continue to hire, train and retain qualified employees at current wage rates since we operate in a competitive labor market, and there are currently significant inflationary and other pressures on wages.  If we are unable to hire, properly train and retain qualified employees, we could experience higher employment costs and reduced revenues, which could adversely affect our earnings.

We depend upon our ability to recruit and retain experienced physical therapists.

Our revenue generation is dependent upon referrals from physicians in the communities our clinics serve, and our ability to maintain good relations with these physicians. Our therapists are the front line for generating these referrals and we are dependent on their talents and skills to successfully cultivate and maintain strong relationships with these physicians. If we cannot recruit and retain our base of experienced and clinically skilled therapists, our business may decrease, and our net operating revenues may decline. Periodically, we have clinics in isolated communities that are temporarily unable to operate due to the unavailability of a therapist who satisfies our standards.

We may also experience increases in our labor costs, primarily due to higher wages and greater benefits required to attract and retain qualified healthcare personnel, and such increases may adversely affect our profitability. Furthermore, while we attempt to manage overall labor costs in the most efficient way, our efforts to manage them may have limited effectiveness and may lead to increased turnover and other challenges.

Failure to maintain effective internal control over our financial reporting could have an adverse effect on our ability to report our financial results on a timely and accurate basis.

We are required to produce our consolidated financial statements in accordance with the requirements of accounting principles generally accepted in the United States of America. Effective internal control over financial reporting is necessary for us to provide reliable financial reports, to help mitigate the risk of fraud and to operate successfully. We are required by federal securities laws to document and test our internal control procedures in order to satisfy the requirements of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal control over financial reporting.

We may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with applicable law, or our independent registered public accounting firm may not be able to issue an unqualified attestation report if we conclude that our internal control over financial reporting is not effective. If we fail to maintain effective internal control over financial reporting, or our independent registered public accounting firm is unable to provide us with an unqualified attestation report on our internal control, we could be required to take costly and time-consuming corrective measures, be required to restate the affected historical financial statements, be subjected to investigations and/or sanctions by federal and state securities regulators, and be subjected to civil lawsuits by security holders. Any of the foregoing could also cause investors to lose confidence in our reported financial information and in us and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future.

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Our revenues may fluctuate due to weather.

We have a significant number of clinics in states that normally experience snow and ice during the winter months. Also, a significant number of our clinics are located in states along the Gulf Coast and Atlantic Coast which are subject to periodic winter storms, hurricanes and other severe storm systems. Periods of severe weather may cause physical damage to our facilities or prevent our staff or patients from traveling to our clinics, which may cause a decrease in our net operating revenues.

We operate in a highly competitive industry.

We encounter competition from local, regional or national entities, some of which have superior resources or other competitive advantages. Intense competition may adversely affect our business, financial condition or results of operations. For a more complete description of this competitive environment, see “Business—Competition” in Item 1. An adverse effect on our business, financial condition or results of operations may require us to write down goodwill.

We may incur closure costs and losses.

The competitive, economic or reimbursement conditions in our markets in which we operate may require us to reorganize or to close certain clinics. In the event a clinic is reorganized or closed, we may incur losses and closure costs. The closure costs and losses may include, but are not limited to, lease obligations, severance, and write-down or write-off of goodwill and other intangible assets.

Future acquisitions may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities.

As part of our growth strategy, we intend to continue pursuing acquisitions of outpatient physical therapy clinics and industrial injury prevention services businesses. There can be no assurance that we will be able to successfully identify or complete future acquisitions. Acquisitions may involve significant cash expenditures, potential debt incurrence and operational losses, dilutive issuances of equity securities and expenses that could have an adverse effect on our financial condition and results of operations. Acquisitions involve numerous risks, including:

• the difficulty and expense of integrating acquired personnel into our business;

• the diversion of management’s time from existing operations;

• the potential loss of key employees of acquired companies;

• the difficulty of assignment and/or procurement of managed care contractual arrangements; and

• the assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities for failure to comply with healthcare regulations.

Employer and other contracted customers may terminate their relationship with us which could adversely affect the business.

In our industrial injury prevention services business, we perform services for large employers and their employees pursuant to contracts and other services agreement.  These contracts and other services agreements are able to be terminated by the employer-clients on little or short notice, and either a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected. Similarly, in our rehabilitation business, we have management and other services agreements with hospitals, physician groups and other ancillary providers; either a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected.

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RISKS RELATED TO OUR COMMON STOCK

Issuance of shares in connection with financing transactions or under stock incentive plans will dilute current stockholders.

Pursuant to our stock incentive plans, our Compensation Committee of the Board, consisting solely of independent directors, is authorized to grant stock awards to our employees, directors and consultants. Shareholders will incur dilution upon the exercise of any outstanding stock awards or the grant of any restricted stock. In addition, if we raise additional funds by issuing additional common stock, or securities convertible into or exchangeable or exercisable for common stock, further dilution to our existing stockholders will result, and new investors could have rights superior to existing stockholders.

The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock.

On December 31, 2023, we had reserved approximately 513,193 shares for future equity grants. We may issue additional restricted securities or register additional shares of common stock under the Securities Act of 1933, as amended (the “Securities Act”), in the future. The issuance of a significant number of shares of common stock upon the exercise of stock options or the availability for sale, or sale, of a substantial number of the shares of common stock eligible for future sale under effective registration statements, under Rule 144 or otherwise, could adversely affect the market price of the common stock.

Provisions in our articles of incorporation and bylaws could delay or prevent a change in control of our company, even if that change would be beneficial to our stockholders.

Certain provisions of our articles of incorporation and bylaws may delay, discourage, prevent or render more difficult an attempt to obtain control of our company, whether through a tender offer, business combination, proxy contest or otherwise. These provisions include the charter authorization of “blank check” preferred stock and a restriction on the ability of stockholders to call a special meeting.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

RISK MANAGEMENT AND STRATEGY

The Company recognizes the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our patients’ health information and all our data.

Managing Material Risks & Integrated Overall Risk Management

The Company has strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. Cybersecurity considerations are an integral part of our decision-making processes where communication, data and access are involved. Our Information technology (“IT”) department works closely with our operations teams to continuously evaluate and address cybersecurity risks in alignment with our business and operational objectives. Our Chief Information Systems Officer, (“CISO”) and IT teams play an important role in assessing the cybersecurity infrastructure employed within our acquired practices to ensure that necessary security enhancements are employed in a timely manner.  The Company provides annual cybersecurity awareness training to its employees to mitigate risks by educating employees regarding best practices to avoid cybersecurity related breaches.

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Engage Third-parties on Risk Management

Understanding the ever-changing and complex nature of cybersecurity threats, our organization values collaboration with external experts, including cybersecurity consultants, for advisory purposes. These collaborations are aimed at enhancing our understanding and management of cybersecurity risks. Through such engagements, we seek to gain insights and recommendations on improving our risk management frameworks and responses to potential cybersecurity incidents.

This approach allows us to benefit from specialized expertise, helping ensure that our cybersecurity strategies and processes are informed by current industry insights. While these collaborations are not mandated, they are encouraged as part of our commitment to maintaining a vigilant and adaptive cybersecurity posture in line with evolving best practices.

Oversee Third-party Risk

Aware of the potential risks posed by third-party service providers, our Company takes steps to perform security-related diligence on such providers. This diligence process aims to understand and evaluate the security measures and practices of our third-party partners. Our approach includes reviewing available information and seeking insights into their security and data management practices. This method is part of our broader strategy to mitigate the risks associated with data breaches or other security incidents that may arise from third-party engagements.

Risks from Cybersecurity Threats

We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing. While we have experienced cybersecurity incidents within several of our partnership subsidiaries over the years, these incidents have not been material, as each incident (i) has been isolated to certain segregated IT environments, (ii) has affected relatively few patients and their associated health information, and/or (iii) had a low probability of compromised data.  Each of the foregoing cybersecurity incidents has been remediated in the ordinary course of business. However, we could experience a cybersecurity incident that materially affects us in the future. See “Risk Factors” in Item 1A on this Form-10K for additional discussion of cybersecurity risks to our business.

Governance

The Board of Directors recognizes the significance of cybersecurity threats to the Company’s operational integrity, data security and stakeholders.  The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity threats and sees this as a major priority for the company. The Board has established oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats.

Board of Directors Oversight

The Compliance Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this domain. The Compliance Committee is composed of board members with diverse expertise, including risk management, technology, health care operations, and finance, equipping them to oversee cybersecurity risks effectively. In addition, each of the directors on the Compliance Committee has completed the Diligent Cyber Risk and Strategy Certification Program, developed by Diligent Corporation, a leading corporate governance technology company, which teaches cyber literacy for corporate directors to effectively govern significant enterprise-wide cyber risks and have meaningful conversations with management.

Management’s Role Managing Risk

The CISO plays a pivotal role in informing the Compliance Committee on cybersecurity risks. The CISO, in concert with the Chief Compliance Officer and General Counsel, provides comprehensive briefings to the Compliance Committee on a regular basis. These briefings encompass a broad range of topics, including:

● Current cybersecurity landscape and emerging threats;

● Status of ongoing cybersecurity initiatives and strategies;

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● Incident reports and learnings from any cybersecurity events; and

● Compliance with regulatory requirements and industry standards.

In addition to our scheduled meetings, the Compliance Committee and management maintain an ongoing dialogue regarding emerging or potential cybersecurity risks. The Compliance Committee actively participates in strategic decisions related to cybersecurity. This involvement ensures that cybersecurity considerations are integrated into the Company’s broader strategic objectives.

Risk Management Personnel

Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO, Mr. Chadd Pence. With over 25 years of experience in the field of IT and cybersecurity, Mr. Pence brings a wealth of expertise to his role. His background includes experience as an enterprise CISO and his knowledge and experience are instrumental in developing and executing our cybersecurity strategies. Our CISO oversees our cybersecurity efforts and governance programs, tests our compliance with standards, remediates known risks, and provides regular guidance to management and the Board on these areas. In addition, to supplement this expertise, we periodically engage external experts, including cybersecurity consultants, to help us evaluate our risk management related policies and to help us to review and remediate cybersecurity incidents.

Monitor Cybersecurity Incidents

The CISO is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The CISO implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of a variety of security measures and system audits to identify potential vulnerabilities. In the event of a cybersecurity incident, the CISO is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.

Reporting to Board of Directors

The CISO, in his capacity, regularly informs our Chief Financial Officer and Chief Executive Officer of all aspects related to cybersecurity risks and incidents. This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing the Company. Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Compliance Committee and the full Board of Directors, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues.

ITEM 2. PROPERTIES

We lease the properties used for our clinics under non-cancelable operating leases with terms ranging from one to seven years, with the exception of the property for one clinic which we own. We intend to lease the premises for any new clinic location except in rare instances where leasing is not a cost-effective alternative. Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 25 clinics occupying space in the range of over 7,000 square feet to16,500 square feet.

We also lease our executive offices located in Houston, Texas, under a non-cancelable operating lease expiring in February 2028. We currently lease approximately 44,000 square feet of space (including allocations for common areas) at our executive offices.

ITEM 3. LEGAL PROCEEDINGS

We are a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of our business. We cannot predict the ultimate outcome of pending litigation, proceedings, regulatory and other governmental audits and investigations. These matters could potentially subject the Company to sanctions, damages, recoupments, fines, and other penalties. The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to our businesses in the future that may, either individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations, and liquidity.

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Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. We have been a defendant in these cases in the past and may be named as a defendant in similar cases from time to time in the future.

Prior Florida Legal Matter

In 2019, a qui tam lawsuit (“the Complaint”) was filed by a relator on behalf of the United States against us and one of our Florida majority-owned subsidiaries (the “Hale Partnership”).   This whistleblower lawsuit was filed in the U.S. District Court for the Southern District of Texas, seeking damages and civil penalties under the federal False Claim Act.  The U.S Government declined to intervene in the case and unsealed the Complaint in July 2019.  The Complaint alleged that the Hale Partnership engaged in conduct to purposely “upcode” its billings for services provided to Medicare patients. The plaintiff-relator also claimed that similar false claims occurred on other days and at other Company-owned partnerships.

In January 2022, we entered into a settlement agreement with the plaintiff-relator. In the settlement agreement, the plaintiff-relator released all defendants from liability for all conduct alleged in the Complaint, and the Company admitted no liability or wrongdoing.  In connection with the settlement, the Office of the United States Attorney for the Southern District of Texas agreed to a dismissal of the claims against the Hale Partnership and the Company. Under the terms of the settlement, we agreed to make aggregate payments to the government, the plaintiff-relator and her counsel of $2.8 million.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has traded on the New York Stock Exchange (“NYSE”) since August 14, 2012, under the symbol “USPH.” Prior to that, our common stock was traded on the Nasdaq Global Select Market under the symbol “USPH”. As of February 29, 2024, there were 83 holders of record of our outstanding common stock.

DIVIDENDS

Our Board of Directors declared the following dividends during the year ended December 31, 2023:

Declaration Date	Record Date	Payment Date	Dividend Per Share		Aggregate Amount (in thousands)
02/21/2023	03/10/2023	04/07/2023	$	0.43	$	5,617
05/02/2023	05/18/2023	06/09/2023	$	0.43	$	5,621
08/07/2023	08/18/2023	09/08/2023	$	0.43	$	6,445
11/06/2023	11/16/2023	12/08/2023	$	0.43	$	6,445

There is no assurance that future dividends will be declared. The declaration and payment of dividends in the future are at the discretion of our Board of Directors after taking into account various factors, including, but not limited to, our financial condition, operating results, available cash and current and anticipated cash needs, and the terms of our Credit Agreement (as defined in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”). We are currently restricted from paying dividends on our common stock in excess of $50,000,000 in any fiscal year on our common stock under the Credit Agreement.

FIVE YEAR PERFORMANCE GRAPH

The following performance graph compares the cumulative total stockholder return of our common stock to The NYSE Composite Index and the NYSE Health Care Index for the period from December 31, 2018 through December 31, 2023. The graph assumes that $100 was invested in our common stock and the common stock of each of the companies listed on The NYSE Composite Index and The NYSE Health Care Index on December 31, 2018 and that any dividends were reinvested.

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Comparison of Five Years Cumulative Total Return for the Year Ended December 31, 2023

 

	12/18	12/19	12/20	12/21	12/22	12/23
U. S. Physical Therapy, Inc.	100	112	117	93	79	91
NYSE Healthcare Index	100	119	132	161	155	159

The foregoing performance graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference. In addition, the performance graph and the related description shall not be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C.

ITEM 6. RESERVED

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of U.S. Physical Therapy, Incl and its subsidiaries (herein referred to as “we”, “us”, “our” or the “Company”) should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” and “Forward-Looking Statements” sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 28, 2023.

EXECUTIVE SUMMARY

We operate our business through our reportable segments which include the (1) physical therapy operations segment and (2) the industrial injury prevention services (“IIP”) segment. Our 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, post-offer employment testing, functional evaluations and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors. These services are performed through Industrial Sports Medicine Professionals, consisting of both physical therapists and specialized certified athletic trainers (“ATCs”).

During the last three years, we completed the following acquisitions of clinic practices and IIP businesses detailed below:

		% Interest	Number of
Acquisition	Date	Acquired	Clinics
October 2023 Acquisition	October 31, 2023	**	*
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
December 2021 Acquisition	December 31, 2021	75%	3
November 2021 Acquisition	November 30, 2021	70%	*
September 2021 Acquisition	September 30, 2021	100%	*
June 2021 Acquisition	June 30, 2021	65%	8
March 2021 Acquisition	March 31, 2021	70%	6

* IIP business

** On October 31, 2023, we concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business (“October 2023 Acquisition”).

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The following table provides a roll forward of our clinic count for the periods presented.

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
Number of clinics, beginning of period		640			591			554
Additions		46			65			42
Closed or sold		(15	)		(16	)		(5	)
Number of clinics, end of period		671			640			591

Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing partnerships, and continue acquiring companies that provide or serve our IIP sector.

In May 2023, we 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, we 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 our credit agreement while the remainder is expected to be used primarily for additional acquisitions.

Our Board of Directors raised our quarterly dividend to $0.44 per share, on February 27, 2024, and declared a quarterly dividend for the first quarter of 2024 at the higher rate.

Medicare Reimbursement

The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice. The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies. The following is a summary of significant regulatory changes which have affected our results of operations as well as the policies and payment rates that may affect our future results of operations.

For calendar years 2021 and 2022, CMS’s expected decreases in Medicare reimbursement were mostly offset by one-time increases in payments as a result of other legislation passed by Congress. Payments under the 2023 MPFS physician fee schedule decreased by 2%, and for calendar year 2024, CMS’s final policies for 2024 will result in an approximately 3.5% decrease in Medicare payments for the therapy specialty.

In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, the CQ modifier is not required. Also, when the same service (code) is furnished separately by the physical therapist and PTA, CMS applies the de minimis standard to each 15-minute unit of codes, not on the total physical therapist and PTA time of the service. For dates of service on and after January 1, 2022, CMS pays for physical therapy and occupational therapy services provided by PTAs and occupational therapist assistants (“OTAs”) at 85% of the otherwise applicable Part B payment amount. CMS allows a timed service to be billed without the CQ or CO modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes. This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint. The calendar year 2024 MPFS final rule did not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapy assistants.

RESULTS OF OPERATIONS

The defined terms with their respective description used in the following discussion are listed below:

Mature Clinics are clinics opened or acquired prior to January 1, 2022, and are still operating as of December 31, 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 daily visits 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 clinics in operation during the periods presented.

Full Year 2023 refers to the year ended December 31, 2023.

Full Year 2022 refers to the year ended December 31, 2022.

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Full Year 2023 versus Full Year 2022

Total net revenue for the Full Year 2023 increased $51.7 million, or 9.3%, to $604.8 million from $553.1 million for the Full Year 2022 while operating costs increased $42.2 million, or 9.6%, to $483.3 million from $441.1 million over the same periods, respectively. Total operating cost was $483.3 million for the 2023 Year, or 79.9% of total revenue, as compared to $441.1million or 79.7% of total revenue for the 2022 Year. Gross profit for the Full Year 2023 was $121.5 million, or 20.1% of net revenue, compared to $112.0 million for the Full Year 2022, or 20.3% of net revenue.

Net income attributable to our shareholders (“USPH net income”) was $28.2 million for Full Year 2023 compared to $32.2 million for Full Year 2022.  USPH net income included a non-cash impairment charge, prior to allocation to non-controlling interest and income taxes, of $17.5 million in the year ended December 31, 2023 ($9.1 million net of $5.2 million allocated to non-controlling interest and $3.1 million income tax) and $9.1 million in the year ended December 31, 2022 ($4.7 million net of $2.7 million allocated to non-controlling interest and $1.6 million income tax). In accordance with Generally Accepted Accounting Principles (“GAAP”), the revaluation of non-controlling interest, net of taxes, is not included in net income but is charged directly to retained earnings; however, this change is included in the computation of earnings per share.  Earnings per share for Full Year 2023 were $1.28 compared to $2.25 for Full Year 2022.

	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands, except per share data)
Earnings per share
Computation of earnings per share - USPH shareholders:
Net income attributable to USPH shareholders	$	28,239		$	32,158
Charges to retained earnings:
Revaluation of redeemable non-controlling interest		(13,565	)		(3,890	)
Tax effect at statutory rate (federal and state)		3,466			994
	$	18,140		$	29,262
Earnings per share (basic and diluted)	$	1.28		$	2.25
Shares used in computation - basic and diluted		14,188			12,985

Non-GAAP Measures

We use Adjusted EBITDA and Operating Results, non-GAAP measures, which eliminate certain items described below that can be subject to volatility and unusual costs, as the principal measures to evaluate and monitor financial performance period over period. We believe that Adjusted EBITDA and Operating Results are useful measures for investors to use in comparing the Company's period-to-period results as well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures.

Adjusted EBITDA is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, non-cash asset impairment charge, change in fair value of contingent earn-out consideration, Relief Funds, changes in revaluation of put-right liability, equity-based awards compensation expense, and related portions for non-controlling interests.

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Operating Results equals net income attributable to our shareholders less non-cash asset impairment charge, changes in revaluation of put-right liability, Relief Funds, changes in fair value of contingent earn-out consideration, and any allocations to non-controlling interests, all net of taxes. Operating Results per share also exclude the impact of the revaluation of redeemable non-controlling interest and the associated tax impact.

The tables below reconcile net income attributable to our shareholders calculated in accordance with GAAP to Operating Results and Adjusted EBITDA.

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ADJUSTED EBITDA AND OPERATING RESULTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)

	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands, except per share data)
Adjusted EBITDA  (a non-GAAP measure)
Net income attributable to USPH shareholders	$	28,239		$	32,158
Adjustments:
Provision for income taxes		12,156			12,164
Depreciation and amortization		15,695			14,743
Interest expense, debt and other, net		9,303			5,779
Interest income from investments		(3,774	)		-
Impairment of goodwill and other intangible assets		17,495			9,112
Equity-based awards compensation expense		7,236			7,264
Change in revaluation of put-right liability		(2,582	)		5
Change in fair value of contingent earn-out consideration		1,550			(2,520	)
Relief Funds*		(467	)		-
Other income		(390	)		(859	)
Allocation to non-controlling interests		(6,744	)		(4,185	)
		77,717			73,661
Operating Results (a non-GAAP measure)
Net income attributable to USPH shareholders	$	28,239		$	32,158
Adjustments:
Impairment of goodwill and other intangible assets		17,495			9,112
Change in fair value of contingent earn-out consideration		1,550			(2,520	)
Change in revaluation of put-right liability		(2,582	)		5
Relief Funds*		(467	)		-
Allocation to non-controlling interest		(5,215	)		(2,734	)
Tax effect at statutory rate (federal and state)		(2,755	)		(987	)
	$	36,265		$	35,034
Operating Results per share (a non-GAAP measure)	$	2.56		$	2.70

*In March 2020 in response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provided waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in appropriations for the Public Health and Social Services Emergency Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care providers for lost revenues and health care related expenses that are attributable to COVID-19. The Company recorded income under the CARES Act ("Relief Funds").

Adjusted EBITDA increased $4.1 million to $77.7 million for Full Year 2023 from $73.7 million in Full Year 2022 while Operating Results increased $1.2 million to $36.3 million, or $2.56 per share, in Full Year 2023 from $35.0 million, or $2.70 per share, in the Full Year 2022.  The increase in both Adjusted EBITDA and Operating Results was primarily associated with clinic additions since the comparable prior year period and increased volume at mature clinics.

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Physical Therapy Operations

	For the Year Ended December 31,						Variance
	2023			2022			$			%
	(In thousands, except percentages)
Revenue related to:
Mature Clinics (1)	$	452,459		$	421,806		$	30,653		7.3	%
Clinic additions (2)		60,495			39,990			20,505		*		(6)
Clinics sold or closed (3)		1,602			2,794			(1,192	)	*		(6)
Net Patient Revenue		514,556			464,590			49,966		10.8	%
Other (4)		11,992			11,502			490		4.3	%
Total		526,548			476,092			50,456		10.6	%
Operating costs (4)		421,484			380,035			41,449		10.9	%
Gross profit	$	105,064		$	96,057		$	9,007		9.4	%
Financial and operating metrics (not in thousands):
Net rate per patient visit (1)	$	102.80		$	103.63		$	(0.83	)	(0.8	)%
Patient visits (1)		5,005,426			4,483,282			522,144.0		11.6	%
Average daily visits per clinic (1)		30.0			28.7			1.3		4.5	%
Gross margin		20.0	%		20.2	%
Salaries and related costs per visit, clinics (5)	$	59.19		$	59.52		$	(0.33	)	(0.6	)%
Operating costs per visit, clinics (5)	$	82.79		$	83.34		$	(0.55	)	(0.7	)%
Working days		254			255			(1	)	(0.4	)%
Number of clinics at the end of the period		671			640			31		4.8	%

(1) See defined terms above for definitions.

(2) Clinic additions during the years ended 2023 and 2022.

(3) Revenue from closed clinics includes revenues from the 15 and 16 clinics closed during the full year December 31, 2023 and 2022, respectively.

(4) Includes revenues and costs from management contracts.

(5) Excludes management contract costs.

(6) Not meaningful.

Revenues

Revenues increased $50.5 million, or 10.6%, to $526.5 million in Full Year 2023 compared to $476.1 million in Full Year 2022.  This increase was primarily due to a record-high average daily visits per clinic for a full year in the Company’s history of 30.0 visits, and an increase in volume from the 31 net new clinics added since the comparable prior year period, partially offset by a decrease in net rate per patient visit to $102.80 for Full Year 2023 compared to $103.63 for Full Year 2022. Total patient visits were 5,005,426 for the 2023 Year and 4,483,282 for the 2022 Year, an increase of 11.6%, with visits at mature clinics up 3.1%. The decrease in net rate in the Full Year 2023 from the Full Year 2022 was primarily due to the combined Medicare rate reductions in 2022 and 2023. All other payor categories, including commercial and workers’ compensation, increased as compared to the prior year.

Other revenue was $12.0 million for the Full Year 2023 Year and $11.5 million for the Full Year 2022, of which management contracts was $8.6 million for the Full Year 2023 as compared to $8.1 million for the Full Year 2022.

Operating costs

Operating costs increased by $41.4 million or 10.9% to $421.5 million in the Full Year 2023 from $380.0 million in the Full Year 2022. The increase was primarily due to the higher volume from the new clinics added since the comparable year period as well as increased patient visits in Mature Clinics. Operating costs for Mature Clinics increased $10.1 million year over year to $363.2 million for the Full Year 2023 from $353.2 million for the Full Year 2022 due to increased visits in the comparable periods. On a per visit basis (excluding management contracts), operating costs decreased to $82.79 for the Full Year 2023 compared to $83.34 for the Full Year 2022.

Salaries and related costs related to clinics increased to $296.3 million in the Full Year 2023 from $266.8 million in the 2022 Year, an increase of $29.5 million, or 11.1%. Salaries and related costs per visit (excluding management contracts), related to clinics decreased to $59.19 for the Full Year 2023 from 59.52 for the Full Year 2022 mostly due to the 31 new clinics added year over year as well as increased visits from Mature Clinics.

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Rent, supplies, contract labor and other costs related to clinics increased to $97.2 million in the Full Year 2023 from $87.6 million in the 2022 Year, an increase of $9.6 million, or 11.1% mostly due to the 31 new clinics added year over year as well as increased visits from Mature Clinics. Rent, supplies, contract labor and other costs, clinics decreased slightly on a per visit basis to $19.42 per visit for the Full Year 2023 compared to $19.53 for the Full Year 2022. Operating costs related to management contracts increased 10.7% from $6.4 million for the Full Year 2022 to $7.1 million in the Full Year 2023.

The provision for credit losses was $6.2 million for the Full Year 2023 and $5.5 million for the Full Year 2022. As a percentage of net revenues, the provision for credit losses were 1.0% for both 2023 and 2022. Our provision for credit losses as a percentage of total patient accounts receivable was 5.0% on December 31, 2023, and 5.2% on December 31, 2022.

Gross Profit

Gross profit from physical therapy operations increased $9.0 million, or 9.4%, to $105.1 million for Full Year 2023 from $96.1 million for Full Year 2022 while the gross profit margin from physical therapy operations decreased slightly to 20.0% for Full Year 2023 from 20.2% and Full Year 2022.

Industrial Injury Prevention Services

	For the Year Ended December 31,
	202			2022
	(In thousands, except percentages)
Net revene	$	78,254		$	77,052
Operating costs		61,809			61,085
Gross profit	$	16,445		$	15,967
Gross margin		21.0	%		20.7	%

IIP business revenue increased $1.2 million to $78.3 million for the Full Year 2023 as compared to $77.1 million for the Full Year 2022. Operating costs related to the IIP business increased 1.2% in the Full Year 2023 to $61.8 million from $61.1 million for the Full Year 2022. Gross profit increased $0.5 million, or 3.0%, to $16.4 million for Full Year 2023 from $16.0 million for the Full Year 2022 while gross profit margin percentage from IIP operations increased slightly to 21.0% for Full Year 2023 from 20.7% for the Full Year 2022.

Corporate Office Costs

Corporate office costs were $52.0 million, or 8.6% of net revenue, for the Full Year 2023 compared to $46.1 million, or 8.3% of net revenue, for the Full Year 2022. The increase in corporate office costs was primarily due to higher salaries and related costs to support the larger number of clinics.

Impairment of Goodwill and Other Intangible Assets

A non-cash impairment charge of $17.5 million was recognized during the Full Year 2023 related to a reporting unit in our IIP segment. This compares to a $9.1 million non-cash impairment charge to goodwill in the comparable prior year period related to the same reporting unit.

Operating Income

Operating income was $52.1 million for the Full Year 2023 compared to $56.8 million for the Full Year 2022.  Excluding the non-cash impairment charge of $17.5 million in the Full Year 2023 and $9.1 million in the Full Year 2022, operating income was $69.6 million for the twelve months ended 2023 compared to $65.9 million for the twelve months ended 2022.

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Other (Expenses) Income

Interest Expense, Debt and Other

Interest expense, net of $3.3 million savings from an interest rate swap arrangement discussed below in the “Liquidity and Capital Resources - Interest Rate Swap”, increased $3.5 million to $9.3 million for the Full Year 2023 compared to $5.8 million in the Full Year 2022 due to increased borrowings. The interest rate on the Company’s term loan, was 4.9% for the Full Year 2023, with an all-in effective interest rate, including all associated costs, of 5.3%.

Interest income from investment

Interest income from investment amounted to $3.8 million for the Full Year 2023. This interest income is a result of investing excess cash associated with proceeds from our secondary offering completed in May 2023.

Change in fair value of contingent earn-out consideration

We revalued contingent earn-out consideration related to certain acquisitions resulting in an expense of $1.6 million for the Full Year 2023 compared to a gain of $2.5 million for the Full Year 2022.

Change in Revaluation of Put-Right Liability

For the Full Year 2023, we recorded a gain of $2.6 million on the valuation of the put-right liability compared to a loss of less than $0.1 million for the Full Year 2022. The put-right 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.

Equity in earnings of unconsolidated affiliate

For the Full Year 2023, we recognized income of $1.0 million compared to $1.2 million for the Full Year 2022 from a joint venture which provides physical therapy services for patients at hospitals. Since we are deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.

Provision for Income Taxes

The provision for income tax was $12.2 million for each of the years ended 2023 and 2022. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 30.1% for 2023 and 27.4% for 2022 as calculated below.  The increase in the effective tax rate was primarily due to return-to-provision adjustments mostly related to true up of differences between tax and book basis of certain intangibles.

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	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands, except percentages)
Income before taxes	$	49,376		$	55,571
Less: Net income attributable to non-controlling interest:
Redeemable non-controlling interest - temporary equity		(4,426	)		(6,902	)
Non-controlling interest - permanent equity		(4,555	)		(4,347	)
	$	(8,981	)	$	(11,249	)
Income before taxes less net income attributable to non-controlling interest	$	40,395		$	44,322
Provision for income taxes	$	12,156		$	12,164
Effective income tax rate		30.1	%		27.4	%

Net Income Attributable to Non-controlling Interest

Net income attributable to redeemable non-controlling interest (temporary equity) was $4.4 million for the Full Year 2023 and $6.9 million for the Full Year 2022.  Net income attributable to non-controlling interest (permanent equity) was $4.6 million for the Full Year 2023 and $4.3 million for the Full Year 2022.

Other Comprehensive Income

We entered into an interest rate swap agreement in May 2022, which became effective on June 30, 2022.  The maturity date of the swap agreement is June 30, 2027.  It has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan.  Beginning in July 2022, we pay a fixed one-month Secured Overnight Financing Rate (“SOFR”) of interest of 2.815%. The total interest rate in any period also includes an applicable margin based on the Company’s consolidated leverage ratio. In the Full Year 2023, our interest rate including the applicable margin was 4.9%.  Unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax. The fair value of the interest rate swap at December 31, 2023, was $3.7 million, and $5.4 million at December 31, 2022, which has been included within Other assets (current and long term) in the accompanying Consolidated Balance Sheet. The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized loss of $1.2 million, net of tax, for the 2023 Year.

LIQUIDITY AND CAPITAL RESOURCES

We believe that our business has sufficient cash to allow us to meet our short-term cash requirements. Total cash and cash equivalents were $152.8 million as of December 31, 2023, compared to $31.6 million as of December 31, 2022. Additionally, we had $144.4 million of outstanding borrowings and $175.0 million in available credit under our credit facilities as of December 31, 2023, compared to $179.1 million of outstanding borrowings and $145.9 million in available credit under our credit facilities as of December 31, 2022.

On May 30, 2023, we completed a secondary offering of our common stock resulting in net proceeds of $163.6 million after deducting fees associated with the transaction. A portion of the net proceeds was used to repay the $35.0 million then outstanding under our Credit Agreement while the remainder is expected to be used primarily for acquisitions. Our cash is currently invested in a high-yield savings account which generated interest income of approximately $2.1 million in 2023.

We believe that our cash and cash equivalents and availability under our Credit Facilities are sufficient to fund the working capital needs of our operating subsidiaries through at least February 29, 2025.

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Historically, we have generated sufficient cash from operations to fund our development activities and to cover operational needs. We plan to continue developing new clinics and making additional acquisitions. We have, from time to time, purchased the non-controlling interests of limited partners in our existing partnerships. We may purchase additional non-controlling interests in the future.  Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using our cash, financing, or a combination of the two.

We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements. When possible, we submit our claims electronically. The collection process is time consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect. Medicare and other payor claims relating to new clinics awaiting CMS approval initially may not be submitted for six months or more. When all reasonable internal collection efforts have been exhausted, accounts are written off prior to sending them to outside collection firms. With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the balance has been outstanding for 120 days or longer.  As of December 31, 2023, we have accrued $8.8 million related to credit balances (included in accrued expenses), a portion of which is due to patients and payors.  The credit balances are expected to be resolved or paid in the next twelve months.

The average accounts receivable days outstanding was 29 days on December 31, 2023, and 31 days on December 31, 2022. Net patient receivables in the amounts of $6.3 million and $5.5 million were written-off in 2023 and 2022, respectively.

Cash Flow

A summary of our operating, investing, and financing activities is discussed below.

	Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
Net cash provided by operating activities	$	81,978	$	58,537	$	76,406
Net cash used in investing activities		45,015		81,269		124,136
Net cash provided by financing activities		84,268		25,759		43,379

Operating Activities

Cash provided by operating activities increased $23.4 million to $82.0 million for the year ended December 31, 2023 as compared to $58.5 million for the year ended December 31, 2022.  This increase was mostly due to higher Adjusted EBITDA as well as increased collections from patient receivables.

Investing Activities

Cash used in investing activities during the year ended December 31, 2023 totaled $45.0 million and consisted of $9.3 million of fixed assets purchases and $37.8 million used in the purchase of majority interests in businesses and non-controlling interest, temporary and permanent equity.  These were partially offset by $1.0 million proceeds from sale of non-controlling interest, temporary and permanent and $0.8 million distribution from an unconsolidated affiliate.

Financing Activities

Cash provided by financing activities during the year ended December 31, 2023, totaled $84.3 million and consisted of $163.6 million proceeds from a secondary offering completed in May 2023, partially offset by $31.0 million of net payments under our revolving credit facility, $24.1 million of dividends paid to our shareholders, $16.1 million distribution to non-controlling interest and payments of $8.2 million on our debt.

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Senior Credit Facilities

On December 5, 2013, we 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, we 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 million. Such loans will be available through the following facilities (collectively, the “Senior Credit Facilities”):

1) Revolving Facility: $175 million, five-year, revolving credit facility (“Revolving Facility”), which includes a $12 million sublimit for the issuance of standby letters of credit and a $15 million sublimit for swingline loans (each, a “Swingline Loan”).

2) Term Facility: $150 million term loan facility (the “Term Facility”). The Term Facility amortizes in quarterly installments of: (a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year, and (c) 1.875% in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date.

The proceeds of the Revolving Facility have been and shall continue to be used by us for working capital and other general corporate purposes of our Company and its subsidiaries, including to fund future acquisitions and invest in growth opportunities. The proceeds of the Term Facility were used by us to refinance the indebtedness outstanding under the Second Amended and Restated Credit Agreement, to pay fees and expenses incurred in connection with the loan facilities transactions, for working capital and other general corporate purposes.

We are 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 agreement plus an applicable margin or, at our option, an alternate base rate plus an applicable margin. The interest rate for the 2023 Year on our Senior Credit Facilities, net of savings from the interest rate swap described below, was 5.1%, with an all-interest rate, including all associated costs, of 5.7%. Interest is payable at the end of the selected interest period but no less frequently than quarterly and on the date of maturity.

We will also pay to the Administrative Agent, for the account of each lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”). We 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.

Our obligations under the Credit Agreement are guaranteed by our wholly owned material domestic subsidiaries (each, a “Guarantor”), and our obligations and any Guarantors are secured by a perfected first priority security interest in substantially all of our existing and future personal property and each Guarantor, subject to certain exceptions.

As of December 31, 2023, $144.4 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 December 31, 2023, we were in compliance with all of the covenants contained in the Credit Agreement. The average effective interest rate, net of the savings from interest rate swap discussed below, for borrowings under the Senior Credit Facility, inclusive of all associated costs, was 5.3% for the Full Year 2023.

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Interest Rate Swap

In May 2022, we entered into an interest rate swap agreement, effective on June 30, 2022, with Bank of America, N.A, which became effective on June 30, 2022. It has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan and has a maturity date of June 30, 2027. Beginning in July 2022, we receive 1-month SOFR, and pay a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis. The total interest rate in any period also includes an applicable margin based on our consolidated leverage ratio. In connection with the swap, no cash was exchanged between us and the counterparty.

We designated our 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 accumulate other comprehensive income (loss), net of tax.

As of December 31, 2023, the fair value of the interest rate swap was $3.7 million, a decrease of $1.2 million, net of a $0.4 million, income tax effect, as compared to December 31, 2022. The fair value of the interest rate swap is included in other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized loss in our unaudited consolidated statements of comprehensive income. The interest rate swap arrangement generated $3.3 million in interest savings for the Full Year 2023. The average interest rate for the term facility, net of the savings from the swap in the Full Year 2023 was 4.9%.

Notes Payable and Deferred Payments Related to Acquisitions

We generally enter into various notes payable as a means of financing our acquisitions. Our present outstanding notes payable primarily relate to the acquisitions of a business or acquisitions of majority interests in such businesses. At December 31, 2023, our remaining outstanding balance on these notes aggregated $5.3 million. $1.6 million of the outstanding notes payable are payable in 2023, $2.4 million is payable in 2024, and $1.3 million is payable in 2025. Notes are generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest. Interest accrues at various interest rates ranging from 3.25% to 8.0% per annum.

On September 29, 2023, we 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 was paid January 2024, and the second installment of $0.3 million is due on September 30, 2025.

In a separate transaction, on September 29, 2023, we acquired a 70% equity interest in a single 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, we 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, we and a local partner together acquired a 75% interest in a four-clinic physical therapy practice. After the transaction, our ownership interest is 45%, our 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 us, $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 us and $0.1 million will be paid by the local partner). The note will be paid on July 1, 2024. We guaranteed the full payment of $0.3 million on its due date.

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On February 28, 2023, we 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.

On November 30, 2022, we 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. The note accrues interest at 7.0% per annum and the principal and interest are payable on November 30, 2024.

On October 31, 2022, we 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 a potential additional amount to be paid at a later date based on the performance of the business. This contingent consideration had a fair value of $9.8 million on December 31, 2023. The fair value of this contingent consideration will be adjusted quarterly based on certain criteria and market inputs. There is no maximum payout for this contingency.

On September 30, 2022, we 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, we 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, we 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 is 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.

Historically, we have generated sufficient cash from operations to fund our development activities and to cover operational needs. We currently have $152.8 million of cash on hand, a significant portion of which is available for deployment into development and other growth initiatives.  We plan to continue developing new clinics and making additional acquisitions. We have from time to time purchased the non-controlling interests of limited partners in our Clinic Partnerships. We may purchase additional non-controlling interests in the future. Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using a combination of cash and financing. A large acquisition may require financing.

We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements. When possible, we submit our claims electronically. The collection process is time consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect. Medicare and other payor claims relating to new clinics awaiting CMS approval initially may not be submitted for six months or more. When all reasonable internal collection efforts have been exhausted, accounts are written off prior to sending them to outside collection firms. With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the account receivable has been outstanding for 120 days or longer.

Redeemable Non-Controlling Interest

Certain of our limited partnership agreements, as amended, provide that, upon the triggering events, we have a call right and the selling entity or individual has a put right for the purchase and sale of the limited partnership interest held by the partner. Once triggered, the put right and the call right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature. The purchase price of the partner’s limited partnership interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The fair value of the redeemable non-controlling interest at December 31, 2023 was $174.8 million.

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In the event that a limited non-controlling interest partner’s employment ceases at any time after a specified date that is typically between three and five years from the acquisition date, we have agreed to certain contractual provisions which enable such non-controlling interest partners to exercise their right to trigger our repurchase of that partner’s non-controlling interest at a predetermined multiple of earnings before interest and taxes.

Share Repurchase Program

In March 2009, the Board authorized the repurchase of up to 10% of our common stock (“March 2009 Authorization”). Under the March 2009 Authorization, the Company has purchased a total of 859,499 shares. In November 2023, the Board terminated the March 2009 Authorization such that any such repurchase of our common stock would be considered and determined by the Board at the time of repurchase. We did not purchase any shares of our common stock during the year ended December 31, 2023, or December 31, 2022.

Contractual Obligations

We have future obligations for debt repayments and associated interest payments as well as future minimum rentals under our non-cancellable operating leases. The obligations as of December 31, 2023, are summarized as follows:

	Total		2024		2025		2026		2027		2028		Thereafter
	(In thousands)
Term facility (1)	$	144,375		5,625		7,500		9,375	$	121,875	$	-	$	-
Notes payable (2)		3,775		2,486		1,289		-		-		-		-
Interest expense on Term Facility and notes payable (3)		20,958		6,725		6,508		6,210		1,515		-		-
Operating leases (4)		144,666		46,845		36,447		27,406		18,495		10,025		5,448
	$	313,774	$	61,681	$	51,744	$	42,991	$	141,885	$	10,025	$	5,448

(1) Amounts due under our Term Facility discussed above.

(2) Amounts due related to certain acquisitions discussed above.

(3) Interest on our Senior Credit Facility was estimated using the average outstanding balance for the respective periods and our effective interest rate on our Term Facility at December 31, 2023, of 4.7%.  Interest on our other debt was estimated using the stated rate in the debt agreement.

(4) Includes variable non-lease components, including but not limited to common area maintenance.

CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires estimates and judgments that affect the reported amounts of our assets, liabilities, net sales and expenses, and disclosure of contingent assets and liabilities. Management bases estimates on historical experience and other assumptions it believes to be reasonable given the circumstances and evaluates these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the following critical accounting policies involve a higher degree of judgment and complexity. See Note 2, Significant Accounting Policies, to our audited consolidated financial statements which are included elsewhere in this Annual Report on Form 10-K for a complete discussion of our significant accounting policies. The following reflect the significant estimates and judgments used in the preparation of our consolidated financial statements.

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Revenue Recognition

Revenues are recognized in the period in which services are rendered. Net patient revenue consists of revenues from 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 – 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.

Management contract revenue, which is included in other revenue in the consolidated statements of net income, is derived from contractual arrangements whereby we manage a clinic owned by a third party. We do not have any ownership interest in these clinics. Typically, revenues are 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.

Revenues from the IIP business, which are also included in other revenues in the consolidated statements of net income, are derived from onsite services we provide to clients’ employees including injury prevention, rehabilitation, ergonomic assessments, and performance optimization. Revenue from the IIP business is recognized when obligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration we expect to receive in exchange for providing injury prevention services to our clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period.

Additionally, other revenue includes services we provide on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gym membership fees. Contract terms and rates are agreed to in advance between us 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 contract liability over the period of the agreement and recognized at the point in time when the services are performed.

We determine allowances for credit losses based on the specific agings of receivables and payor classifications at each clinic. The provision for credit losses is included in clinic operating costs in the statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for credit losses, includes only those amounts we estimate to be collectible. Our provision for credit losses was 1.0% of total net revenue for each years ended December 31, 2023, 2022 and 2021, respectively.  Management believes that this is reasonable because the majority of our payors consist of highly solvent, highly regulated, commercial insurance companies as well as government programs, including Medicare.

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 our clinics. We estimate contractual allowances based on our interpretation of the applicable regulations, payor contracts and historical calculations. Each month we estimate our contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and apply an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic. Based on our historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow us to provide the necessary detail and accuracy with our collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from our estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. Our billing systems may not capture the exact change in our contractual allowance reserve estimate from period to period. Therefore, in order to assess the accuracy of our revenues and hence our contractual allowance reserves, our management regularly compares our cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, the historical difference between net revenues and corresponding cash collections in any given fiscal year has generally reflected a difference within approximately 1.0% to 1.5% of net revenues. Additionally, analysis of subsequent period’s 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, we believe that a reasonable likely change in the contractual allowance reserve estimate would not be more than 1.0% to 1.5% of gross billings in accounts receivable at December 31, 2023. For purposes of demonstrating the sensitivity of this estimate on our Company’s financial condition, a 1.0% to 1.5% increase or decrease in our aggregate contractual allowance reserve percentage would decrease or increase, respectively, net patient revenue by approximately $1.4 million to $1.5 million for the year ended December 31, 2023. Management believes the changes in the estimate of the contractual allowance reserve for the periods ended December 31, 2023, 2022 and 2021 have not been material to the statement of income.

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Goodwill

Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over the fair value of the acquired business assets, which include certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009, from the purchase of some or all of a particular local management’s equity interest in an existing clinic. Effective January 1, 2009, if the purchase price of a non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.

Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair value if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. We evaluate indefinite-lived tradenames in conjunction with our annual goodwill impairment test.

We operate our business through two segments consisting of our physical therapy clinics and our IIP business. For purposes of goodwill impairment analysis, each of our segments is further broken down into reporting units.  Reporting units within our physical therapy business comprise of regions primarily based on each clinic’s location. In addition to the six regions, in 2023 and 2022, the IIP business consisted of two reporting units.

As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, we are 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, we consider relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. We consider both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis.

An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit. The evaluation of goodwill in 2021 did not result in any goodwill amounts that were deemed impaired.

We recorded a charge for goodwill impairment of $15.8 million and $9.1 million in the years ended December 31, 2023, and December 31, 2022, respectively. We also recorded a charge of $1.7 million for the impairment of a tradename during the year ended December 31, 2023. The charges for impairment related to one reporting unit in the IIP business. The impairments are a result of a change in the reporting unit’s current and projected operating income as well as various market inputs based on current market conditions.

During the year ended December 31, 2023, we did not recognize any additional impairment as a result of the Company’s annual assessment of goodwill and tradenames for the other seven reporting units. We also noted no impairment to long-lived assets for all reporting units.

We will continue to monitor for any triggering events or other indicators of impairment.

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No impairment was recognized as part of our annual assessment of goodwill for the other seven reporting units.

Redeemable Non-Controlling Interest

The non-controlling interests that are reflected as redeemable non-controlling interest in our consolidated financial statements consist of those owners, including us, that have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that we purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met and the owners request the purchase (“Put Right”). We also have a call right (“Call Right”). The Put Right or Call Right may be triggered by the owner or us, respectively, 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 three to five years, as defined in the limited partnership agreement. The Put Rights and Call Rights are not automatic (even upon death) and require either the owner or us to exercise our rights when the conditions triggering the Put or Call Rights have been satisfied. 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.

On the date we acquire a controlling interest in a partnership and the limited partnership agreement for such partnerships contains redemption rights not under our control, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption—Redeemable non-controlling interest. Then, in each reporting period thereafter until it is purchased by us, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial 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 value. We record any adjustment in the redemption value, net of tax, directly to retained earnings and not in the consolidated statements of net income. Although the adjustments are not reflected in the consolidated statements of net income, current accounting rules require that we reflect the adjustments, net of tax, in the earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statement of income. We believe the redemption value (i.e. the carrying amount) and fair value are the same.

Non-Controlling Interest

We recognize non-controlling interests, in which we have no obligation but the right to purchase the non-controlling interests, as equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the consolidated statements of net income. Operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner. When we purchase a non-controlling interest and the purchase differs from the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We maintain an interest rate swap arrangement which is considered a derivative instrument. Our indebtedness as of December 31, 2023, was the outstanding balance of seller notes from our acquisitions of $3.8 million, and an outstanding balance on our Credit Agreement of $144.4 million, which includes a term note with a balance of $144.4 million. The Revolving Facility does not have a balance as of December 31, 2023, and is subject to fluctuating interest rates. A 1% change in the interest rate would yield an additional $1.5 million of interest expense. See Note 10 to our consolidated financial statements included in Item 8.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND RELATED INFORMATION

Reports of Independent Registered Public Accounting Firm—Grant Thornton LLP (PCAOB ID Number 248)	48
Audited Financial Statements:
Consolidated Balance Sheets as of December 31, 2023 and 2022	51
Consolidated Statements of Net Income for the years ended December 31, 2023, 2022 and 2021	52
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021	53
Consolidated Statements of Changes in Equity for the years ended December 31, 2023, 2022 and 2021	54
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021	55
Notes to Consolidated Financial Statements	56

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

U.S. Physical Therapy, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of net income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 29, 2024 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Measurement of Patient Revenue Net of Contractual Adjustments

As further discussed in Note 2 to the consolidated financial statements, revenues are recognized in the period in which services are rendered. Net patient revenues (patient revenues less estimated contractual adjustments) are 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. The Company has agreements with third-party payors that provide for payments at amounts different from its established rates. Each month the Company estimates its contractual adjustment for each clinic based on the terms of third-party payor contracts and the historical collection and write-off experience of the clinic and applies a contractual adjustment reserve percentage to the gross accounts receivable balances. The Company then performs a comparison of cash collections to corresponding net revenues for the prior twelve months. We identified the measurement of contractual adjustments as a critical audit matter.

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The principal consideration for our determination that the measurement of patient revenue net of contractual adjustments is a critical audit matter is that the estimate requires a high degree of auditor subjectivity in evaluating management’s assumptions related to developing future collection patterns across the various clinic locations.

Our audit procedures related to the Company’s measurement of contractual adjustments included the following, among others.

• We tested the design and operating effectiveness of controls relating to billing and cash collections, net rate trend analysis and cash collections versus net revenue trend analysis.

• For a sample of patient visits, we inspected and compared underlying documents for each transaction, which included gross billing rates and cash collected (net revenue).

• For a sample of patient visits, we traced gross billings and net revenue to net revenue recorded in the general ledger and to each report used in determining and assessing the contractual adjustment calculation.

• We compared cash collections to recorded net revenue over the twelve month period ended December 31, 2023 and again for the twelve month period ended in the first month subsequent to period end, to identify whether there were unusual trends that would indicate that the usage of historical collection patterns would no longer be reasonable to predict future collection patterns.

Impairment Assessments – Fair Value of a Certain Reporting Unit and Other Indefinite-lived Intangible Assets

As further discussed in Note 2 to the financial statements, goodwill and other indefinite-lived intangible assets are tested by the Company’s management for impairment at least annually or more frequently if events or circumstances indicate potential impairment. Goodwill and other indefinite-lived intangible assets are tested for impairment at the reporting unit level. For the year ended December 31, 2023 management prepared a quantitative impairment analysis for a reporting unit included in the industrial injury prevention services segment. The Company engaged a third-party valuation specialist for the estimation of fair value of the reporting unit. We identified the estimation of the fair value of this reporting unit as a critical audit matter.

The principal consideration for our determination that the estimation of the fair value of a certain reporting unit and other indefinite-lived intangible assets is a critical audit matter is that the estimate requires a  high degree of auditor subjectivity due to significant judgments with respect to assumptions used to project the future cash flows, including revenue growth rates, EBITDA and EBITDA margins, royalty rate, as well as the discount rate and the valuation methodologies applied by the third-party valuation specialist.

Our audit procedures related to the estimation of the fair value of this reporting unit included the following, among others.

• We tested the design and operating effectiveness of controls over management’s review of the assumptions used to project future cash flows, the selection of appropriate discount rate, royalty rates, and valuation methodologies applied.

• We utilized valuation specialists to evaluate:

o The appropriateness of the methodologies applied,

o The reasonableness of the discount rate, royalty rates, and

o The qualifications of the third-party valuation specialist engaged by the Company based on their credentials and experience.

• We assessed the reasonableness of assumptions applied by management in their future cash flows, including revenue growth rates, EBITDA, and EBITDA margins.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2004.

Houston, TX

February 29, 2024

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

U.S. Physical Therapy, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023, and our report dated February 29, 2024 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Houston, Texas 

February 29, 2024

50

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	December 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	152,825		$	31,594
Patient accounts receivable, less provision for credit losses of $2,736 and $2,829, respectively		51,866			51,934
Accounts receivable - other		17,854			16,671
Other current assets		10,830			11,067
Total current assets		233,375			111,266
Fixed assets:
Furniture and equipment		63,982			62,074
Leasehold improvements		46,941			42,877
Fixed assets, gross		110,923			104,951
Less accumulated depreciation and amortization		(84,821	)		(80,203	)
Fixed assets, net		26,102			24,748
Operating lease right-of-use assets		103,431			103,004
Investment in unconsolidated affiliate		12,256			12,131
Goodwill		509,571			494,101
Other identifiable intangible assets, net		109,682			108,755
Other assets		2,821			4,149
Total assets	$	997,238		$	858,154
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST
Current liabilities:
Accounts payable - trade	$	3,898		$	3,300
Accounts payable - due to seller of acquired business		-			3,204
Accrued expenses		55,344			37,413
Current portion of operating lease liabilities		35,252			33,709
Current portion of  term loan and notes payable		7,691			7,863
Total current liabilities		102,185			85,489
Notes payable, net of current portion		1,289			1,913
Revolving facility		-			31,000
Term loan, net of current portion and deferred financing costs		137,702			142,918
Deferred taxes		24,815			21,303
Operating lease liabilities, net of current portion		76,653			77,934
Other long-term liabilities		2,356			13,029
Total liabilities		345,000			373,586
Redeemable non-controlling interest - temporary equity		174,828			167,515
Commitments and Contingencies
U.S. Physical Therapy, Inc. (“USPH”) shareholders’ equity:
Preferred stock, $0.01 par value, 500,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.01 par value, 20,000,000 shares authorized, 17,202,291 and 15,216,326 shares issued, respectively		172			152
Additional paid-in capital		281,096			110,317
Accumulated other comprehensive gain		2,782			4,004
Retained earnings		223,772			232,948
Treasury stock at cost, 2,214,737 shares		(31,628	)		(31,628	)
Total USPH shareholders’ equity		476,194			315,793
Non-controlling interest - permanent equity		1,216			1,260
Total USPH shareholders’ equity and non-controlling interest - permanent equity		477,410			317,053
Total liabilities, redeemable non-controlling interest, USPH shareholders’ equity and non-controlling interest - permanent equity	$	997,238		$	858,154

The accompanying notes are an integral part of these Consolidated Financial Statements.

51

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
Net patient revenue	$	514,556		$	464,590		$	438,330
Other revenue		90,246			88,554			56,692
Net revenue		604,802			553,144			495,022
Operating cost:
Salaries and related costs		353,390			319,191			278,469
Rent, supplies, contract labor and other		123,731			116,381			94,066
Provision for credit losses		6,172			5,548			5,305
Total operating cost		483,293			441,120			377,840
Gross profit		121,509			112,024			117,182
Corporate office costs		51,953			46,111			46,533
Impairment of goodwill and other intangible assets		17,495			9,112			-
Operating income		52,061			56,801			70,649
Other (expense) income
Interest expense, debt and other		(9,303	)		(5,779	)		(942	)
Interest income from investments		3,774			-			-
Change in fair value of contingent earn-out consideration		(1,550	)		2,520			-
Change in revaluation of put-right liability		2,582			(5	)		-
Equity in earnings of unconsolidated affiliate		955			1,175			112
Relief Funds		467			-			4,597
Settlement of a legal matter		-			-			(2,635	)
Resolution of a payor matter		-			-			1,216
Other		390			859			199
Total other (expense) income		(2,685	)		(1,230	)		2,547
Income before taxes		49,376			55,571			73,196
Provision for income taxes		12,156			12,164			15,272
Net income		37,220			43,407			57,924
Less: Net income attributable to non-controlling interest:
Redeemable non-controlling interest - temporary equity		(4,426	)		(6,902	)		(11,358	)
Non-controlling interest - permanent equity		(4,555	)		(4,347	)		(5,735	)
		(8,981	)		(11,249	)		(17,093	)
Net income attributable to USPH shareholders	$	28,239		$	32,158		$	40,831
Basic and diluted earnings per share attributable to USPH shareholders	$	1.28		$	2.25		$	2.41
Shares used in computation - basic and diluted		14,188			12,985			12,898
Dividends declared per common share	$	1.72		$	1.64		$	1.46

The accompanying notes are an integral part of these Consolidated Financial Statements.

52

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN THOUSANDS)

	Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
Net income	$	37,220		$	43,407		$	57,924
Other comprehensive loss
Unrealized (loss) gain on cash flow hedge		(1,642	)		5,378			-
Tax effect at statutory rate (federal and state)		420			(1,374	)		-
Comprehensive income	$	35,998		$	47,411		$	57,924
Comprehensive income attributable to non-controlling interest		(8,981	)		(11,249	)		(17,093	)
Comprehensive income attributable to USPH shareholders	$	27,017		$	36,162		$	40,831

The accompanying notes are an integral part of these Consolidated Financial Statements.

53

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(IN THOUSANDS)

	U.S. Physical Therapy, Inc.
	Common Stock				Additional			Accumulated Other		Retained			Treasury Stock						Total Shareholders’			Non-Controlling
	Shares		Amount		Paid-In Capital			Comprehensive Gain		Earnings			Shares			Amount			Equity			Interests			Total
Balance January 1, 2021		15,066	$	151	$	95,622		$	-	$	212,015			(2,215	)	$	(31,628	)	$	276,160		$	1,470		$	277,630
Net income attributable to USPH shareholders		-		-		-			-		40,831			-			-			40,831			-			40,831
Net income attributable to non-controlling interest - permanent equity		-		-		-			-		-			-			-			-			5,735			5,735
Issuance of restricted stock, net of cancellations		60		-		-			-		-			-			-			-			-			-
Revaluation of redeemable non-controlling interest		-		-		-			-		(9,686	)		-			-			(9,686	)		-			(9,686	)
Purchase of non-controlling interest		-		-		(918	)		-		-			-			-			(918	)		(60	)		(978	)
Sale of non-controlling interest		-		-		96			-		-			-			-			96			2			98
Compensation expense - equity-based awards		-		-		7,867			-		-			-			-			7,867			-			7,867
Dividends paid to USPH shareholders		-		-		-			-		(18,765	)		-			-			(18,765	)		-			(18,765	)
Distributions to non-controlling interest partners - permanent equity		-		-		-			-		-			-			-			-			(5,572	)		(5,572	)
Short swing profit settlement		-		-		20			-		-			-			-			20			-			20
Other		-		-		1			-		-			-			-			1			-			1
Balance December 31, 2021		15,126	$	151	$	102,688		$	-	$	224,395			(2,215	)	$	(31,628	)	$	295,606		$	1,575		$	297,181

	U.S. Physical Therapy, Inc.
	Common Stock				Additional			Accumulated Other		Retained			Treasury Stock						Total Shareholders’			Non-Controlling
	Shares		Amount		Paid-In Capital			Comprehensive Gain		Earnings			Shares			Amount			Equity			Interests			Total
Balance January 1, 2022		15,126	$	151	$	102,688		$	-	$	224,395			(2,215	)	$	(31,628	)	$	295,606		$	1,575		$	297,181
Net income attributable to USPH shareholders		-		-		-			-		32,158			-			-			32,158			-			32,158
Net income attributable to non-controlling interest - permanent equity		-		-		-			-		-			-			-			-			4,347			4,347
Issuance of restricted stock, net of cancellations		90		1		-			-		-			-			-			1			-			1
Revaluation of redeemable non-controlling interest		-		-		-			-		(2,896	)		-			-			(2,896	)		-			(2,896	)
Purchase of non-controlling interest		-		-		(353	)		-		-			-			-			(353	)		(101	)		(454	)
Compensation expense - equity-based awards		-		-		7,264			-		-			-			-			7,264			-			7,264
Transfer of compensation liability for certain stock		-		-		707			-		-			-			-			707			-			707
Dividends paid to USPH shareholders		-		-		-			-		(21,321	)		-			-			(21,321	)		-			(21,321	)
Distributions to non-controlling interest partners - permanent equity		-		-		-			-		-			-			-			-			(5,246	)		(5,246	)
Deferred taxes related to redeemable non-controlling interest - temporary equity		-		-		-			-		613			-			-			613			-			613
Other comprehensive gain		-		-		-			4,004		-			-			-			4,004			-			4,004
Other		-		-		11			-		(1	)		-			-			10			685			695
Balance December 31, 2022		15,216	$	152	$	110,317		$	4,004	$	232,948			(2,215	)	$	(31,628	)	$	315,793		$	1,260		$	317,053

	U.S. Physical Therapy, Inc.
	Common Stock				Additional			Accumulated Other			Retained			Treasury Stock						Total Shareholders’			Non-Controlling
	Shares		Amount		Paid-In Capital			Comprehensive Loss			Earnings			Shares			Amount			Equity			Interests			Total
Balance January 1, 2023		15,216	$	152	$	110,317		$	4,004		$	232,948			(2,215	)	$	(31,628	)	$	315,793		$	1,260		$	317,053
Net income attributable to USPH shareholders		-		-		-			-			28,239			-			-			28,239			-			28,239
Net income attributable to non-controlling interest - permanent equity		-		-		-			-			-			-			-			-			4,555			4,555
Issuance of restricted stock, net of cancellations		70		-		-			-			-			-			-			-			-			-
Issuance of common stock, pursuant to the secondary public offering, net of issuance costs		1,916		20		163,626			-			-			-			-			163,646			-			163,646
Revaluation of redeemable non-controlling interest		-		-		-			-			(13,564	)		-			-			(13,564	)		-			(13,564	)
Compensation expense - equity-based awards		-		-		7,236			-			-			-			-			7,236			-			7,236
Sale of non-controlling interest		-		-		-			-			-			-			-			-			4			4
Purchase of partnership interests -  non-controlling interest		-		-		(83	)		-			-			-			-			(83	)		(36	)		(119	)
Dividends payable to USPH shareholders		-		-		-			-			(24,128	)		-			-			(24,128	)		-			(24,128	)
Distributions to non-controlling interest partners - permanent equity		-		-		-			-			-			-			-			-			(4,567	)		(4,567	)
Deferred taxes related to redeeemable non-controlling interest - temporary equity		-		-		-			-			587			-			-			587			-			587
Other comprehensive loss		-		-		-			(1,222	)		(2	)		-			-			(1,224	)		-			(1,224	)
Other		-		-		-			-			(308	)		-			-			(308	)		-			(308	)
Balance December 31, 2023		17,202	$	172	$	281,096		$	2,782		$	223,772			(2,215	)	$	(31,628	)	$	476,194		$	1,216		$	477,410

The accompanying notes are an integral part of these Consolidated Financial Statements.

54

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

	Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
OPERATING ACTIVITIES
Net income including non-controlling interest	$	37,220		$	43,407		$	57,924
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation and amortization		15,695			14,743			11,591
Provision for credit losses		6,172			5,548			5,305
Equity-based awards compensation expense		7,236			7,264			7,867
Amortization of debt issue costs		420			305			56
Change in deferred income taxes		4,490			4,309			5,688
Change in revaluation of put-right liability		(2,582	)		5			-
Change in fair value of contingent earn-out consideration		1,550			(2,520	)		-
Equity of earnings in unconsolidated affiliate		(955	)		(1,175	)		(112	)
Loss (gain) on sale of clinics and fixed assets		166			(643	)		-
Impairment of goodwill and other intangible assets		17,495			9,112			-
Other		-			(83	)		(134	)
Changes in operating assets and liabilities:
Increase in patient accounts receivable		(5,645	)		(10,279	)		(9,417	)
Increase in accounts receivable - other		(356	)		(307	)		(1,538	)
Increase (decrease) in other current and long term assets		(197	)		(5,940	)		(633	)
Decrease (increase) in accounts payable and accrued expenses		15			(7,755	)		4,657
Decrease (increase) in other long-term liabilities		1,254			2,546			(4,848	)
Net cash provided by operating activities		81,978			58,537			76,406
INVESTING ACTIVITIES
Purchase of fixed assets		(9,294	)		(8,248	)		(8,201	)
Purchase of majority interest in businesses, net of cash acquired		(26,582	)		(59,788	)		(86,823	)
Purchase of redeemable non-controlling interest, temporary equity		(10,986	)		(14,987	)		(28,465	)
Purchase of non controlling interest, permanent equity		(281	)		(280	)		(1,274	)
Proceeds on sale of non-controlling interest, permanent equity		102			-			131
Proceeds on sale of partnership interest - redeemable non-controlling interest, temporary equity		875			402			69
Distributions from unconsolidated affiliate		830			1,259			152
Proceeds on sale of partnership interest, clinics and fixed assets		-			373			275
Other		321			-			-
Net cash used in investing activities		(45,015	)		(81,269	)		(124,136	)
FINANCING ACTIVITIES
Proceeds from issuance of common stock pursuant to the secondary public offering, net of issuance costs		163,646			-			-
Proceeds from revolving facility		24,000			101,000			316,000
Distributions to non-controlling interest, permanent and temporary equity		(16,100	)		(15,348	)		(16,931	)
Cash dividends paid to shareholders		(24,128	)		(21,321	)		(18,765	)
Payments on revolving facility		(55,000	)		(184,000	)		(218,000	)
Principal payments on notes payable		(4,400	)		(930	)		(4,899	)
Payments on term loan		(3,750	)		(1,875	)		-
Proceeds from term loan		-			150,000			-
Payment of deferred financing costs		-			(1,779	)		-
Payment of Medicare Accelerated and Advance Funds		-			-			(14,054	)
Other		-			12			28
Net cash provided by financing activities		84,268			25,759			43,379
Net increase in cash and cash equivalents		121,231			3,027			(4,351	)
Cash and cash equivalents - beginning of period		31,594			28,567			32,918
Cash and cash equivalents - end of period	$	152,825		$	31,594		$	28,567
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes	$	4,926		$	7,615		$	12,214
Interest paid	$	8,655		$	5,687		$	1,352
Non-cash investing and financing transactions during the period:
Purchase of businesses - seller financing portion	$	1,815		$	1,574		$	3,050
Liabilities assumed associated with a purchase of a business	$	524		$	-		$	-
Notes payable related to purchase of redeemable non-controlling interest, temporary equity	$	1,087		$	1,074		$	1,759
Notes payable related to the purchase of non-controlling interest, permanent equity	$	200		$	296		$	-
Notes receivable related to sale of redeemable non-controlling interest, temporary equity	$	4,136		$	1,580		$	914
Notes receivable related to the sale of non-controlling interest, permanent equity	$	458		$	-		$	-

The accompanying notes are an integral part of these Consolidated Financial Statements.

55

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2023, 2022 and 2021

1. Organization, Nature of Operations and Basis of Presentation

The consolidated financial statements include the accounts of U.S. Physical Therapy, Inc. and its subsidiaries (the “Company”). All significant intercompany transactions and balances have been eliminated.

The Company operates its business through two reportable business segments. The Company’s reportable segments include the physical therapy operations segment and the industrial injury prevention services (“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.

During the last three years, the Company completed the acquisitions of the following clinic practices and IIP businesses detailed below:

		% Interest	Number of
Acquisition	Date	Acquired	Clinics
October 2023 Acquisition	October 31, 2023	**	*
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
December 2021 Acquisition	December 31, 2021	75%	3
November 2021 Acquisition	November 30, 2021	70%	*
September 2021 Acquisition	September 30, 2021	100%	*
June 2021 Acquisition	June 30, 2021	65%	8
March 2021 Acquisition	March 31, 2021	70%	6

* IIP business

** On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business (“October 2023 Acquisition”).

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.

Impact of COVID-19

Relief Funds

In March 2020 in response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care providers for lost revenues and health care related expenses that are attributable to COVID-19. For the year ended December 31, 2021, the Company recorded income of approximately $4.6 million under the CARES Act (“Relief Funds”). Under the Company’s accounting policy, these payments were recorded as Other income – Relief Funds.

56

2. Significant Accounting Policies

Cash Equivalents

The Company maintains its cash and cash equivalents at financial institutions. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The combined account balances at several institutions typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes that this risk is not significant.

Long-Lived Assets

Fixed assets are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Estimated useful lives for furniture and equipment range from three to eight years and for software purchased from three to seven years. Leasehold improvements are amortized over the shorter of the related lease term or estimated useful lives of the assets, which is generally three to five years.

Impairment of Long-Lived Assets

The Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances that indicate the related amounts may be impaired.

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, if the purchase price of a non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.

Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair value if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite-lived tradenames in conjunction with our annual goodwill impairment test.

57

The Company operates its business through two segments consisting of physical therapy clinics and an IIP business. For the purposes of goodwill impairment analysis, the segments are further broken down into reporting units.  Reporting units within our physical therapy business are comprised of six regions primarily based on each clinic’s location. In addition to the six regions, in 2023 and 2022, 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. The evaluation of goodwill in 2021 did not result in any goodwill amounts that were deemed impaired.

The Company recorded a charge for goodwill impairment of $15.8 million and $9.1 million in the years ended December 31, 2023, and December 31, 2022, respectively. The Company also recorded a charge of $1.7 million for impairment of a tradename during the year ended December 31, 2023. The charges for impairment related to one reporting unit in the IIP business.

During the year ended December 31, 2023, the Company did not recognize any additional impairment as a result of the Company’s 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 will continue to monitor for any triggering events or other indicators of impairment.

Investment in unconsolidated affiliates

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.

Redeemable Non-Controlling Interest

The non-controlling interest that is reflected as redeemable non-controlling interest in the consolidated financial statements consists of those in which 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 three 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.

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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 adjustment in the redemption value, net of tax, directly to retained earnings and are not reflected in the consolidated statements of net income. Although the adjustments are not reflected in the 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 consolidated statements of net income. Management believes the redemption value (i.e. the carrying amount) and fair value are the same.

Non-Controlling Interest

The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the statements of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.

When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. For ASC 606, 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, workers’ compensation) 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, the Company is 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 the Company’s established rate and the anticipated reimbursement rate is accounted for as an offset to revenue—contractual allowance. Payments for services rendered are typically due 30 to 120 days after receipt of the invoice.

Patient revenue

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 revenues (patient revenues less estimated contractual adjustments, see – Contractual Adjustments, for additional information) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as the Company provides physical and occupational therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that provide payments to the Company at amounts different from its established rates.

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Other Revenue

Revenue from the IIP business, 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, post-offer employment testing and performance optimization. Revenue from the Company’s IIP business is recognized when obligations under the terms of the contract are satisfied. Revenues are 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.

Management contract revenue, which is also included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for third party owners. 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 a point in time when services are performed. Costs, typically salaries for the Company’s employees, are recorded when incurred. Management contract revenue was $8.6 million, $8.1 million and $9.9 million for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively.

Additionally, other revenue from physical therapy operations includes services the Company provides on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gym membership fees. 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 contract liability over the period of the agreement and recognized at the point in time, when the services are performed.

Contractual Allowances

The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience. 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 for any fiscal year has generally reflected a difference within approximately 1% to 1.5% of net revenues. 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% of gross billings included in accounts receivable each at December 31, 2023 and December 31, 2022.

Allowance for Credit Losses

The Company determines allowances for credit losses based on the specific agings and payor classifications at each clinic. The provision for credit losses is included in operating costs in the consolidated statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for credit losses, includes only those amounts the Company estimates to be collectible.

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Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The CARES Act includes changes to certain tax law related to net operating losses and the deductibility of interest expense and depreciation. ASC 740, Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. The legislation had no effect on the Company’s deferred income taxes and current income taxes payable during the year ended December 31, 2023.

The  Company records interest or penalties in interest and other expense, in the consolidated statements of net income. The Company did not have any interest or penalties in each of the years ended December 31, 2023, 2022 and 2021.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date.

• Level 1 – Quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

• Level 3 – Unobservable inputs based on the Company’s own assumptions.

The carrying amounts reported in the balance sheets for cash and cash equivalents, contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturity of these financial instruments. The carrying amount under the Credit Agreement approximates the fair value due to the proximity of the debt issue date and the balance sheet date and the variable component of interest on debt. The interest rate on the Credit Agreement is tied to the Secured Overnight Financing Rate (“SOFR”).

The put right associated with the potential future purchase of the separate company in the November 2021 acquisition are both is also marked to fair value on a recurring basis using Level 3 inputs. The put right associated with the potential future purchase of the separate company in the IIP business is determined using a Monte Carlo simulation model utilizing unobservable inputs such as asset volatility and discount rates. The unobservable inputs in the valuation include asset volatility of 25.0% and a discount rate of 11.22%. The value of the put right associated with the potential future purchase of a company in the IIP business decreased $2.6 million from $3.6 million on December 31, 2022 to approximately $1.0 million on December 31, 2023. Accordingly, the Company recognized a gain of $2.6 million on this change in revaluation for the twelve months ended December 31, 2023.

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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 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 December 31, 2023, was $3.7 million, of which $2.6 million has been included within Other current assets and $1.1 million has been included in Other assets in the accompanying Consolidated Balance Sheet. The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized loss of $1.2 million, net of tax, for the year ended December 31, 2023.

The redemption value of redeemable non-controlling interests approximates the fair value. See Note 6 for the changes in the fair value of Redeemable non-controlling interest.

The consideration for some of the Company’s acquisitions include future payments that are contingent upon the occurrence of future operational objectives being met. The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates. These fair value measurements are based on significant inputs not observable in the market. Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period.The Company determined the fair value of its contingent consideration obligation to be $9.8 million and $8.3 million on December 31, 2023 and 2022.

Segment Reporting

Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and industrial injury prevention services.

Use of Estimates

In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames, allocations of purchase price, allowance for receivables, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and related disclosures. Actual results may differ from these estimates.

Self-Insurance Program

The Company utilizes a self-insurance plan for its employee group health and dental insurance coverage administered by a third party. Predetermined loss limits have been arranged with the insurance company to minimize the Company’s maximum liability and cash outlay. Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims. Management believes that the current accrued amounts are sufficient to pay claims arising from self-insurance claims incurred through December 31, 2023.

Restricted Stock

Restricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant. Compensation expense for grants of restricted stock is recognized based on the fair value per share on the date of grant amortized over the vesting period. The Company recognizes any forfeitures as they occur. The restricted stock issued is included in basic and diluted shares for the earnings per share computation.

Reclassification of Prior Period Presentation

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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Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The objective of ASU 2019-12 is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. The amendments in  this ASU are effective for fiscal years beginning after December 15, 2020, and early adoption was permitted. The Company completed the adoption of ASU 2020-06 effective January 1, 2021 and there was no material impact on the Company’s financial statements.

In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the treasury stock method. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive, regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy.

This pronouncement was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021.The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The use of either the modified retrospective or fully retrospective method of transition is permitted. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements.

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 Company’s Credit Agreement bear interest based on SOFR.

Recently Issued Accounting Guidance

In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-01, Leases (Topic 842): Common Control Arrangements, which requires companies to amortize leasehold improvements associated with related party leases under common control over the useful life of the leasehold improvement to the common control group. The ASU is effective for annual reporting periods beginning on or after December 15, 2023; however, early adoption is permitted. The ASU can either be applied prospectively or retrospectively. The adoption of ASU 2023-01 did not have a material effect on the Company’s financial statements.

3. Earnings Per Share

The computations of basic and diluted earnings are as follows.

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
	(In thousands, except per share data)
Computation of earnings per share - USPH shareholders:
Net income attributable to USPH shareholders	$	28,239		$	32,158		$	40,831
Charges to retained earnings:
Revaluation of redeemable non-controlling interest		(13,565	)		(3,890	)		(13,011	)
Tax effect at statutory rate (federal and state)		3,466			994			3,324
	$	18,140		$	29,262		$	31,144
Earnings per share (basic and diluted)	$	1.28		$	2.25		$	2.41
Shares used in computation:
Basic and diluted earnings per share - weighted-average shares		14,188			12,985			12,898

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4. 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 IIP 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.

The finalized purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2022 and 2021 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, i.e. trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For some of the acquisitions in 2023, the Company is in the process of completing its formal valuation analysis 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 at December 31, 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 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.

For the 2023, 2022 and 2021 acquisitions, total current assets primarily represent patient accounts receivable. Total non-current assets are fixed assets, primarily equipment, used in the practices.

During 2023, 2022 and 2021, the Company acquired a majority interest in the following businesses:

2023 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
October 2023 Acquisition	October 31, 2023		**		*
September 2023 Acquisition1	September 29, 2023		70%		4
September 2023 Acquisition2	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

* IIP business

** On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business (“October 2023 Acquisition”).

On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business. The previous owner of the ergonomics software business retained a 45% equity interest. The total purchase price of the combined businesses was approximately $4.0 million and was paid in cash.

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 was paid in January 2024, and the second installment of $0.3 million is due on September 30, 2025.

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In a separate transaction, on September 29, 2023, the Company acquired a 70% equity interest in a single 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 purchase prices for the 2023 acquisitions have been preliminarily allocated as follows.

	For the Year Ended December 31, 2023
				Physical Therapy
	IIP			Operations			Total
	(In thousands)
Cash paid, net of cash acquired	$	3,955		$	22,627		$	26,582
Seller note		-			985			985
Deferred payments		-			830			830
Contingent payments		-			200			200
Total consideration	$	3,955		$	24,642		$	28,597
Estimated fair value of net tangible assets acquired:
Total current assets	$	392		$	1,141		$	1,533
Total non-current assets		335			3,149			3,484
Total liabilities		(41	)		(3,163	)		(3,204	)
Net tangible assets acquired		686			1,127			1,813
Customer and referral relationships		757			6,819			7,576
Non-compete agreement		37			329			366
Tradenames		187			1,680			1,867
Goodwill		2,562			25,521			28,083
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(274	)		(10,834	)		(11,108	)
	$	3,955		$	24,642		$	28,597

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 12.0 years. For the non-compete agreements, the weighted-average amortization period is 5.1 years. The values assigned to tradenames are tested annually for impairment.

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2022 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
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

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. The note accrues interest at 7.0% per annum and the principal and interest are payable on November 30, 2024. As part of the acquisition, the Company agreed to additional contingent consideration of up to $1.6 million if future operational objectives were met. The additional contingent consideration was valued at $1.6 million on December 31, 2023, and was paid in full in January 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 $9.8 million on December 31, 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.

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The purchase price for the 2022 acquisitions has been allocated as follows.

	Physical Therapy
	Operations
	(In thousands)
Cash paid, net of cash acquired	$	59,788
Seller notes		1,574
Contingent payments		10,000
Total consideration	$	71,362
Estimated fair value of net tangible assets acquired:
Total current assets	$	1,329
Total non-current assets		7,798
Total liabilities		(10,930	)
Net tangible assets acquired		(1,803	)
Customer and referral relationships		18,062
Non-compete agreements		934
Tradenames		5,445
Goodwill		75,525
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(26,801	)
	$	71,362

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 12.2 years. For non-compete agreements, the weighted-average amortization period is 5.0 years. The values assigned to tradenames are tested annually for impairment.

2021 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
December 2021 Acquisition	December 31, 2021		75%		3
November 2021 Acquisition	November 30, 2021		70%		*
September 2021 Acquisition	September 30, 2021		100%		*
June 2021 Acquisition	June 30, 2021		65%		8
March 2021 Acquisition	March 31, 2021		70%		6

* IIP business

On December 31, 2021, the Company acquired a 75% interest in three-clinic physical therapy practice with the practice founder retaining 25%. The purchase price for the 75% interest was approximately $3.7 million, of which $3.5 million was paid in cash and $0.2 million in the form of a note payable. The note accrued interest at 3.25% per annum and the principal and interest was paid on December 31, 2023.

On November 30, 2021, the Company acquired an approximate 70% interest in a leading provider of industrial injury prevention services (“IIP Acquisition”). In each case, the previous owners retained the remaining interest. The purchase price for the approximate 70% equity interest, not inclusive of a contingent payment up to $2.0 million, was approximately $63.2 million of which $60.7 million was paid in cash and $1.0 million in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest is payable on November 30, 2023. As part of the transaction, the Company also agreed to the potential future purchase of a separate company under the same ownership that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area. The current owners have the right to put this transaction to the Company in approximately five years, with such right having a $1.2 million value on December 31, 2023, as reflected on the Company’s consolidated balance sheet in Other long-term liabilities. The value of this right will be adjusted in future periods, as appropriate, with any change in value reflected in the Company’s consolidated statement of income. The Company does not currently possess more than 50% of the controlling interests in this separate company, does not control this company through contract or governance rights and currently does not exercise significant influence over this separate company. Due to the aforementioned reasons, and based on current accounting guidance, the Company did not consolidate the separate company through the variable interest or voting interest model. The Company revalued the contingent earn-out consideration related to the acquisition during the year ended December 31, 2022, resulting in a gain of $2.0 million and the reduction of the liability to $0.

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On September 30, 2021, the Company acquired a company that specializes in return-to-work and ergonomic services, among other offerings. The Company acquired the company’s assets at a purchase price of approximately $3.3 million (which includes the obligation to pay an amount up to $0.6 million in contingent payment consideration in conjunction with the acquisition if specified future operational objectives are met), and contributed those assets to Briotix Health. The initial purchase price, not inclusive of the $0.6 million contingent payment, was approximately $2.7 million, of which $2.4 million was paid in cash, and $0.3 million is in the form of a note payable. The note accrued interest at 3.25% per annum and the principal and interest was paid in September 2023. The Company revalued the contingent earn-out consideration related to the acquisition during the year ended December 31, 2022, resulting in the elimination of the $0.6 million liability previously booked to $0.

On June 30, 2021, the Company acquired a 65% interest in an eight-clinic physical therapy with the previous owners retaining 35%. The purchase price was approximately $10.3 million, of which $9.0 million was paid in cash, $1.0 million is payable based on the achievement of certain business criteria and $0.3 million is in the form of a note payable. The note accrued interest at 3.25% per annum and the principal and interest and was paid in June 2023. Additionally, the Company has an obligation to pay an additional amount up to $0.8 million in contingent payment consideration in conjunction with the acquisition if specified future operational objectives are met. The Company recorded acquisition-date fair value of this contingent liability based on the likelihood of the contingent earn-out payment. The earn-out payment valued at $0.8 million on December 31, 2023, will subsequently be remeasured to fair value each reporting date.

On March 31, 2021, the Company acquired a 70% interest in a five-clinic physical therapy practice with the previous owners retaining 30%. When acquired, the practice was developing a sixth clinic which has been completed. The purchase price for the 70% interest was approximately $12.0 million, of which $11.7 million was paid in cash and $0.3 million in the form of a note payable. The note accrued interest at 3.25% per annum and the principal and interest was paid in March 2023.

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The purchase price for the 2021 acquisitions has been allocated as follows.

				Physical Therapy
	IIP			Operations			Total
	(In thousands)			(In thousands)			(In thousands)
Cash paid, net of cash acquired	$	63,193		$	23,630		$	86,823
Seller notes		1,250			800			2,050
Contingent payments		2,520			837			3,357
Other payable		-			1,000			1,000
Seller put right		3,522			-			3,522
Total consideration	$	70,485		$	26,267		$	96,752
Estimated fair value of net tangible assets acquired:
Total current assets	$	5,588		$	1,885		$	7,473
Total non-current assets		12,620			7,014			19,634
Total liabilities		(4,842	)		(8,313	)		(13,155	)
Net tangible assets acquired		13,366			586			13,952
Customer and referral relationships		21,127			7,969			29,096
Non-compete agreements		500			415			915
Tradenames		5,141			2,144			7,285
Goodwill		58,257			27,109			85,366
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(27,906	)		(11,956	)		(39,862	)
	$	70,485		$	26,267		$	96,752

5. Acquisitions and Sale of Non-Controlling Interests

During 2023, the Company acquired additional interests in three partnerships which are included in non-controlling interests - permanent equity. The additional interests purchased in each of the partnerships ranged from 0.15% to 35.0%. The aggregated purchase price for these acquired interests was $0.5 million. The Company also sold interests in four partnerships for an aggregate price of $0.6 million. The non-controlling interests - permanent equity sold in each of the partnerships ranged from 0.5% to 8.0%.

During 2022, the Company acquired additional interests in three partnerships which are included in non-controlling interest. The additional interests purchased in each of the partnerships ranged from 10% to 35%. The aggregated purchase price for these acquired interests was $0.3 million.

During 2021, the Company acquired additional interests in five partnerships which are included in non-controlling interest. The additional interests purchased in each of the partnerships ranged from 5% to 35%. The aggregated purchase price for these acquired interests was $1.3 million. The Company also sold an interest in a partnership for $0.1 million.

6. Redeemable Non-Controlling Interest

Physical Therapy Practice Acquisitions

When the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic (referred to as “Therapy Practice”), these Therapy Practice transactions occur in a series of steps which are described below.

1. Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals (the “Selling Shareholders”) most of whom are physical therapists that work in the Acquired Therapy Practice and provide physical therapy services to patients.

2. In conjunction with the Acquisition, the Seller Entity contributes the acquired Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one hundred percent (100%) of the limited and general partnership interests in NewCo. Therefore, in this step, NewCo becomes a wholly-owned subsidiary of the Seller Entity.

3. The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from  50% to 90%) of the limited partnership interest and in all cases 100% of the general partnership interest in NewCo. The Company does not purchase 100% of the limited partnership interest because the Selling Shareholders, through the Seller Entity, want to maintain an ownership percentage. The consideration for the Acquisition is primarily payable in the form of cash at closing and a two-year note in lieu of an escrow (the “Purchase Price”). The Purchase Agreement usually does not contain any future earn-out or other contingent consideration that is payable to the Seller Entity or the Selling Shareholders.

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4. The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo.

5. As noted above, the Company does not purchase 100% of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“Seller Entity Interest”).

6. In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that ranges from three to five years (the “Employment Term”), with automatic one-year renewals, unless employment is terminated prior to the end of the Employment Term. As a result, a Selling Shareholder becomes an employee (“Employed Selling Shareholder”) of NewCo. The employment of an Employed Selling Shareholder can be terminated by the Employed Selling Shareholder or NewCo, with or without cause, at any time. In a few situations, a Selling Shareholder does not become employed by NewCo and is not involved with NewCo following the closing; in those situations, such Selling Shareholders sell their entire ownership interest in the Seller Entity as of the closing of the Acquisition.

7. The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities based on other employees in similar capacities within NewCo, the Company and the industry.

8. The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing Therapy Practice activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the Selling Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing Therapy Practice during the Non-Compete Term.

9. The Non-Compete Term commences as of the date of the Acquisition and expires on the later of:

a. Two years after the date an Employed Selling Shareholders’ employment is terminated (if the Selling Shareholder becomes an Employed Selling Shareholder) or

b. Five to six years from the date of the Acquisition, as defined in the Non-Compete Agreement, regardless of whether the Selling Shareholder is employed by NewCo.

10. The Non-Compete Agreement applies to a restricted region which is defined as a mileage radius from the Acquired Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in competing Therapy Practices or activities outside the designated geography (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the competing Therapy Practice or activities outside the designated geography.
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:

1. Put Right

a. In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to the fifth anniversary of the Closing Date, the Seller Entity thereafter may have an irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

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b. In the event that any Selling Shareholder is not employed by NewCo as of the fifth anniversary of the Closing Date and the Company has not exercised its Call Right with respect to the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter has the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

c. In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Seller Entity has the Put Right, and upon the exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

2. Call Right

a. If any Selling Shareholder’s employment by NewCo is terminated prior to the fifth anniversary of the Closing Date, the Company thereafter has an irrevocable right to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below.

b. In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Company has the Call Right, and upon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

3. For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on available cash within NewCo; therefore, the undistributed earnings amount is small, if any.

4. The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and the Call Right noted above.

5. The Put Right and the Call Right do not have an expiration date.

6. The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire ownership interest in the Seller Entity at the closing of the Acquisition.
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.

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ProgressiveHealth Acquisition

On November 30, 2021, the Company acquired a majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest in certain subsidiaries (“Progressive Subsidiaries”) that operate in the industrial injury prevention and therapy services businesses.  The Progressive transaction was completed in a series of steps which are described below.

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 (100%) of the membership interests in Progressive NewCo. Therefore, in this step, Progressive NewCo became wholly-owned by the Progressive Selling Shareholders.

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 100% of the membership interests in Progressive NewCo and the Progressive Selling Shareholders retained a portion of the membership interest in Progressive NewCo (“Progressive Selling Shareholders’ Interest”).

6. The Company and the Progressive Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”) which restricts the Progressive Selling Shareholders from competing for a specified period of time (the “Progressive Non-Compete Term”).

7. The Progressive Non-Compete Term commences as of the date of the closing of the Progressive acquisition (the “Progressive Closing Date”) and expires on the later of:

a. Two years after the date a Progressive Selling Shareholder no longer is involved in the management of Progressive NewCo or

b. Seven years from the date of the acquisition.

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 30% of their respective residual interests on each of the 4th and 5th anniversaries of the Progressive Closing Date, and then 10% on each of the 6th and 7th anniversaries

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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 Progressive Put Right, and upon the exercise of the Progressive Put Right, the Progressive Selling Shareholder’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

2. Progressive Call Right

a. If any Progressive Selling Shareholder’s ceases to perform management services on behalf of Progressive NewCo, the Company thereafter shall have an irrevocable right to purchase from such Progressive Selling Shareholder his Interest, in each case at the purchase price described in “3” below.

3. For the Progressive Put Right and the Progressive Call Right, the purchase price is derived from a formula based on a specified multiple of Progressive NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of Progressive NewCo (the “Progressive Redemption Amount”). Progressive NewCo’s earnings are distributed monthly based on available cash within Progressive NewCo; therefore, the undistributed earnings amount is small, if any.

4. The Progressive Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Progressive Put Right and the Progressive Call Right noted above.

5. The Progressive Put Right and the Progressive Call Right do not have an expiration date.

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 Progressive Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Progressive 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.

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Carrying Amounts of Redeemable Non-Controlling Interests

For the years ended December 31, 2023, 2022 and 2021, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests.

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
	(In thousands)
Beginning balance	$	167,515		$	155,262		$	132,340
Net income allocated to redeemable non-controlling interest		4,426			6,902			11,358
Distributions to redeemable non-controlling interest partners		(11,533	)		(10,102	)		(11,359	)
Changes in the fair value of redeemable non-controlling interest		13,565			3,862			13,011
Purchases of redeemable non-controlling interest		(12,073	)		(16,061	)		(30,204	)
Acquired interest		11,007			26,746			39,862
Contributed capital		-			231			-
Sales of redeemable non-controlling interest		5,012			1,982			982
Changes in notes receivable related to redeemable non-controlling interest		(3,091	)		(1,901	)		(914	)
Adjustments in notes receivables related to the sales of redeemable non-controlling interest		-			594			186
Ending balance	$	174,828		$	167,515		$	155,262

The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests.

	As of the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Contractual time period has lapsed but holder’s employment has not terminated	$	96,876	$	75,688	$	80,781
Contractual time period has not lapsed and holder’s employment has not terminated		77,952		91,827		74,481
Holder’s employment has terminated and contractual time period has expired		-		-		-
Holder’s employment has terminated and contractual time period has not expired		-		-		-
	$	174,828	$	167,515	$	155,262

7. Goodwill

The changes in the carrying amount of goodwill consisted of the following.

	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Beginning balance	$	494,101		$	434,679
Acquisitions		28,083			72,674
Adjustments for purchase price allocation of businesses acquired in prior year		3,187			(4,140	)
Impairment of goodwill		(15,800	)		(9,112	)
Ending balance	$	509,571		$	494,101

During the years ended December 31, 2023, and December 31, 2022, the Company recorded a charge for goodwill impairment of $15.8 million and $9.1 million respectively, related to an IIP Acquisition. The impairment is related to a change in an IIP subsidiary’s current and projected operating income as well as various market inputs based on current market conditions.

8. Intangible Assets, net

The Company’s intangible assets, net, consisted of the following.

	As of the Year Ended
	December 31, 2023							December 31, 2022
	Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Customer and referral relationships	$	93,658	$	(30,414	)	$	63,244	$	86,974	$	(23,736	)	$	63,238
Tradenames		44,573		-			44,573		43,373		-			43,373
Non-compete agreements		9,459		(7,594	)		1,865		9,143		(6,999	)		2,144
	$	147,690	$	(38,008	)	$	109,682	$	139,490	$	(30,735	)	$	108,755

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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 6 to 14 years. Non-compete agreements are amortized over the respective term of the agreements which range from 5 to 6 years. The weighted average amortization period for customer and referral relationships was 12.7 years for the year ended December 31, 2023 and 12.9 years for the year ended December 31, 2022. The weighted average amortization period for non-compete agreements was 5.6 years for the years ended December 31, 2023, and December 31, 2022. During the year ended December 31, 2023, the Company recognized a charge of $1.7 million related to the impairment of a tradename related to an IIP acquisition.

The following table details the amount of amortization expense recorded for intangible assets for the periods presented.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Customer and referral relationships	$	6,678	$	5,974	$	3,240
Non-compete agreements		595		549		458
	$	7,273	$	6,523	$	3,698

The remaining balances of the customer and referral relationships and non-compete agreements are expected to be amortized as follows.

For the Year Ended December 31,	Customer and Referral Relationships		Non-Compete Agreements
	(In thousands)
2024	$	6,967	$	599
2025		6,823		533
2026		6,356		393
2027		6,192		232
2028		5,923		102
Thereafter	$	30,983	$	6

9. Accrued Expenses

Accrued expenses consisted of the following.

	As of the Year Ended
	December 31, 2023		December 31, 2022
	(In thousands)
Salaries and related costs	$	25,641	$	22,912
Credit balances due to patients and payors		8,847		8,094
Group health insurance claims		2,301		1,666
Federal income taxes payable		1,006		-
Contingency payable		12,285		620
Other property taxes payable		355		277
Interest payable		235		273
Closure costs		231		243
Other		4,443		3,328
	$	55,344	$	37,413

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10. Borrowings

Amounts outstanding under the Credit Agreement (as defined above) and notes payable consisted of the following.

	As of the Year Ended
	December 31, 2023							December 31, 2022
	Principal Amount		Unamortized Debt Issuance Cost			Net Debt		Principal Amount		Unamortized Debt Issuance Cost			Net Debt
	(In thousands)
Term Facility	$	144,375	$	(1,468	)	$	142,907	$	148,125	$	(1,861	)	$	146,264
Revolving Facilitiy		-		-			-		31,000		-			31,000
Other (1)		3,775		-			3,775		6,430		-			6,430
Total debt		148,150		(1,468	)		146,682		185,555		(1,861	)		183,694
Less: Current portion of long-term debt		8,111		(420	)		7,691		8,271		(408	)		7,863
Long-term debt, net of current portion	$	140,039	$	(1,048	)	$	138,991	$	177,284	$	(1,453	)	$	175,831

(1) The long-term portion is included as part of Other Long-Term Liabilities in the Consolidated Balance Sheet.

Effective December 5, 2013, the Company entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility. This agreement was amended and/or restated in August 2015, January 2016, March 2017, November 2017, 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 million. Such loans were made available through the following facilities (collectively, the “Senior Credit Facilities”):

1) Revolving Facility: $175 million, five-year, revolving credit facility (“Revolving Facility”), which includes a $12 million sublimit for the issuance of standby letters of credit and a $15 million sublimit for swingline loans (each, a “Swingline Loan”).

2) Term Facility: $150 million term loan facility (the “Term Facility”). The Term Facility amortizes in quarterly installments of: (a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year, and (c) 1.875% in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date.

The 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.

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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 December 31, 2023, $144.4 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 December 31, 2023, the Company was in compliance with all of the covenants contained in the Credit Agreement.

The Company generally enters into various notes payable as a means of financing a portion of its acquisitions and purchasing of non- controlling interests. In conjunction with these transactions in 2023 and 2022, the Company entered into notes payable in the aggregate amount of $4.7 million of which an aggregate principal payment of $0.9 million was paid in 2023, $2.5 million is due in 2024, and $1.3 million is due in 2025. Interest accrues in the range of 3.25% to 7.0% per annum and is payable with each principal installment.

11. Derivative Instruments

The Company is exposed to certain market risks during the ordinary course of business due to adverse changes in interest rates. The exposure to interest rate risk primarily results from the Company’s variable-rate borrowing. The Company may elect to use derivative financial instruments to manage risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile and the Company’s risk management activities do not eliminate these risks.

Interest Rate Swap

In May 2022, the Company entered into an interest rate swap agreement, effective on June 30, 2022, with Bank of America, N.A. The swap has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan. The swap has a maturity date of June 30, 2027. Beginning in July 2022, the Company receives a 1-month SOFR, and pays a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis. The total interest rate in any period will also include an applicable margin based on the Company’s consolidated leverage ratio.

In connection with the swap, no cash was exchanged between the Company and the counterparty.

The Company designated its interest rate swap as a cash flow hedge and structured it to be highly effective. Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax.

Savings from the interest rate swap arrangement totaled $3.3 million for the year ended December 31, 2023, and less than $0.1 million for the year ended December 31, 2022. These savings reduce the amount of interest expense, debt and other in the accompanying consolidated statements of income.

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The impacts of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income are presented in the table below.

	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Net income	$	37,220		$	43,407
Other comprehensive (loss) gain
Unrealized (loss) gain on cash flow hedge		(1,642	)		5,378
Tax effect at statutory rate (federal and state)		420			(1,374	)
Comprehensive income	$	35,998		$	47,411
Comprehensive income attributable to non-controlling interest		(8,981	)		(11,249	)
Comprehensive income attributable to USPH shareholders		27,017			36,162

The valuations of the Company’s interest rate derivatives are measured as the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty, which is a Level 2 fair value measurement.

The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as follows:

	As of the Year Ended
	December 31, 2023		December 31, 2022
	(In thousands)
Other current assets	$	2,663	$	2,858
Other assets	$	1,073	$	2,520
		3,736		5,378

12. 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. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the net present value of the fixed lease payments over the lease term. The Company’s operating lease terms are generally five years or less. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term.Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage are not included in the right-of-use assets or operating lease liabilities. These are expensed as incurred and recorded as variable lease expense.

The components of lease expense were as follows.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Operating lease cost	$	38,559	$	35,154	$	32,021
Short-term lease cost		1,353		1,049		1,160
Variable lease cost		8,912		6,287		7,057
Total lease cost*	$	48,824	$	42,490	$	40,238

* Sublease income was immaterial.

Lease costs are reflected in the consolidated statements of net income in the line item — rent, supplies, contract labor and other.

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The supplemental cash flow information related to leases was as follows.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities	$	39,813	$	36,136	$	33,192
Right-of-use assets obtained in exchange for new operating lease liabilities	$	36,264	$	40,502	$	46,088

The aggregate future lease payments for operating leases as of December 31, 2023, were as follows.

Fiscal Year	Amount (In thousands)
2024	$	38,809
2025		30,628
2026		22,845
2027		15,275
2028 and thereafter		13,174
Total lease payments	$	120,731
Less: imputed interest		8,826
Total operating lease liabilities	$	111,905

Average lease terms and discount rates were as follows:

	As of the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
Weighted-average remaining lease term	3.9 years			4.1 Years			4.2 Years
Weighted-average discount rate		4.0	%		2.9	%		2.8	%

13. Income Taxes

Significant components of deferred tax assets and liabilities included in the consolidated balance sheets as of the periods below were as follows.

	As of the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Deferred tax assets:
Compensation	$	1,680		$	1,464
Allowance for credit losses		574			605
Lease obligations - including closed clinics		28,592			28,525
Deferred tax assets	$	30,846		$	30,594
Deferred tax liabilities:
Depreciation and amortization	$	(27,290	)	$	(23,836	)
Operating lease right-of-use assets		(26,427	)		(26,318	)
Gain on cash flow hedge		(955	)		(1,373	)
Change in revaluation of put-right liability		(586	)		-
Other		(403	)		(370	)
Deferred tax liabilities		(55,661	)		(51,897	)
Net deferred tax liabilities	$	(24,815	)	$	(21,303	)

The deferred tax assets and liabilities related to purchased interests not yet finalized may result in an immaterial adjustment.

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As of December 31, 2023, the Company has a federal tax payable of $1.0 million and state tax receivables of $2.1 million. The federal and state income tax receivable is included in other current assets on the accompanying consolidated balance sheets.

The differences between the federal tax rate and the Company’s effective tax rate for the years ended December 31, were as follows for the periods presented:

	For the Year Ended
	December 31, 2023				December 31, 2022				December 31, 2021
	(In Thousands)
U. S. tax at statutory rate	$	8,483	21.0	%	$	9,307	21.0	%	$	11,782		21.0	%
State income taxes, net of federal benefit		2,135	5.3	%		2,079	4.7	%		2,478		4.4	%
Shortfall (excess) equity compensation deduction		123	0.3	%		149	0.3	%		(246	)	-0.4	%
Non-deductible expenses		710	1.8	%		629	1.4	%		1,258		2.2	%
Return to provision adjustments		705	1.7	%		-	0.0	%		-		0.0	%
	$	12,156	30.1	%	$	12,164	27.4	%	$	15,272		27.2	%

Significant components of the provision for income taxes were as follows for the periods presented.

	For the Year Ended
	December 31, 2023		December 31, 2022			December 31, 2021
	(In Thousands)
Current:
Federal	$	6,996	$	(770	)	$	7,477
State		512		518			2,107
Total current		7,508		(252	)		9,584
Deferred:
Federal		3,819		9,933			4,866
State		829		2,483			822
Total deferred		4,648		12,416			5,688
Total income tax provision	$	12,156	$	12,164		$	15,272

Each year, the Company performs a detailed reconciliation of its federal and state taxes payable and receivable accounts along with its federal and state deferred tax asset and liability accounts. This process resulted in a $1.0 million increase in income tax expense in 2023. The Company considers this reconciliation process to be an annual control.

The Company is required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income in the periods which the deferred tax assets are deductible, management believes that a valuation allowance is not required, as it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

The Company’s U.S. federal returns remain open to examination for 2020 through 2022 and U.S. state jurisdictions are open for periods ranging from 2019 through 2022.

The Company does not believe that it has any significant uncertain tax positions at December 31, 2023 and December 31, 2022, nor is this expected to change within the next twelve months due to the settlement and expiration of statutes of limitation.

The Company did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the years ended December 31, 2023, 2022 and 2021.

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14. 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.

Physical Therapy Operations

The physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which the Company generally owns a 1% general partnership interest in all the Clinic Partnerships. The Company’s limited partnership interests generally range from 65% to 75% (the range is 10% - 99%) in the Clinic Partnerships. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most of the clinics (hereinafter referred to as “Clinic Partnerships”). To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries, under profit sharing arrangements with therapists (hereinafter referred to as “Wholly-Owned Facilities”).

The Company continues to seek to attract for employment physical therapists who have established relationships with physicians and other referral sources, by offering these therapists a competitive salary and incentives based on the profitability of the clinic that they manage. For multi-site clinic practices in which a controlling interest is acquired by the Company, the prior owners typically continue on as employees to manage the clinic operations, retain a non-controlling ownership interest in the clinics and receive a competitive salary for managing the clinic operations. In addition, the Company has developed satellite clinic facilities as part of existing Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operate more than one clinic location.

Besides the multi-clinic acquisitions referenced in the table above, during 2023 and 2022, we purchased the assets and businesses of nine and three physical therapy clinics, respectively, in separate transactions.

Clinic Partnerships

For non-acquired Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interests, typically owned by the managing therapist, directly or indirectly, are recorded within the balance sheets and income statements as non-controlling interest—permanent equity. For acquired Clinic Partnerships with redeemable non-controlling interests, the earnings attributable to the redeemable non-controlling interests are recorded within the consolidated balance sheets and income statements as redeemable non-controlling interest—temporary equity.

Wholly-Owned Facilities

For Wholly-Owned Facilities with profit sharing arrangements, an appropriate accrual is recorded for the amount of profit sharing due the clinic partners/directors. The amount is expensed as compensation and included in clinic operating costs—salaries and related costs. The respective liability is included in current liabilities—accrued expenses on the consolidated balance sheets.

Industrial Injury Prevention Services

Services provided in the IIP segment include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacity evaluations, and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors. The Company performs these services through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers (“ATCs”).

On October 31, 2023, the Company purchased a 100% interest in an IIP business and a 55% equity interest in an ergonomics software business for a total purchase price of approximately $4.0 million.

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Segment Financials

The Company evaluates the 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. Prior year results presented herein have been changed to conform to the current presentation.

	For the Year Ended December 31,
	2023		2022		2021
	(In thousands)
Net revenue:
Physical therapy operations	$	526,548	$	476,092	$	451,122
Industrial injury prevention services		78,254		77,052		43,900
Total Company	$	604,802	$	553,144	$	495,022
Operating Costs:
Salaries and related costs:
Physical therapy operations	$	302,765	$	272,360	$	251,256
Industrial injury prevention services		50,625		46,831		27,213
Total salaries and related costs	$	353,390	$	319,191	$	278,469
Rent supplies, contract labor and other:
Physical therapy operations	$	112,547	$	102,114	$	88,073
Industrial injury prevention services		11,184		14,267		5,993
Total rent, supplies, contract labor and other	$	123,731	$	116,381	$	94,066
Provision for credit losses:
Physical therapy operations	$	6,129	$	5,517	$	5,249
Industrial injury prevention services		43		31		56
Total provision for credit losses	$	6,172	$	5,548	$	5,305
Total Company	$	483,293	$	441,120	$	377,840
Gross profit:
Physical therapy operations	$	105,064	$	96,057	$	106,488
Industrial injury prevention services		16,445		15,967		10,694
Total Company	$	121,509	$	112,024	$	117,182
Total Assets:
Physical therapy operations	$	857,274	$	708,662	$	587,801
Industrial injury prevention services		139,964		149,492		161,625
Total Company	$	997,238	$	858,154	$	749,426

15. 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. The Company is deemed to not have a controlling interest in the company, and therefore the Company’s investment is accounted for using the equity method of accounting. The investment balance of this joint venture as of December 31, 2023, is $12.3 million and the earnings amounted to approximately $1.0 million. The investment balance of this joint venture as of December 31, 2022, was $12.1 million and the earnings amounted to approximately $1.2 million.

16. Equity Based Plans

Stock-based compensation expense was approximately $7.2 million, $7.3 million, and $7.8 million for the years ended December 31, 2023, 2022 and 2021 respectively. As of December 31, 2023, the remaining $9.8 million of compensation expense will be recognized over a weighted average period of 1.75 years.

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Stock Incentive Plans

Amended and Restated 1999 Employee Stock Option Plan

The Amended and Restated 1999 Employee Stock Option Plan (the “Amended 1999 Plan”) permits the Company to grant to non-employee directors and employees of the Company up to 600,000 non-qualified options to purchase shares of common stock and restricted stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). The exercise prices of options granted under the Amended 1999 Plan are determined by the Compensation Committee. The period within which each option will be exercisable is determined by the Compensation Committee.  As of December 31, 2023, there were less than 0.1 million shares remaining that can be subject to new awards under the Amended 1999 Plan.

Amended and Restated 2003 Stock Option Plan

The Amended and Restated 2003 Stock Option Plan (the “Amended 2003 Plan”) permits the Company to grant to key employees and outside directors of the Company incentive and non-qualified options and shares of restricted stock covering up to 2,600,000 shares of common stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). As of December 31, 2023, there were 0.5 million shares remaining that can be subject to new awards under the Amended 2003 Plan.

Restricted Stock Awards

During 2023, 2022 and 2021, the Company granted the following shares of restricted stock to directors, officers, and employees pursuant to its equity plans as follows:

			Weighted Average Fair
Year Granted	Number of Shares		Value Per Share
2023		73,384	$	102.79
2022		95,316	$	100.08
2021		60,317	$	131.29

During 2023, 2022 and 2021, the following shares were cancelled due to employee terminations prior to restrictions lapsing:

			Weighted Average Fair
Year Cancelled	Number of Shares		Value Per Share
2023		4,086	$	103.99
2022		5,180	$	109.42
2021		439	$	113.80

Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant.

There were 124,638 and 124,939 shares outstanding as of December 31, 2023, and December 31, 2022, respectively, for which restrictions had not lapsed. The restrictions will lapse from 2024 through 2027.

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17. Preferred and Common Stock

Preferred Stock

The Board is empowered, without approval of the shareholders, to cause shares of preferred stock to be issued in one or more series and to establish the number of shares to be included in each such series and the rights, powers, preferences, and limitations of each series. There are no provisions in the Company’s Articles of Incorporation specifying the vote required by the holders of preferred stock to take action. All such provisions would be set out in the designation of any series of preferred stock established by the Board. The bylaws of the Company specify that, when a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before the meeting, unless a different vote is required by law or the Company’s Articles of Incorporation.

Because the Board has the power to establish the preferences and rights of each series, it may afford the holders of any series of preferred stock, preferences, powers, and rights, voting or otherwise, senior to the right of holders of common stock. The issuance of the preferred stock could have the effect of delaying or preventing a change in control of the Company.

Common Stock

From September 2001 through December 31, 2008, the Board authorized the Company to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of the Company’s common stock. In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of its common stock (“March 2009 Authorization”). Under the March 2009 Authorization, the Company has purchased a total of 859,499 shares. The Company is required to retire shares purchased under the March 2009 Authorization.

In November 2023, the Board terminated the March 2009 Authorization such that any such proposed repurchase of our common stock would be considered and determined by the Board at such time. The Company did not purchase any shares of its common stock during 2023, 2022 or 2021.

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.

18. Defined Contribution Plan

The Company has several 401(k) profit sharing plans covering all employees with three months of service. For certain plans, the Company makes matching contributions. The Company may also make discretionary contributions of up to 50% of employee contributions. The Company did not make any discretionary contributions for the years ended December 31, 2023, 2022 and 2021.The Company matching contributions totaled $2.2 million, $2.0 million and $1.9 million, respectively, for the years ended December 31, 2023, 2022 and 2021.

19. Contingencies

The Company is a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of our business.

Prior Florida Legal Matter

In 2019, a qui tam lawsuit (“the Complaint”) was filed by a relator on behalf of the United States against the Company and one of our Florida majority-owned subsidiaries (the “Hale Partnership”).   This whistleblower lawsuit was filed in the U.S. District Court for the Southern District of Texas, seeking damages and civil penalties under the federal False Claim Act.  The U.S Government declined to intervene in the case and unsealed the Complaint in July 2019.  The Complaint alleged that the Hale Partnership engaged in conduct to purposely “upcode” its billings for services provided to Medicare patients. The plaintiff-relator also claimed that similar false claims occurred on other days and at other Company-owned partnerships.

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In January 2022, the Company entered into a settlement agreement with the plaintiff-relator. In the settlement agreement, the plaintiff-relator released all defendants from liability for all conduct alleged in the Complaint, and the Company admitted no liability or wrongdoing.  In connection with the settlement, the Office of the United States Attorney for the Southern District of Texas agreed to a dismissal of the claims against the Hale Partnership and the Company. Under the terms of the settlement, the Company agreed to make aggregate payments to the government, the plaintiff-relator and her counsel of $2.8 million.

20. Related Party Transactions

For the year ended December 31, 2021, the Company recorded approximately $20,000 related to the short swing profit settlement remitted by a shareholder of the Company under Section 16(b) of the Securities Exchange Act of 1934, as amended. The Company recognized the proceeds as an increase to additional paid-in-capital in the consolidated balance sheets as of December 31, 2021, and consolidated statements of stockholder’s equity, as well as in cash provided by financing activities included in Other, in the consolidated statements of cash flows, for the year ended December 31, 2021.

21. Subsequent Event

On February 27, 2024, the Company’s Board of Directors declared a dividend of $0.44 per share which will be paid on April 5, 2024 to shareholders of record as of March 12, 2024.

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ITEM 9. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of the end of the fiscal period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that the information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. U.S. Physical Therapy, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk. Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria described in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2023.

The Company’s internal control over financial reporting has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report included on page 40.

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

Not applicable.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICATIONS THAT PREVENT INSPECTION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement relating to our 2024 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report.

ITEM 11. EXECUTIVE COMPENSATION

The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement relating to our 2024 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMEMNT AND RELATED STOCKHOLDER MATTERS

The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement relating to our 2024 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement relating to our 2024 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement relating to our 2024 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Documents filed as a part of this report:

87

1. Financial Statements

Reference is made to the Index to Financial Statements and Related Information under Item 8 in Part II hereof, where these documents are listed.

2. Financial Statement Schedules

See page 85 for Schedule II — Valuation and Qualifying Accounts. All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial statements or notes thereto.

3. Exhibits

The exhibits listed in List of Exhibits on the next page are filed or incorporated by reference as part of this report.

88

EXHIBIT INDEX

LIST OF EXHIBITS

Number	Description
1.1	Underwriting Agreement, dated May 24, 2023, by and between U.S. Physical Therapy, and BofA Securities, Inc. and J.P. Morgan Securities LLC., as representatives of the several underwriters named therein. [incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 25, 2023.]
3.1	Articles of Incorporation of the Company [filed as an exhibit to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 and incorporated herein by reference].
3.2	Amendment to the Articles of Incorporation of the Company [filed as an exhibit to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 and incorporated herein by reference].
3.3	Bylaws of the Company, as amended [filed as an exhibit to the Company’s Form 10-KSB for the year ended December 31, 1993 and incorporated herein by reference—Commission File Number—1-11151].
4.1*	Description of Company Securities [filed herewith the Company’s Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020.]
10.1+	1999 Employee Stock Option Plan (as amended and restated May 20, 2008) [incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 17, 2008].
10.2+	U.S. Physical Therapy, Inc. 2003 Stock Incentive Plan, (as amended and restated effective March 26, 2016) [incorporated herein by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed with the SEC on April 7, 2016.]
10.3+	First Amendment to U.S. Physical Therapy, Inc. 2003 Stock Incentive Plan, (as amended and restated effective March 26, 2016) effective on March 1, 2022 [incorporated herein by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed with the SEC on April 4, 2022.]
10.4+	Form of Restricted Stock Agreement [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2016].

89

Number	Description
10.5+	Objective Long-Term Incentive Plan for Senior Management [incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.]
10.6+	Discretionary Long-Term Incentive Plan for Senior Management [incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.]
10.7+	Third Amended and Restated Employment Agreement by and between the Company and Christopher J. Reading dated effective May 21, 2019 [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 22, 2019]

90

Number	Description
10.8+	Amended & Restated Employment Agreement commencing by and between the Company and Graham Reeve dated effective May 21, 2019 [incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on March 22, 2019]
10.9+	Form of Restricted Stock Agreement [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 22, 2019]
10.10+	U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.1 to the Company Current Report on Form 8-K filed with the SEC on March 6, 2020].
10.11+	Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Christopher Reading [incorporated by reference to Exhibit 10.3 to the Company Current Report on Form 8-K filed with the SEC on March 26, 2020].
10.12+	Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Graham Reeve [incorporated by reference to Exhibit 10.4 to the Company Current Report on Form 8-K filed with the SEC on March 26, 2020].
10.13+	Employment Agreement by and between the Company and Eric Williams entered into on December 3, 2020 and commencing as of July 1, 2021 [filed by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on December 7, 2020.]
10.14+	U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2021, effective March 17, 2021 [incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 16, 2021]
10.15+	U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2021, effective March 17, 2021 [incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 16, 2021]
10.16+	Third Amended and Restated Credit Agreement dated as of June 17, 2022 among the Company, as the borrower, and Bank of America, N.A., as Administrative Agent, Regions Capital Markets as Syndication Agent, BofA Securities Inc. and Regions Capital Markets as Joint Load Arrangers, BofA Securities Inc., as Sole Bookrunner and the lenders named therein. [incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 10-Q filed with the SEC on June 21, 2022]
10.17+	Employment Agreement by and between the Company and Rick Binstein entered into on March 23, 2022 [incorporated by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on March 23, 2022]
10.18+	U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 14, 2022]
10.19+	U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 14, 2022]
10.20+	U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.3 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 14, 2022]

91

10.21+ U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.4 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 14, 2022]

10.22+	U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2023, effective March 2, 2023 [incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 8, 2023]
10.23+	U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2023, effective March 2, 2023 [incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 8, 2023]
10.24+	U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2023, effective March 2, 2023 [incorporated by reference to Exhibit 99.3 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 8, 2023]
10.25+	U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2023, effective March 2, 2023 [incorporated by reference to Exhibit 99.4 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 8, 2023]
10.26+	Employment Agreement entered into as of November 9, 2020 by and between U.S. Physical Therapy and Carey Hendrickson [incorporated by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on September 23, 2020.]

92

Number	Description
21.1*	Subsidiaries of the Registrant
23.1*	Consent of Independent Registered Public Accounting Firm—Grant Thornton LLP
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
32.1*	Certification of Periodic Report of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1*	U.S. Physical Therapy Compensation Clawback Policy
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

+ Management contract or compensatory plan or arrangement.

93

FINANCIAL STATEMENT SCHEDULE*
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

(In Thousands)

	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Additions Charged to Other Accounts		Deductions			Balance at End of Period
YEAR ENDED DECEMBER 31, 2023:
Reserves and allowances deducted from asset accounts:
Allowance for credit losses(1)	$	2,829	$	6,172		-	$	6,265	(2)	$	2,736
YEAR ENDED DECEMBER 31, 2022:
Reserves and allowances deducted from asset accounts:
Allowance for credit losses	$	2,768	$	5,548		-	$	5,487	(2)	$	2,829
YEAR ENDED DECEMBER 31, 2021:
Reserves and allowances deducted from asset accounts:
Allowance for credit losses	$	2,008	$	5,305		-	$	4,545	(2)	$	2,768

(1) Related to patient accounts receivable and accounts receivable-other.

(2) Uncollectible accounts written off, net of recoveries.

* All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial statements or notes thereto.

94

ITEM 16. FORM 10-K SUMMARY

None.

95

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

U.S. PHYSICAL THERAPY, INC.
	(Registrant)
By:	/s/ Carey Hendrickson
	Carey Hendrickson Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

Date: February 29, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the date indicated above.

/s/ Carey Hendrickson	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	February 29, 2024
Carey Hendrickson

/s/ Chris J. Reading	Chief Executive Officer, President and Director (Principal Executive Officer)	February 29, 2024
Chris J. Reading
/s/ Edward L. Kuntz	Chairman of the Board	February 29, 2024
Edward L. Kuntz
/s/ Bernard A. Harris	Director	February 29, 2024
Dr. Bernard A. Harris, Jr.
/s/ Kathleen A. Gilmartin	Director	February 29, 2024
Kathleen A. Gilmartin
/s/ Anne Motsenbocker	Director	February 29, 2024
Anne Motsenbocker
/s/ Reginald E. Swanson	Director	February 29, 2024
Reginald E. Swanson
/s/ Clayton K. Trier	Director	February 29, 2024
Clayton K. Trier

/s/ Nancy J. Ham	Director	February 29, 2024
Nancy J. Ham

96

EX-4.1

EXHIBIT 4.1

The Company’s authorized capital stock consists of 500,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”), and 20,000,000 Common Stock.

The following is a summary of the material provisions of the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”) and Amended and Restated By-laws (the “By-laws”), insofar as they relate to the material terms of the Common Stock. This description summarizes the material terms and provisions of the Common Stock, but it is not complete. This summary is qualified in its entirety by reference to the Certificate of Incorporation and By-laws, which are incorporated herein by reference.

Each holder of the Common Stock is entitled to one vote for each share on all matters to be voted upon by the stockholders and there are no cumulative voting rights. In the event of a liquidation, dissolution or winding up of the Company, holders of the Common Stock would be entitled to share in the Company’s assets remaining after the payment of the Company’s debts and liabilities. Holders of the Common Stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of the holders of the Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock that we may designate in the future.

The Common Stock is not convertible into, or exchangeable for, any other class or series of the Company’s capital stock. Holders of the Common Stock do not have preemptive or other rights to subscribe for or purchase additional securities of the Company. Certain provisions of the Company’s articles of incorporation and bylaws may delay, discourage, prevent or render more difficult an attempt to obtain control of the Company, whether through a tender offer, business combination, proxy contest or otherwise. These provisions include the charter authorization of “blank check” preferred stock (as described above) and a restriction on the ability of stockholders to call a special meeting.

EX-21.1

EXHIBIT 21.1

Notes	Name	DBA	Entity Type	State of Formation	Date of Formation	Foreign Qualification	General Partner (LP)/BOD (corp)/Manging Member or Board of Managers (LLC)	Tax ID
	1 On 1 Physical Therapy, LLC		LLC	DE	1/13/2022
	2037953 Ontario, Inc.		Corp	Canada			Briotix Health, LP
	Ability Health PT Management GP, LLC		LLC	TX		FL	Rehab Partners #4, Inc.	81-4216526
	Ability Health Services and Rehabilitation, L.P.	Ability Rehabilitation SST Rehab	LP	TX		FL	Ability Health PT Management GP, LLC	38-4017532
	Achieve Management GP, LLC		LLC	TX			Rehab Partners #4, Inc	47-3291851
	Achieve Physical Therapy and Performance, Limited Partnership		LP	TX			Achieve Management GP, LLC	47-3283941
	Action Therapy Centers, Limited Partnership	Action Physical Therapy Houston Hand Therapy PT Professionals	LP	TX			Rehab Partners #1, Inc.	76-0389610
	Adams County Physical Therapy, Limited Partnership		LP	TX		PA	Rehab Partners #5, Inc.	76-0483100
	Advance Rehabilitation & Consulting, Limited Partnership		LP	TX		AL, FL & GA	Advance Rehabilitation Management GP, LLC	27-4414647
	Advance Rehabilitation Management GP, LLC		LLC	TX		FL	Rehab Partners #4, Inc	27-4414443
	Agape Physical Therapy & Sports Rehabilitation, Limited Partnership		LP	TX		MD	Agape Physical Therapy Management GP, LLC	32-0378859
	Agape Physical Therapy Management GP, LLC		LLC	TX			Rehab Partners #4, Inc	45-5378415
	Agility Spine & Sports PT Management GP LLC		LLC	TX				82-1024870
	Agility Spine & Sports Physical Therapy and Rehabilitation, Limited Partnership		LP	TX		AZ	Agility Spine & Sports PT Management GP, LLC	82-0901134
	ARC Iowa PT Plus, LLC		LLC	TX		IA	ARC PT Management GP, LLC (note:  owned 100% by ARC Physical Therapy Plus, LP)	82-5241308
	ARC Physical Therapy Plus, Limited Partnership		LP	TX		IA, KS, MO	ARC PT Management GP, LLC	80-0955852
	ARC PT Management GP, LLC		LLC	TX		MO	Rehab Partners #4, Inc.	46-3942987
	ARCH Physical Therapy and Sports Medicine, Limited Partnership		LP	TX		MI	Rehab Partners #1, Inc.	27-5086288
	Arrow Physical Therapy, Limited Partnership	Broken Arrow Physical Therapy	LP	TX		OK	Rehab Partners #2, Inc.	76-0631992
	Arrowhead Physical Therapy, Limited Partnership	Elite Sports Medicine & Physical Therapy	LP	TX		MS	Rehab Partners #2, Inc.	26-0176798
	Ashland Physical Therapy, Limited Partnership		LP	TX		OR	Rehab Partners #6, Inc.	75-3054977
	Atlas PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	93-2148037
	Atlas Physical Therapy , Limited Partnership		LP	CO			Atlas PT Management GP, LLC	93-2689010
	Audubon Physical Therapy, Limited Partnership		LP	TX		LA	Rehab Partners #6, Inc.	76-0622471
	Barren Ridge Physical Therapy, Limited Partnership		LP	TX		VA	Rehab Partners #6, Inc.	26-3594831
	Bayside Management GP, LLC		LLC	TX			Rehab Partners #4, Inc	27-4348787
	Bayside Physical Therapy & Sports Rehabilitation, Limited Partnership		LP	TX		MD	Bayside Management GP, LLC	27-4348871
	Beaufort Physical Therapy, Limited Partnership		LP	TX		NC	Rehab Partners #3, Inc.	76-0639928
	Bow Physical Therapy & Spine Center, Limited Partnership		LP	TX		NH	Rehab Partners #6, Inc.	76-0623486
	Brazos Valley Physical Therapy, Limited Partnership		LP	TX			Rehab Partners #3, Inc.	76-0407118
	Brick Hand & Rehabilitative Services, Limited Partnership		LP	TX		NJ	Rehab Partners #3, Inc.	76-0420711
	Briotix Health, Limited Partnership	InSite Health (6/25/2020 - Per Cyndi M. and Leon P. this dba is no longer used).	LP	DE		AL, AZ, CA, CO, CT, FL, GA, HI, IL, IA, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NV, NJ, NY, NC, OH, OK, OR, PA, SC, TN, TX, UT, VA, WA, WI	Briotix Management GP, LLC	81-1190407
	Briotix Management GP, LLC		LLC	TX		FL, MA, OH, UT		81-1200727
	BTE Workforce Solutions, LLC (formerly BTE Technoligies, Inc.)		LLC	DE		AK, AL,CO, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MD, ME, MI, MN, MO,MS, MT, NC, ND, NE, NH, NJ, NM, NV, OK, PA, RI, SC, SD, TN, TX, UT, VT, WI, WV, WY	Briotix Health, LP	52-1165956
	C. Foster Physical Therapists, Limited Partnership		LP	TX			C. Foster PT Management GP, LLC	36-4965660
	C. Foster PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	35-2689219
	Cape Cod Hand Therapy, Limited Partnership	Cape Cod Hand & Upper Extremity Therapy	LP	TX		MA	Rehab Partners #1, Inc.	27-0058293
	Carbon County Therapy, LLC		LLC	WY			Fremont Therapy Group, Limited Partnership	85-2336515
	Carolina Physical Therapy and Sports Medicine, Limited Partnership		LP	TX		SC	Carolina PT Management GP, LLC	82-1408170
	Carolina PT Management GP, LLC		LLC	TX				82-1453799
	Center for Physical Rehabilitation and Therapy, Limited Partnership		LP	DE		MI	CPR Management GP, LLC	47-4006118
	Cleveland Physical Therapy, Ltd.		LP	TX			Rehab Partners #2, Inc.	76-0410649
	Clinical Partnership Solutions, LLC	ProgressiveHealth Clinical Partnership Solutions	LLC	IN				27-3006735
	Clinical Management Solutions, LLC	ProgressiveHealth Clinical Management Solutions	LLC	IN		KY		38-3975536
	Comprehensive Hand & Physical Therapy, Limited Partnership		LP	TX		FL	Rehab Partners #2, Inc.	76-0452158
	Coppell Spine & Sports Rehab, Limited Partnership	North Davis/Keller Physical Therapy Physical Therapy of Colleyville Physical Therapy of North Texas Physical Therapy of Corinth Trinity Sports & Physical Therapy Physical Therapy of Flower Mound Southlake Physical Therapy Physical Therapy of Trophy Club  Heritage Trace Physical Therapy Therapy Partners of Frisco/Little Elm Therapy Partners of North Texas	LP	TX			Rehab Partners #5, Inc.	76-0513962
	CPR Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	47-3434985
	Cross Creek Physical Therapy, Limited Partnership		LP	TX		MS	Rehab Partners #4, Inc.	35-2185612
	Crossroads Physical Therapy, Limited Partnership	Green Oaks Physical Therapy - Fort Worth Green Oaks Physical Therapy	LP	TX			Rehab Partners #1, Inc.	76-0551398
	Crossroads Rehabilitation, Limited Partnership	Crossroads Physical Therapy	LP	TX		MI	Rehab Partners #1, Inc.	84-1658419
	Custom Physical Therapy, Limited Partnership		LP	TX		NV	Rehab Partners #4, Inc.	04-3708931
	Cutting Edge Physical Therapy, Limited Partnership		LP	TX		IN	Rehab Partners #4, Inc.	20-4069256
	Dearborn Physical Therapy, Ltd.	Advanced Physical Therapy	LP	TX		MI	Rehab Partners #1, Inc.	76-0376595
	Decatur Hand and Physical Therapy Specialists, Limited Partnership		LP	TX		GA	Rehab Partners #4, Inc.	20-3319149
	Dekalb Comprehensive Physical Therapy, Limited Partnership		LP	TX		GA	Rehab Partners #4, Inc.	20-3631634
	Denali Physical Therapy, Limited Partnership		LP	TX		AK	Rehab Partners #5, Inc.	20-8666329
	DHT Hand Therapy, Limited Partnership	Arizona Desert Hand Therapy Services Desert Hand and Physical Therapy	LP	TX		AZ	DHT Management GP, LLC	20-5881475
	DHT Management GP, LLC		LLC	TX		AZ	Rehab Partners #4, Inc	20-5881418
	Dynamic Hand Therapy & Rehabilitation, Limited Partnership		LP	TX		IL	Rehab Partners #4, Inc.	20-8847486
	Eastgate Physical Therapy, Limited Partnership	Summit Physical Therapy	LP	TX		OH	Rehab Partners #4, Inc.	76-0637484
	Edge Physical Therapy, Limited Partnership	River's Edge Physical Therapy	LP	TX		MT	Rehab Partners #3, Inc.	76-0473771
	Elite PT Management GP, LLC		LLC	TX	11/28/2022		Rehab Partners #4, Inc	92-1227794
	Elite Spine and Sports Physical Therapy, LP		LP	TX		PA		92-1300829
	Enhanced Physiotherapy and Performance, LLC	Enhanced Physical Therapy	LLC	TX	1/25/2022	TN	STAR Physical Therapy, LP	87-4738491
	Enid Therapy Center, Limited Partnership	Enid Physical Therapy	LP	TX		OK	Rehab Partners #2, Inc.	76-0384228
	Everett Management, LLC		LLC	WA			U.S. Physical Therapy, Ltd.	37-1776322
	Evergreen Physical Therapy, Limited Partnership		LP	TX		MI	Rehab Partners #1, Inc.	20-8613843
	Excel Physical Therapy, Limited Partnership		LP	TX		AK	Excel PT Texas GP, LLC	20-3951569
	Excel PT Texas GP, LLC		LLC	TX			Rehab Partners #6, Inc.	20-3951532
	Excel Orthopedic PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	88-2873165
	Excel Orthopedic Physical Therapy, Limited Partnership	Excel Physical Therapy	LP	TX		MT	Excel Orthopedic PT Management GP, LLC	88-2946955
	Fit2WRK, Inc.		Corp	TX			U.S. Physical Therapy, Inc.	27-1647054
	Five Rivers Therapy Services, Limited Partnership	Peak Physical Therapy	LP	TX		AR	Rehab Partners #3, Inc.	20-3785604
	Flannery Physical Therapy, Limited Partnership	Physical Therapy Plus	LP	TX		NJ	Rehab Partners #3, Inc.	76-0580514
	Fredericksburg Physical Therapy, Limited Partnership		LP	TX			Rehab Partners #1, Inc.	20-3589445
	Fremont PT Management GP, LLC		LLC	TX				85-4237359
	Fremont Therapy Group, Limited Partnership		LP	TX		UT, WY	Fremont PT Management GP, LLC	86-1249211
	Frisco Physical Therapy, Limited Partnership	PT of Prosper	LP	TX			Rehab Partners #1, Inc.	76-0625171
	Gahanna Physical Therapy, Limited Partnership	Cornerstone Physical Therapy	LP	TX		OH	Rehab Partners #4, Inc.	27-0643842
	Genesee Valley Physical Therapy, Limited Partnership		LP	TX		MI	Rehab Partners #1, Inc.	26-2299603
	Green Oaks Physical Therapy, Limited Partnership		LP	TX			Rehab Partners #1, Inc.	72-1531238
	Hamilton Physical Therapy Services, LP		LP	TX		NJ	HPTS Management GP, LLC	74-3145890
	Hands-On Sports Medicine, Limited Partnership	Metro Spine and Sports Rehabilitation	LP	TX		IL	Rehab Partners #4, Inc.	20-3300800
	Hanoun Medical, Inc.	BTE Workforce Solutions Briotix Health	Corp	Ontario, Canada		British Columbia	2037053 Ontario, Inc. (owned by Briotix Health, LP)
	Harbor Physical Therapy, Limited Partnership		LP	TX		MD	Rehab Partners #6, Inc.	20-3303737
	HH Rehab Associates, Inc.	Genesee Valley Physical Therapy Theramax Physical Therapy	Corp	MI		DE	U.S. PT - Michigan, Inc.	38-2427228
	High Plains Physical Therapy, Limited Partnership		LP	TX		WY	Rehab Partners #4, Inc.	41-2060941
	Highlands Physical Therapy & Sports Medicine, Limited Partnership		LP	TX		NJ	Rehab Partners #3, Inc.	27-3126287
	Horizon Rehabilitation PT Management GP, LLC		LLC	TX			USPT, Ltd.	87-3158670
	Horizon Rehabilitation and Sports Medicine, Limited Partnership		LP	TX		SC	Horizon Rehabilitation PT Management GP, LLC	87-3221050
	Houston On Demand Physical Therapy, LLC		LLC	TX			Kingwood Physical Therapy, Ltd.	85-3267403
	HPTS Management GP, LLC		LLC	TX		NJ	Rehab Partners #3, Inc.	74-3145888
	Indy ProCare Physical Therapy, Limited Partnership		LP	TX		IN	Rehab Partners #4, Inc.	45-4419567
	Integrated Rehab PT Management GP, LLC		LLC	TX	8/1/2022		Rehab Partners #4, Inc.	88-3566334
	Integrated Rehabilitation Services, Limited Partnership		LP	TX	8/10/2022		Integrated Rehab PT Management GP, LLC	88-3692263
	Integrius, LLC		LLC	GA				46-4689092
To be dissolved	InSite Health Limited Partnership		LP	DE			IH GP, LLC	82-4365153
	Intermountain Physical Therapy, Limited Partnership		LP	TX		ID	Rehab Partners #6, Inc.	76-0532873
	Jackson Clinics PT Management GP , LLC		LLC	TX			Rehab Partners #4, Inc.	46-4470249
	Jackson Clinics, Limited Partnership		LP	TX		MD, VA	Jackson Clinics PT Management GP, LLC	61-1729833
	Jaco Rehab Honolulu Management GP, LLC		LLC	TX				84-3191941
	Jaco Kapolei Management GP, LLC		LLC	TX				84-3152468
	Jaco Mililani Management GP LLC		LLC	TX				84-3167120
	Jaco Waikele Management GP LLC		LLC	TX				84-3176419
	Jaco Rehab Honolulu, Limited Partnership		LP	TX		HI	Jaco Rehab Honolulu Management GP, LLC	84-3255422
	Jaco Rehab Kapolei, Limited Partnership		LP	TX		HI	Jaco Kapolei Management GP, LLC	84-3236943
	Jaco Rehab Mililani, Limited Partnership		LP	TX			Jaco Mililani Management GP, LLC	84-3206751
	Jaco Rehab Waikele, Limited Partnership		LP	TX		HI	Jaco Waikele Management GP, LLC	84-3226914
	Joan Ostermeier Physical Therapy, Limited Partnership	Sport & Spine Clinic of Wittenberg	LP	TX		WI	Rehab Partners #1, Inc.	76-0556793
	Julie Emond Physical Therapy, Limited Partnership	Maple Valley Physical Therapy	LP	TX		VT	Rehab Partners #5, Inc.	76-0544267
	Kelly Lynch Physical Therapy, Limited Partnership	Sport & Spine Clinic of Watertown	LP	TX		WI	Rehab Partners #1, Inc.	76-0559026
	Kennebec Physical Therapy, LLC		LLC	TX		ME	U.S. Physical Therapy, Ltd.	46-4456545
	Kingwood Physical Therapy, Ltd.	Spring-Klein Physical Therapy West Woodlands Physical Therapy Lake Conroe Sports Medicine and Rehabilitation Cypress Oaks Physical Therapy  Star Therapy Services of Fairfield; Grand Oaks Sports Medicine and Rehabilitation Star Therapy Services of Lakewood	LP	TX			Rehab Partners #2, Inc.	76-0384227
	Lake Houston Physical Therapy, Limited Partnership	Northern Oaks Orthopedic & Sports PT	LP	TX			Rehab Partners #1, Inc.	75-3050296
	Leader Physical Therapy, Limited Partnership	Memphis Physical Therapy	LP	TX		TN	Rehab Partners #4, Inc.	76-0539465
Withdraw PA	Life Fitness Physical Therapy, LLC	In Balance Physical Therapy Herbst Physical Therapy	LLC	MD		PA	U.S. Physical Therapy, Ltd.	20-1193079
	Life Strides Physical Therapy and Rehabilitation, Limited Partnership		LP	TX		SC	Rehab Partners #2, Inc.	20-5120914
	LiveWell Physical Therapy, Limited Partnership		LP	TX			Rehab Partners #5, Inc.	26-3700763
	Madden and Gilbert PT GP, LLC		LLC	TX	1/7/2022		OPTN, LLC	87-4640726
	Madden and Gilbert Physical Therapy, LP		LP	TX	1/20/2022	MD	Madden and Gilbert PT GP, LLC	87-4672389
	Madison Physical Therapy, Limited Partnership		LP	TX		NJ	MSPT Management GP, LLC	27-2047964
	Madison Spine, Limited Partnership		LP	TX		NJ	MSPT Management GP, LLC	90-0813058
	Max Motion Physical Therapy, Limited Partnership		LP	TX		AZ	Rehab Partners #3, Inc.	26-3988733
	Merrill Physical Therapy, Limited Partnership		LP	TX		WI	Rehab Partners #1, Inc.	76-0512097
	Mishock Physical Therapy, Limited Partnership	Xcelerate Physical Therapy	LP	TX		PA	Mishock PT Management GP, LLC	30-0783139
	Mishock PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	46-2793533
	Mission Rehabilitation and Sports Medicine, Limited Partnership	RYKE Rehabilitation	LP	TX			RYKE Management GP, LLC	26-3747839
	Mobile Spine and Rehabilitation, Limited Partnership		LP	TX		AL	Rehab Partners #6, Inc.	76-0600186
	Momentum Physical & Sports Rehabilitation, L.P.	Momentum Physical Therapy & Sports Rehab;  Momentum On-Demand; Momentum Mobile PT; Momentum Physical Therapy	LP	TX		FL, CO, AZ	Rehab Partners #10, LLC	47-2388509
	Mountain View Physical Therapy, Limited Partnership	Mountain View Physical and Hand Therapy	LP	TX		OR	Rehab Partners #6, Inc.	76-0528482
	MSPT Management GP, LLC		LLC	TX		NJ	Rehab Partners #4, Inc	27-2047906
	National Rehab Delaware, Inc.		Corp	DE		MO	National Rehab GP, Inc.	74-2899827
shows tax clearance	National Rehab GP, Inc.		Corp	TX		FL,MO	U.S. PT - Delaware, Inc.	76-0345539
	National Rehab Management GP, Inc.		Corp	TX		IL, OH	U.S. PT - Delaware, Inc.	76-0345543
	New Horizons Physical Therapy, Limited Partnership		LP	TX		IN	Rehab Partners #4, Inc.	20-2729857
	Norman Physical Therapy, Limited Partnership		LP	TX		OK	Rehab Partners #4, Inc.	76-0420713
	North Jersey Game On Physical Therapy, Limited Partnership	Madison Spine & Physical Therapy	LP	TX		NJ	Rehab Partners #3, Inc.	27-3885529
	North Lake Physical Therapy and Rehab, Limited Partnership		LP	TX		OR	North Lake PT Management GP, LLC	90-0964749
	North Lake PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	46-2599705
	Northern Edge PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	93-2850049
	Northern Edge Physical Therapy, Limited Partnership		LP	DE			Northern Edge PT Management GP, LLC	93-2812858
	Northern Lights Physical Therapy, Limited Partnership		LP	TX		ND	Rehab Partners #3, Inc.	27-0342077
	Northwest PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	82-2410286
	Northwoods Physical Therapy, Limited Partnership		LP	TX		MI	Rehab Partners #1, Inc.	26-1258418
	OPR Management Services, Inc.		Corp	TX		AK, AL, AZ, CO, CT, DE, FL, GA, HI, IA, ID, IL, IN, KS, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, OH, OK, OR, PA, SC, SD, TN, VA, VT, WI, WY	U.S. Physical Therapy, Ltd.	81-3815218
	OSR Physical Therapy, Limited Partnership		LP	TX		MN	OSR Physical Therapy Management GP, LLC	83-0657305
	OSR Physical Therapy Management GP LLC		LLC	TX				83-0649952
	One to One PT Management GP LLC		LLC	TX		FL	Rehab Partners #4, Inc.	84-4060850
	One to One Physical Therapy, Limited Partnership		LP	DE		FL	One to One PT Management GP, LLC	84-4074270
	Oregon Spine & Physical Therapy, Limited Partnership	Peak State Physical Therapy	LP	TX		OR	Rehab Partners #6, Inc.	76-0613909
	P4 Physical Therapy, Limited Partnership		LP	TX		GA, TN	TX - P4 PT Management GP, LLC	88-3148972
	Peak Performance PT Management GP, LLC		LLC	TX			Peak Performance Physical Therapy and Fitness, LLC	85-3948317
	Peak Performance Physical Therapy, Limited Partnership		LP	TX		LA	Peak Performance PT Management GP, LLC	85-4174416
	Pelican State Physical Therapy, Limited Partnership	Audubon Physical Therapy	LP	TX		LA	Rehab Partners #6, Inc.	76-0433513
	Penns Wood Physical Therapy, Limited Partnership		LP	TX		PA, OH, WI	Rehab Partners #5, Inc.	76-0430771
	PerformancePro Sports Medicine and Rehabilitation, Limited Partnership		LP	TX			Rehab Partners #5, Inc.	26-1539873
	Phoenix Physical Therapy, Limited Partnership		LP	TX		OH	Rehab Partners #4, Inc.	27-0932165
Check with Peter if to be dissolved	Physical Restoration and Sports Medicine, Limited Partnership		LP	TX		VA	Rehab Partners #6, Inc.	27-0878621
	Physical Therapy Northwest, Limited Partnership		LP	TX		OR	Northwest PT Management GP, LLC	82-2397360
	Physical Therapy and Spine Institute, Limited Partnership		LP	TX		IL	Rehab Partners #4, Inc.	76-0438263
	Physical Therapy Solutions, Limited Partnership		LP	DE		VA	PTS GP Management, LLC	47-3075583
	Pinnacle Therapy Services, LLC		LLC	DE		MO	U.S. Physical Therapy, Ltd.	46-3247784
	Pioneer Physical Therapy, Limited Partnership		LP	TX		NE	Rehab Partners #1, Inc.	20-3530492
	Plymouth Physical Therapy Specialists, Limited Partnership		LP	TX		MI	Rehab Partners #3, Inc.	76-0424739
	Port City Physical Therapy, Limited Partnership		LP	TX		ME	Rehab Partners #3, Inc.	76-0585914
	Precision Physical Therapy, Limited Partnership		LP	TX		PA	Rehab Partners #5, Inc.	76-0438265
	Premier Physical Therapy and Sports Performance, Limited Partnership		LP	DE			Premier Management GP, LLC	47-5385666
	Premier Management GP, LLC		LLC	DE			Rehab Partners #4, Inc.	47-5403407
	ProActive Physical Therapy, Limited Partnership		LP	TX		SD	Rehab Partners #3, Inc.	76-0600187
	ProCare Physical Therapy Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	46-2044643
	ProCare PT, Limited Partnership		LP	TX		PA	ProCare Physical Therapy Management GP, LLC	90-0941849
	ProgressiveHealth Companies, LLC		LLC	DE			U.S. Physical Therapy, Ltd.	87-4264322
	ProgressiveHealth Occ Health, LLC		LLC	IN		AZ, MI, MO, NJ, NY, TN, UT	U.S. Physical Therapy, Ltd.	20-8266936
	ProgressiveHealth HealthSpot, LLC		LLC	IN		AL, WV	U.S. Physical Therapy, Ltd.	85-3187128
	ProgressiveHealth, LLC		LLC	IN		KY, MO, TX		68-0666444
	ProgressiveHealth Rehabilitation Solutions,Inc.		Corp	GA				58-1888359
	Progressive Physical Therapy Clinic, Ltd.	Progressive Hand and Physical Therapy	LP	TX			Rehab Partners #1, Inc.	76-0387638
	PTS GP Management, LLC		LLC	TX			Rehab Partners #4, Inc.	47-3239903
	Quad City Physical Therapy & Spine, Limited Partnership		LP	TX		IA	Rehab Partners #5, Inc.	14-1921829
	RACVA GP, LLC		LLC	TX		VA	Rehab Partners #4, Inc.	37-1838302
	R. Clair Physical Therapy, Limited Partnership	Clair Physical Therapy	LP	TX			Rehab Partners #1, Inc.	76-0478967
	Radtke Physical Therapy, Limited Partnership		LP	TX		MN	Rehab Partners #5, Inc.	76-0574455
	Reaction Physical Therapy, LLC		LLC	DE		OK	U.S. Physical Therapy, Ltd.	47-1586428
	Rebound Physical Therapy, Limited Partnership		LP	TX		OR	Rebound PT Management GP, LLC	81-1026078
	Rebound PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	81-1045143
	Red River Valley Physical Therapy, Limited Partnership		LP	TX			Rehab Partners #5, Inc.	20-4489003
	Redmond Ridge Management, LLC		LLC	WA			U.S. Physical Therapy, Ltd.	61-1754288
	Regional Physical Therapy Center, Limited Partnership		LP	TX			Rehab Partners #5, Inc.	76-0429008
	Rehab Partners #1, Inc.		Corp	TX		FL, MA, & WI	U.S. PT Delaware, Inc.	76-0345544
	Rehab Partners #2, Inc.		Corp	TX		FL	U.S. PT Delaware, Inc.	76-0379584
Withdraw, NJ	Rehab Partners #3, Inc.		Corp	TX		MO, MT, NJ, ND, & SD	U.S. PT Delaware, Inc.	76-0394604
Withdraw UT	Rehab Partners #4, Inc.		Corp	TX		OH, & UT	U.S. PT Delaware, Inc.	76-0418425
	Rehab Partners #5, Inc.		Corp	TX		OH	U.S. PT Delaware, Inc.	76-0427607
	Rehab Partners #6, Inc.		Corp	TX		OR	U.S. PT Delaware, Inc.	76-0433511
	Rehab Partners Acquisition #1, Inc.		Corp	TX			U.S. Physical Therapy, Inc.	76-0377650
	Rehabilitation Associates of Central Virginia, Limited Partnership	Rehab Associates of Central Virginia (Campbell County)	LP	TX		VA	RACVA GP, LLC	81-3831622
	Rice Rehabilitation Associates, Limited Partnership		LP	TX		GA	Rehab Partners #4, Inc.	76-0430769
	Riverview Physical Therapy, Limited Partnership (formerly Yarmouth Physical Therapy)		LP	TX		ME	Rehab Partners #3, Inc.	27-0001262
	Roepke Physical Therapy, Limited Partnership	Elite Hand & Upper Extremity Clinic	LP	TX		WI	Rehab Partners #1, Inc.	76-0483099
	RYKE Management GP, LLC		LLC	TX			Rehab Partners #5, Inc.	26-3747599
	Saginaw Valley Sport and Spine, Limited Partnership	Sport & Spine Physical Therapy and Rehab; Evergreen PT	LP	TX		MI	Rehab Partners #3, Inc.	76-0403520
	Saline Physical Therapy of Michigan, Ltd.	Physical Therapy in Motion	LP	TX		MI	Rehab Partners #1, Inc.	76-0376594
	San Antonio On Demand Physical Therapy, LLC		LLC	TX			U.S. Physical Therapy, Ltd.	86-1384984
	Seacoast Physical Therapy, Limited Partnership		LP	TX		ME	Rehab Partners #3, Inc.	45-2498148
	Signature Physical Therapy, Limited Partnership		LP	TX		OK	Rehab Partners #2, Inc.	20-5992649
	Snohomish Management, LLC		LLC	WA			U.S. Physical Therapy, Ltd.	38-3953679
	South Tulsa Physical Therapy, Limited Partnership	Physical Therapy of Jenks South Tulsa Physical Therapy Jenks Physical Therapy	LP	TX		OK	Rehab Partners #2, Inc.	76-0566430
	Spectrum Physical Therapy, Limited Partnership	Southshore Physical Therapy	LP	TX		CT	Rehab Partners #2, Inc.	76-0393448
	Sport & Spine Clinic of Fort Atkinson, Limited Partnership	Sport & Spine Clinic of Sauk City Sport & Spine Clinic of Madison Sport & Spine Clinic of Jefferson Sport & Spine Edgerton	LP	TX		WI	Rehab Partners #1, Inc.	76-0694802
	Sport & Spine Clinic, L.P.	Sport & Spine Sport & Spine Clinic of Edgar          Sport & Spine Minocqua Sport & Spine - Rib Mountain	LP	DE		WI	Rehab Partners Acquisition #1, Inc.	76-0376131
	Spracklen Physical Therapy, Limited Partnership		LP	TX		NE	Rehab Partners #1, Inc.	76-0580510
	STAR PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc	26-1107563
	STAR Physical Therapy, LP		LP	TX		AL, AR, MO, TN, IN	STAR PT Management GP, LLC	62-1707893
	Star Therapy Centers, Limited Partnership	Star Therapy Services of Copperfield Star Therapy Services of Cy-Fair Star Therapy Services of Fulshear Star Therapy Services of Katy Star Therapy Services of Magnolia Star Therapy Services of Spring Cypress Star Therapy Services of Cinco Ranch	LP	TX			Rehab Partners #1, Inc.	76-0389608
	Summit Hand Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	93-1966427
	Summit Hand Therapy, Limited Partnership		LP	DE		UT	Summit Hand Management GP, LLC	93-1996735
	Summit PT Management GP, LLC		LLC	TX	5/18/2022		Rehab Partners #4, Inc.	88-2457192
	Summit Physical Therapy, Limited Partnership	Brookeville Physical Therapy	LP	TX	5/23/2022	OH, WV	Summit PT Management GP, LLC	88-2606821
	Texstar Physical Therapy, Limited Partnership		LP	TX			Rehab Partners #5, Inc.	76-0669263
	The Hale Hand Center, Limited Partnership		LP	TX		FL	Rehab Partners #2, Inc.	76-0601187
	The U.S. Physical Therapy Foundation		NP	TX		Qualified to fund raise in CA, FL, KS, MD, MI, TN, TX, VA		81-1071364
	Therapyworks Physical Therapy, LLC	Therapyworks	LLC	DE		IN	U.S. Physical Therapy, Ltd.	46-4446075
	Thibodeau Physical Therapy, Limited Partnership		LP	TX		MI	Rehab Partners #1, Inc.	26-1147899
	Thomas Hand and Rehabilitation Specialists, Limited Partnership	CoreFit Rehabilitation	LP	TX		AL, AZ, CA, PA, OH, VA, WI	Rehab Partners #3, Inc.	76-0528480
	Thunder Physical Therapy, Limited Partnership		LP	TX		WA	Rehab Partners #4, Inc.	26-3806761
	TX - P4 PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	88-3055868
	U.S. Physical Therapy, Inc.		Corp	NV		AZ; HI; MI; NJ	N/A	76-0364866
	U.S. Physical Therapy, Inc. PAC		NP	TX	5/5/2021			86-3943048
	U.S. Physical Therapy, Ltd.		LP	TX		NC	National Rehab GP, Inc.	76-0388092
	U.S. PT - Delaware, Inc.		Corp	DE		FL, IL, MN, MO NM,	U.S. Physical Therapy, Inc.	51-0343523
	U.S. PT Alliance Rehabilitation Services, Inc.	Alliance Rehabilitation Services	Corp	TX		PA	U.S. Physical Therapy, Inc.	26-2377769
	U.S. PT Management, Ltd.		LP	TX		CA, ID, OH, WA, WI	National Rehab Management GP, Inc.	76-0388500
	U.S. PT Michigan #1, Limited Partnership	Genesee Valley Physical Therapy	LP	TX		MI	Rehab Partners #1, Inc.	76-0570431
	U.S. PT Michigan #2, Limited Partnership	Physical Therapy Solutions	LP	TX		MI	Rehab Partners #2, Inc.	76-0579492
	U.S. PT Solutions, Inc.	Physical Therapy Solutions	Corp	TX		VA	U.S. Physical Therapy, Inc.	26-0609553
	U.S. PT Texas, Inc.	Kinetix Physical Therapy	Corp	TX		MS	U.S. Physical Therapy, Inc.	20-5125415
To be dissolved	U.S. PT Therapy Services, Inc. (formerly U.S. Surgical Partners, Inc.)	Capstone Physical Therapy Carolina Hand and Wellness Center Hand Therapy of North Texas - Frisco Hand Therapy of North Texas - Coppell Innovative Physical Therapy Lake City Hand Therapy Life Sport Physical Therapy Life Sport Physical Therapy - Glen Ellyn Metro Hand Rehabilitation Missouri City Physical Therapy Mountain View Physical Therapy of Medford Mountain View Physical Therapy of Talent Northern Illinois Therapy Services Propel Physical Therapy ReAction Physical Therapy Therapeutic Concepts Tulsa Hand Therapy Waco Sports Medicine and Rehabilitation	Corp	DE		CA, FL, IA, IL, IN, KS, ME, MS, MO, NC, OH, OK, OR, PA, TX VA, & WI	U.S. Physical Therapy, Inc.	76-0613914
	U.S. PT Turnkey Services, Inc. (formerly Surgical Management GP, Inc.	The Hand & Orthopedic Rehab Clinic	Corp	TX		IN	U.S. Physical Therapy, Inc.	20-2803028
	U.S. Therapy, Inc.	First Choice Physical Therapy	Corp	TX		IN	U.S. PT - Delaware, Inc.	76-0637511
		The Facilities Group, Inc.
	University Physical Therapy, Limited Partnership		LP	TX		VA	Rehab Partners #6, Inc.	76-0613913
	USPT Physical Therapy, Limited Partnership	Body Basics Physical Therapy	LP	TX		IA	Rehab Partners #5, Inc.	20-5441273
	Victory Physical Therapy, Limited Partnership		LP	TX			Rehab Partners #5, Inc.	20-4406904
	West Texas Physical Therapy, Limited Partnership		LP	TX			Rehab Partners #5, Inc.	20-5834588
	Wright PT Management GP, LLC		LLC	TX			Rehab Partners #4, Inc.	82-3239740
	Wright Physical Therapy, Limited Partnership		LP	TX		ID	Wright PT Management GP, LLC	82-3255983

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated February 29, 2024, with respect to the consolidated financial statements and internal control over financial reporting included in the Annual Report of U.S. Physical Therapy, Inc. on Form 10-K for the year ended December 31, 2023. We consent to the incorporation by reference of said reports in the Registration Statements of U.S. Physical Therapy, Inc. on Form S-3 (File No. 333-272147) and Forms S-8 (File No. 333-30071, 333-64159, 333-67678, 333-67680, 333-82932, 333-103057, 333-113592, 333-116230, 333-153051, 333-185381, 333-200832, 333-230368, and 333-267090).

/s/ GRANT THORNTON LLP

Houston, Texas

February 29, 2024

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Christopher J. Reading, certify that:

1. I have reviewed this annual report on Form 10-K 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.

Date: February 29, 2024

/s/ Christopher J. Reading

Christopher J. Reading

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Carey Hendrickson, certify that:

1. I have reviewed this annual report on Form 10-K 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.

Date: February 29, 2024

/s/ Carey Hendrickson

Carey Hendrickson

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of U.S. Physical Therapy, Inc. (the “registrant”) on Form 10-K for the year ending December 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “report”), we, Christopher J. Reading, and Carey Hendrickson, Chief Executive Officer and Chief Financial Officer respectively, of the registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

February 29, 2024

/s/ Christopher J. Reading

Christopher J. Reading

Principal Executive Officer

/s/ Carey Hendrickson

Carey Hendrickson

Principal Financial and Accounting Officer

A signed original of this written statement required by Section 906 has been provided to U. S. Physical Therapy, Inc. and will be retained by U. S. Physical Therapy, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-97.1

EXHIBIT 97.1

U.S. Physical Therapy, Inc.

Compensation Clawback Policy

November 14, 2023

1. Purpose and Scope. U.S. Physical Therapy, Inc. (the “Company”) has adopted this compensation Clawback Policy (the “Policy”) to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), as codified by Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Exchange Act Rule 10D-1, and the rules of the New York Stock Exchange (the “NYSE”), which require the recovery of certain forms of executive compensation in the case of accounting restatements resulting from a material error in an issuer’s financial statements. This Policy is adopted by the Board of Directors of the Company (the “Board”) and shall be administered by the Compensation Committee of the Board (the “Committee”).

2. Effective Date. This Policy shall be effective as of November 14, 2023 (the “Effective Date”), and shall apply to Incentive-Based Compensation, as defined below, that is approved, awarded, or granted to Covered Executives on or after the Effective Date.

3. Covered Executives. This Policy applies to all of the Company’s current and former executive officers, as defined below, and such other employees who may from time to time be deemed subject to this Policy by the Committee (each, a “Covered Executive”). For purposes of this Policy, an executive officer means an officer as defined in Rule 10D-1(d) under the Exchange Act, as amended from time to time. As of the Effective Date, "Executive officers" subject to recovery policies adopted under Rule 10D-1 include (1) a president, (2) any vice-president in charge of a principal business unit, division, or function (such as sales, administration or finance), (3) any other officer who performs a policy-making function, or (4) any other person who performs similar policy-making functions for the Company, including executive officers of the Company or its subsidiaries if they perform such functions.

(a) For Covered Executives hired after the Effective Date, the Policy will be attached as an exhibit to their employment agreement and/or any award compensation agreement and will require an acknowledgment of the Policy in the agreement.

(b) All Covered Executives hired before the Effective Date will be bound by the Policy from the Effective Date. For such purposes, they shall be provided with a copy of the Policy, which they shall sign in acknowledgment in a manner substantially consistent with Exhibit A hereof.

4. Incentive-Based Compensation. For purposes of this Policy, the term “Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure and includes, but is not limited to, compensation received pursuant to the Company’s incentive plan, as well as any compensation that Covered Executives would not have been entitled to receive had the financial statements been accurate. “Financial reporting measures” are measures determined and presented in accordance with the accounting principles used in preparing the Company's financial statements, and any measures derived wholly or in part from such measures, including General Accepted Accounting Principles (“GAAP”), non-GAAP financial measures, as well as the Company's stock price and total shareholder return. For the avoidance of doubt, Incentive-Based Compensation does not include annual salary, compensation awarded based on completion of a specified period of service, time-vesting awards or compensation that is awarded solely at the discretion of the Board or the Committee (in each case as long as their grant was not based on the achievement of a financial performance measure), or compensation awarded based on subjective standards, strategic measures, or operational measures (in each case as long as their grant was not based on the achievement of a financial performance measure).

5. Recovery; Accounting Restatement. In the event the Company is required to prepare an accounting restatement of its financial statements due to material noncompliance with any financial reporting requirement under the federal securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (a “Restatement”), the Company shall, as promptly as it reasonably can, recover any Incentive-Based Compensation received by a Covered Executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare such Restatement (the “Restatement Date”), so long as the Incentive-Based Compensation received by such Covered Executive is in excess of what would have been awarded or vested after giving effect to the Restatement. In addition to these last three completed fiscal years, the Policy shall apply to any transition period (that results from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years. However, a transition period between the last day of the Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine to 12 months would be deemed a completed fiscal year. The Company’s obligation to recover erroneously awarded Incentive-Based Compensation is not dependent on if or when the restated financial statements are filed.

5.1. The Restatement Date shall be the earlier of (i) the date the Board, the Committee, or officer(s) are authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare a Restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws as described in Rule 10D-1(b)(1) under the Exchange Act or (ii) the date a court, regulator, or other legally authorized body directs the Company to prepare a Restatement.

5.2. The amount to be recovered will be the excess of the Incentive-Based Compensation paid to the Covered Executive based on the erroneous data in the original financial statements over the Incentive-Based Compensation that would have been paid to the Covered Executive had it been based on the restated results, without respect to any taxes paid. For Incentive-Based Compensation based on stock price or total shareholder return, where the amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the information in an accounting restatement:

A. The amount must be based on a reasonable estimate of the effect of a Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was received; and

B. The Company must maintain documentation of the determination of that reasonable estimate and provide such documentation to the NYSE.

5.3. This Policy shall apply even if the Covered Executive did not engage in any misconduct and even if the Covered Executive had no responsibility for the financial statement errors, miscalculations, omissions or other reasons requiring Restatement.

5.4. Subsequent changes in a Covered Executive’s employment status, including retirement or termination of employment, do not affect the Company’s rights to recover Incentive-Based Compensation pursuant to this Policy. For purposes of this Policy, Incentive-Based Compensation shall be deemed to have been received during the fiscal period in which the financial reporting measure specified in the award is attained, even if such Incentive-Based Compensation is paid or granted after the end of such fiscal period.

5.5. The Company must recover erroneously awarded Incentive-Based Compensation in compliance with this Policy, except to the extent that the Committee has made a determination that recovery would be impracticable for the reasons stated below:

A. The direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before concluding that it would be impracticable to recover any amount of erroneously awarded Incentive-Based Compensation based on the expense of enforcement, the Company must make a reasonable attempt to recover such erroneously awarded Incentive-Based Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the NYSE.

B. Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.

5.6. The Committee shall determine, in its sole discretion, the method of recovering any Incentive-Based Compensation pursuant to this Policy.

6. No Indemnification. The Company shall not indemnify any current or former Covered Executive against the loss of erroneously awarded Incentive-Based Compensation, and shall not pay, or reimburse any Covered Executives for premiums, for any insurance policy to fund such executive’s potential recovery payments.

7. Disclosures. The Company must file all disclosures with respect to the Policy in accordance with the requirements of the Exchange Act and other laws and regulations, including the disclosure required by applicable Securities and Exchange Commission (the “SEC”) filings.

8. Notice. Before the Committee determines to seek recovery pursuant to this Policy, it shall provide the Covered Executive with written notice and the opportunity to be heard at a meeting of the Committee (either in person or via telephone).

9. Amendment and Interpretation. The Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary to reflect the regulations adopted by the SEC and to comply with any rules or standards adopted by NYSE, on which the Company’s securities are listed. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act and any applicable rules or standards adopted by the SEC and NYSE, or any other exchange on which the Company’s securities are listed.

Exhibit A

CLAWBACK POLICY

ACKNOWLEDGEMENT AND AGREEMENT

This Clawback Policy Acknowledgment and Agreement (this “Agreement”) is entered into as of____________, 2023, between U.S. Physical Therapy, Inc, (the “Corporation”) and _______________________ (“Covered Executive”). All capitalized terms not defined herein shall have the meaning provided in the Policy.

RECITALS:

WHEREAS, the Corporation’s Board of Directors (the “Board”) maintains a Compensation Clawback Policy (the “Policy”) for recovery of Incentive-Based Compensation, as defined in the Policy, initially adopted on November 14, 2023, as may be amended from time to time; and

WHEREAS, in consideration of, and as a condition to the receipt of the Incentive-Based Compensation, Covered Executive and the Corporation are entering into this Agreement.

AGREEMENT:

NOW, THEREFORE, the Corporation and Covered Executive hereby agree as follows:

1.       Covered Executive acknowledges receipt of the Policy, a copy of which is attached hereto as Exhibit A and is incorporated into this Agreement by reference. The Covered Executive has read and understands the Policy and has had the opportunity to ask questions to the Corporation regarding the Policy.

2.       Covered Executive hereby acknowledges and agrees that the Policy shall apply to any Incentive-Based Compensation awarded on or after the date of this Agreement, and all such Incentive-Based Compensation shall be subject to recovery or forfeiture under the Policy.

3.       Any applicable award agreement or other document setting forth the terms and conditions of any Incentive-Based Compensation shall be deemed to include the restrictions imposed by the Policy and incorporate it by reference. In the event of any inconsistency between the provisions of the Policy and the applicable award agreement or other document setting forth the terms and conditions of any Incentive-Based Compensation, the terms of the Policy shall govern.

4.      The recovery or forfeiture of Incentive-Based Compensation pursuant to the Policy and this Agreement shall not in any way limit or affect the Corporation’s right to pursue disciplinary action or dismissal, take legal action or pursue any other available remedies available to the Corporation. This Agreement and the Policy shall not replace, and shall be in addition to, any rights of the Corporation to recover Incentive-Based Compensation, or any other compensation, from its executive officers under applicable laws and regulations, including but not limited to the Dodd-Frank Act and the Sarbanes-Oxley Act of 2002.

5.        Covered Executive acknowledges that the Covered Executive’s execution of this Agreement is in consideration of, and is a condition to, the receipt by Covered Executive of awards of Incentive-Based Compensation from the Corporation on and after the date of this Agreement; provided, however, that nothing in this Agreement shall be deemed to obligate the Corporation to make any such awards to the Covered Executive. Covered Executive acknowledges and agrees that Covered Executive will not be entitled to indemnification, insurance subsidizing or right of advancement of expenses in connection with any enforcement of the Policy by the Company.

6.        This Agreement may be executed in two or more counterparts, and by facsimile or electronic transmission, each of which will be deemed to be an original but all of which, taken together, shall constitute one and the same Agreement.

7.        This Agreement shall be governed by and construed in accordance with the laws of the State of Utah, without reference to principles of conflicts of laws. No modifications, waivers or amendments of the terms of this Agreement shall be effective unless in writing and signed by the parties. Each of this Agreement and the Policy shall survive and continue in full force in accordance with its terms notwithstanding any termination of Covered Executive’s employment with the Corporation and/or its affiliates. The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of Covered Executive, and the successors and assigns of the Corporation.

8.     This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior or contemporaneous agreements or understandings relating to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

U.S. Physical Therapy, Inc.

By:

Print:

Title:

COVERED EXECUTIVE:

Print Name:

XML

Document and Entity Information - USD ($) $ in Billions	12 Months Ended
	Dec. 31, 2023	Feb. 29, 2024	Jun. 30, 2023
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Annual Report	true
Document Period End Date	Dec. 31, 2023
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	FY
Document Transition Report	false
Entity File Number	1-11151
Entity Registrant Name	U S PHYSICAL THERAPY INC /NV
Entity Central Index Key	0000885978
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	76-0364866
Entity Address, Address Line One	1300 WEST SAM HOUSTON PARKWAY SOUTH
Entity Address, Address Line Two	SUITE 300
Entity Address, City or Town	HOUSTON
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77042
City Area Code	713
Local Phone Number	297-7000
Title of 12(b) Security	Common Stock, $.01 par value
Trading Symbol	USPH
Security Exchange Name	NYSE
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Document Financial Statement Error Correction [Flag]	false
Entity Shell Company	false
Entity Public Float			$ 1.1
Entity Common Stock, Shares Outstanding		15,068,426
Auditor Firm ID	248
Auditor Name	GRANT THORNTON LLP
Auditor Location	Houston, Texas

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 152,825	$ 31,594
Patient accounts receivable, less provision for credit losses of $2,736 and $2,829, respectively	51,866	51,934
Accounts receivable - other	17,854	16,671
Other current assets	10,830	11,067
Total current assets	233,375	111,266
Fixed assets:
Furniture and equipment	63,982	62,074
Leasehold improvements	46,941	42,877
Fixed assets, gross	110,923	104,951
Less accumulated depreciation and amortization	(84,821)	(80,203)
Fixed assets, net	26,102	24,748
Operating lease right-of-use assets	103,431	103,004
Investment in unconsolidated affiliate	12,256	12,131
Goodwill	509,571	494,101
Other identifiable intangible assets, net	109,682	108,755
Other assets	2,821	4,149
Total assets	997,238	858,154
Current liabilities:
Accounts payable - trade	3,898	3,300
Accounts payable - due to seller of acquired business	0	3,204
Accrued expenses	55,344	37,413
Current portion of operating lease liabilities	35,252	33,709
Current portion of term loan and notes payable	7,691	7,863
Total current liabilities	102,185	85,489
Notes payable, net of current portion	1,289	1,913
Revolving facility	0	31,000
Term loan, net of current portion and deferred financing costs	137,702	142,918
Deferred taxes	24,815	21,303
Operating lease liabilities, net of current portion	76,653	77,934
Other long-term liabilities	2,356	13,029
Total liabilities	345,000	373,586
Redeemable non-controlling interest - temporary equity	174,828	167,515
Commitments and Contingencies
U.S. Physical Therapy, Inc. ("USPH") shareholders' equity:
Preferred stock, $.01 par value, 500,000 shares authorized, no shares issued and outstanding	0	0
Common stock, $.01 par value, 20,000,000 shares authorized, 17,202,291 and 15,216,326 shares issued, respectively	172	152
Additional paid-in capital	281,096	110,317
Accumulated other comprehensive gain	2,782	4,004
Retained earnings	223,772	232,948
Treasury stock at cost, 2,214,737 shares	(31,628)	(31,628)
Total USPH shareholders' equity	476,194	315,793
Non-controlling interest - permanent equity	1,216	1,260
Total USPH shareholders' equity and non-controlling interest - permanent equity	477,410	317,053
Total liabilities, redeemable non-controlling interest, USPH shareholders' equity and non-controlling interest - permanent equity	$ 997,238	$ 858,154

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Current assets:
Provision for credit losses, patient accounts receivable	$ 2,736	$ 2,829
U. S. Physical Therapy, Inc. 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)	17,202,291	15,216,326
Treasury stock, shares (in shares)	2,214,737	2,214,737

XML

CONSOLIDATED STATEMENTS OF NET INCOME - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Revenues:
Net revenue	$ 604,802	$ 553,144	$ 495,022
Operating cost:
Salaries and related costs	353,390	319,191	278,469
Rent, supplies, contract labor and other	123,731	116,381	94,066
Provision for credit losses	6,172	5,548	5,305
Total operating cost	483,293	441,120	377,840
Gross profit	121,509	112,024	117,182
Corporate office costs	51,953	46,111	46,533
Impairment of goodwill and other intangible assets	17,495	9,112	0
Operating income	52,061	56,801	70,649
Other (expense) income
Interest expense, debt and other	(9,303)	(5,779)	(942)
Interest income from investments	3,774	0	0
Change in fair value of contingent earn-out consideration	(1,550)	2,520	0
Change in revaluation of put-right liability	2,582	(5)	0
Equity in earnings of unconsolidated affiliate	955	1,175	112
Relief funds	467	0	4,597
Settlement of a legal matter	0	0	(2,635)
Resolution of a payor matter	0	0	1,216
Other	390	859	199
Total other (expense) income	(2,685)	(1,230)	2,547
Income before taxes	49,376	55,571	73,196
Provision for income taxes	12,156	12,164	15,272
Net income	37,220	43,407	57,924
Less: Net income attributable to non-controlling interest:
Redeemable non-controlling interest - temporary equity	(4,426)	(6,902)	(11,358)
Non-controlling interest - permanent equity	(4,555)	(4,347)	(5,735)
Net income attributable to non-controlling interest	(8,981)	(11,249)	(17,093)
Net income attributable to USPH shareholders	$ 28,239	$ 32,158	$ 40,831
Basic earnings per share attributable to USPH shareholders (in dollars per share)	$ 1.28	$ 2.25	$ 2.41
Diluted earnings per share attributable to USPH shareholders (in dollars per share)	$ 1.28	$ 2.25	$ 2.41
Shares used in computation - basic (in shares)	14,188	12,985	12,898
Shares used in computation - diluted (in shares)	14,188	12,985	12,898
Dividends declared per common share (in dollars per share)	$ 1.72	$ 1.64	$ 1.46
Net Patient Revenue [Member]
Revenues:
Net revenue	$ 514,556	$ 464,590	$ 438,330
Other Revenue [Member]
Revenues:
Net revenue	$ 90,246	$ 88,554	$ 56,692

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
Net income	$ 37,220	$ 43,407	$ 57,924
Other comprehensive loss
Unrealized (loss) gain on cash flow hedge	(1,642)	5,378	0
Tax effect at statutory rate (federal and state)	420	(1,374)	0
Comprehensive income	35,998	47,411	57,924
Comprehensive income attributable to non-controlling interest	(8,981)	(11,249)	(17,093)
Comprehensive income attributable to USPH shareholders	$ 27,017	$ 36,162	$ 40,831

XML

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Other Comprehensive Gain (Loss) [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Total Shareholders' Equity [Member]	Non-Controlling Interests [Member]	Total
Beginning balance at Dec. 31, 2020	$ 151	$ 95,622	$ 0	$ 212,015	$ (31,628)	$ 276,160	$ 1,470	$ 277,630
Beginning balance (in shares) at Dec. 31, 2020	15,066				(2,215)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income attributable to USPH shareholders	$ 0	0	0	40,831	$ 0	40,831	0	40,831
Net income attributable to non-controlling interest - permanent equity	0	0	0	0	0	0	5,735	5,735
Issuance of restricted stock, net of cancellations	$ 0	0	0	0	$ 0	0	0	0
Issuance of restricted stock, net of cancellations (in shares)	60				0
Revaluation of redeemable non-controlling interest	$ 0	0	0	(9,686)	$ 0	(9,686)	0	(9,686)
Revaluation of redeemable non-controlling interest (in shares)	0				0
Purchase of partnership interests - non-controlling interest	$ 0	(918)	0	0	$ 0	(918)	(60)	(978)
Sale of non-controlling interest	0	96	0	0	0	96	2	98
Compensation expense - equity-based awards	0	7,867	0	0	0	7,867	0	7,867
Dividends payable to USPH shareholders	0	0	0	(18,765)	0	(18,765)	0	(18,765)
Distributions to non-controlling interest partners - permanent equity	0	0	0	0	0	0	(5,572)	(5,572)
Short swing profit settlement	0	20	0	0	0	20	0	20
Other	0	1	0	0	0	1	0	1
Ending balance at Dec. 31, 2021	$ 151	102,688	0	224,395	$ (31,628)	295,606	1,575	297,181
Ending balance (in shares) at Dec. 31, 2021	15,126				(2,215)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income attributable to USPH shareholders	$ 0	0	0	32,158	$ 0	32,158	0	32,158
Net income attributable to non-controlling interest - permanent equity	0	0	0	0	0	0	4,347	4,347
Issuance of restricted stock, net of cancellations	$ 1	0	0	0	$ 0	1	0	1
Issuance of restricted stock, net of cancellations (in shares)	90				0
Revaluation of redeemable non-controlling interest	$ 0	0	0	(2,896)	$ 0	(2,896)	0	(2,896)
Revaluation of redeemable non-controlling interest (in shares)	0				0
Purchase of partnership interests - non-controlling interest	$ 0	(353)	0	0	$ 0	(353)	(101)	(454)
Compensation expense - equity-based awards	0	7,264	0	0	0	7,264	0	7,264
Transfer of compensation liability for certain stock	0	707	0	0	0	707	0	707
Dividends payable to USPH shareholders	0	0	0	(21,321)	0	(21,321)	0	(21,321)
Distributions to non-controlling interest partners - permanent equity	0	0	0	0	0	0	(5,246)	(5,246)
Deferred taxes related to redeemable non-controlling interest - temporary equity	0	0	0	613	0	613	0	613
Other comprehensive gain (loss)	0	0	4,004	0	0	4,004	0	4,004
Other	0	11	0	(1)	0	10	685	695
Ending balance at Dec. 31, 2022	$ 152	110,317	4,004	232,948	$ (31,628)	315,793	1,260	317,053
Ending balance (in shares) at Dec. 31, 2022	15,216				(2,215)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income attributable to USPH shareholders	$ 0	0	0	28,239	$ 0	28,239	0	28,239
Net income attributable to non-controlling interest - permanent equity	0	0	0	0	0	0	4,555	4,555
Issuance of restricted stock, net of cancellations	$ 0	0	0	0	$ 0	0	0	0
Issuance of restricted stock, net of cancellations (in shares)	70				0
Issuance of common stock, pursuant to the secondary public offering, net of issuance costs	$ 20	163,626	0	0	$ 0	163,646	0	163,646
Issuance of common stock, pursuant to the secondary public offering, net of issuance costs (in shares)	1,916				0
Revaluation of redeemable non-controlling interest	$ 0	0	0	(13,564)	$ 0	(13,564)	0	(13,564)
Revaluation of redeemable non-controlling interest (in shares)	0				0
Purchase of partnership interests - non-controlling interest	$ 0	(83)	0	0	$ 0	(83)	(36)	(119)
Sale of non-controlling interest	0	0	0	0	0	0	4	4
Compensation expense - equity-based awards	0	7,236	0	0	0	7,236	0	7,236
Dividends payable to USPH shareholders	0	0	0	(24,128)	0	(24,128)	0	(24,128)
Distributions to non-controlling interest partners - permanent equity	0	0	0	0	0	0	(4,567)	(4,567)
Deferred taxes related to redeemable non-controlling interest - temporary equity	0	0	0	587	0	587	0	587
Other comprehensive gain (loss)	0	0	(1,222)	(2)	0	(1,224)	0	(1,224)
Other	0	0	0	(308)	0	(308)	0	(308)
Ending balance at Dec. 31, 2023	$ 172	$ 281,096	$ 2,782	$ 223,772	$ (31,628)	$ 476,194	$ 1,216	$ 477,410
Ending balance (in shares) at Dec. 31, 2023	17,202				(2,215)

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
OPERATING ACTIVITIES
Net income including non-controlling interest	$ 37,220	$ 43,407	$ 57,924
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation and amortization	15,695	14,743	11,591
Provision for credit losses	6,172	5,548	5,305
Equity-based awards compensation expense	7,236	7,264	7,867
Amortization of debt issue costs	420	305	56
Change in deferred income taxes	4,490	4,309	5,688
Change in revaluation of put-right liability	(2,582)	5	0
Change in fair value of contingent earn-out consideration	1,550	(2,520)	0
Equity of earnings in unconsolidated affiliate	(955)	(1,175)	(112)
Loss (gain) on sale of clinics and fixed assets	166	(643)	0
Impairment of goodwill and other intangible assets	17,495	9,112	0
Other	0	(83)	(134)
Changes in operating assets and liabilities:
Increase in patient accounts receivable	(5,645)	(10,279)	(9,417)
Increase in accounts receivable - other	(356)	(307)	(1,538)
Increase (decrease) in other current and long term assets	(197)	(5,940)	(633)
Decrease (increase) in accounts payable and accrued expenses	15	(7,755)	4,657
Decrease (increase) in other long-term liabilities	1,254	2,546	(4,848)
Net cash provided by operating activities	81,978	58,537	76,406
INVESTING ACTIVITIES
Purchase of fixed assets	(9,294)	(8,248)	(8,201)
Purchase of majority interest in businesses, net of cash acquired	(26,582)	(59,788)	(86,823)
Purchase of redeemable non-controlling interest, temporary equity	(10,986)	(14,987)	(28,465)
Purchase of non controlling interest, permanent equity	(281)	(280)	(1,274)
Proceeds on sale of non-controlling interest, permanent equity	102	0	131
Proceeds on sale of partnership interest - redeemable non-controlling interest, temporary equity	875	402	69
Distributions from unconsolidated affiliate	830	1,259	152
Proceeds on sale of partnership interest, clinics and fixed assets	0	373	275
Other	321	0	0
Net cash used in investing activities	(45,015)	(81,269)	(124,136)
FINANCING ACTIVITIES
Proceeds from issuance of common stock pursuant to the secondary public offering, net of issuance costs	163,646	0	0
Proceeds from revolving facility	24,000	101,000	316,000
Distributions to non-controlling interest, permanent and temporary equity	(16,100)	(15,348)	(16,931)
Cash dividends paid to shareholders	(24,128)	(21,321)	(18,765)
Payments on revolving facility	(55,000)	(184,000)	(218,000)
Principal payments on notes payable	(4,400)	(930)	(4,899)
Payments on term loan	(3,750)	(1,875)	0
Proceeds from term loan	0	150,000	0
Payment of deferred financing costs	0	(1,779)	0
Payment of Medicare Accelerated and Advance Funds	0	0	(14,054)
Other	0	12	28
Net cash provided by financing activities	84,268	25,759	43,379
Net increase in cash and cash equivalents	121,231	3,027	(4,351)
Cash and cash equivalents - beginning of period	31,594	28,567	32,918
Cash and cash equivalents - end of period	152,825	31,594	28,567
Cash paid during the period for:
Income taxes	4,926	7,615	12,214
Interest paid	8,655	5,687	1,352
Non-cash investing and financing transactions during the period:
Purchase of businesses - seller financing portion	1,815	1,574	3,050
Liabilities assumed associated with a purchase of a business	524	0	0
Notes payable related to purchase of redeemable non-controlling interest, temporary equity	1,087	1,074	1,759
Notes payable related to the purchase of non-controlling interest, permanent equity	200	296	0
Notes receivable related to sale of redeemable non-controlling interest, temporary equity	4,136	1,580	914
Notes receivable related to the sale of non-controlling interest, permanent equity	$ 458	$ 0	$ 0

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Organization, Nature of Operations and Basis of Presentation

12 Months Ended

Dec. 31, 2023

Organization, Nature of Operations and Basis of Presentation [Abstract]

Organization, Nature of Operations and Basis of Presentation

1. Organization, Nature of Operations and Basis of Presentation

The consolidated financial statements include the accounts of U.S. Physical Therapy, Inc. and its subsidiaries (the “Company”). All significant intercompany transactions and balances have been eliminated.

The Company operates its business through two reportable business segments. The Company’s reportable segments include the physical therapy operations segment and the industrial injury prevention services (“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.

During the last three years, the Company completed the acquisitions of the following clinic practices and IIP businesses detailed below:

		% Interest	Number of
Acquisition	Date	Acquired	Clinics
October 2023 Acquisition	October 31, 2023	**	*
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
December 2021 Acquisition	December 31, 2021	75%	3
November 2021 Acquisition	November 30, 2021	70%	*
September 2021 Acquisition	September 30, 2021	100%	*
June 2021 Acquisition	June 30, 2021	65%	8
March 2021 Acquisition	March 31, 2021	70%	6

* IIP business

** On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business (“October 2023 Acquisition”).

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.

Impact of COVID-19

Relief Funds

In March 2020 in response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care providers for lost revenues and health care related expenses that are attributable to COVID-19. For the year ended December 31, 2021, the Company recorded income of approximately $4.6 million under the CARES Act (“Relief Funds”). Under the Company’s accounting policy, these payments were recorded as Other income – Relief Funds.

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2023

Significant Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Cash Equivalents

The Company maintains its cash and cash equivalents at financial institutions. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The combined account balances at several institutions typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes that this risk is not significant.

Long-Lived Assets

Fixed assets are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Estimated useful lives for furniture and equipment range from three to eight years and for software purchased from three to seven years. Leasehold improvements are amortized over the shorter of the related lease term or estimated useful lives of the assets, which is generally three to five years.

Impairment of Long-Lived Assets

The Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances that indicate the related amounts may be impaired.

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, if the purchase price of a non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.

Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair value if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite-lived tradenames in conjunction with our annual goodwill impairment test.

The Company operates its business through two segments consisting of physical therapy clinics and an IIP business. For the purposes of goodwill impairment analysis, the segments are further broken down into reporting units.  Reporting units within our physical therapy business are comprised of six regions primarily based on each clinic’s location. In addition to the six regions, in 2023 and 2022, 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. The evaluation of goodwill in 2021 did not result in any goodwill amounts that were deemed impaired.

The Company recorded a charge for goodwill impairment of $15.8 million and $9.1 million in the years ended December 31, 2023, and December 31, 2022, respectively. The Company also recorded a charge of $1.7 million for impairment of a tradename during the year ended December 31, 2023. The charges for impairment related to one reporting unit in the IIP business.

During the year ended December 31, 2023, the Company did not recognize any additional impairment as a result of the Company’s 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 will continue to monitor for any triggering events or other indicators of impairment.

Investment in unconsolidated affiliates

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.

Redeemable Non-Controlling Interest

The non-controlling interest that is reflected as redeemable non-controlling interest in the consolidated financial statements consists of those in which 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 three 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 adjustment in the redemption value, net of tax, directly to retained earnings and are not reflected in the consolidated statements of net income. Although the adjustments are not reflected in the 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 consolidated statements of net income. Management believes the redemption value (i.e. the carrying amount) and fair value are the same.

Non-Controlling Interest

The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the statements of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.

When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. For ASC 606, 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, workers’ compensation) 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, the Company is 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 the Company’s established rate and the anticipated reimbursement rate is accounted for as an offset to revenue—contractual allowance. Payments for services rendered are typically due 30 to 120 days after receipt of the invoice.

Patient revenue

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 revenues (patient revenues less estimated contractual adjustments, see – Contractual Adjustments, for additional information) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as the Company provides physical and occupational therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that provide payments to the Company at amounts different from its established rates.

Other Revenue

Revenue from the IIP business, 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, post-offer employment testing and performance optimization. Revenue from the Company’s IIP business is recognized when obligations under the terms of the contract are satisfied. Revenues are 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.

Management contract revenue, which is also included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for third party owners. 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 a point in time when services are performed. Costs, typically salaries for the Company’s employees, are recorded when incurred. Management contract revenue was $8.6 million, $8.1 million and $9.9 million for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively.

Additionally, other revenue from physical therapy operations includes services the Company provides on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gym membership fees. 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 contract liability over the period of the agreement and recognized at the point in time, when the services are performed.

Contractual Allowances

The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience. 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 for any fiscal year has generally reflected a difference within approximately 1% to 1.5% of net revenues. 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% of gross billings included in accounts receivable each at December 31, 2023 and December 31, 2022.

Allowance for Credit Losses

The Company determines allowances for credit losses based on the specific agings and payor classifications at each clinic. The provision for credit losses is included in operating costs in the consolidated statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for credit losses, includes only those amounts the Company estimates to be collectible.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The CARES Act includes changes to certain tax law related to net operating losses and the deductibility of interest expense and depreciation. ASC 740, Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. The legislation had no effect on the Company’s deferred income taxes and current income taxes payable during the year ended December 31, 2023.

The  Company records interest or penalties in interest and other expense, in the consolidated statements of net income. The Company did not have any interest or penalties in each of the years ended December 31, 2023, 2022 and 2021.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date.

• Level 1 – Quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

• Level 3 – Unobservable inputs based on the Company’s own assumptions.

The carrying amounts reported in the balance sheets for cash and cash equivalents, contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturity of these financial instruments. The carrying amount under the Credit Agreement approximates the fair value due to the proximity of the debt issue date and the balance sheet date and the variable component of interest on debt. The interest rate on the Credit Agreement is tied to the Secured Overnight Financing Rate (“SOFR”).

The put right associated with the potential future purchase of the separate company in the November 2021 acquisition are both is also marked to fair value on a recurring basis using Level 3 inputs. The put right associated with the potential future purchase of the separate company in the IIP business is determined using a Monte Carlo simulation model utilizing unobservable inputs such as asset volatility and discount rates. The unobservable inputs in the valuation include asset volatility of 25.0% and a discount rate of 11.22%. The value of the put right associated with the potential future purchase of a company in the IIP business decreased $2.6 million from $3.6 million on December 31, 2022 to approximately $1.0 million on December 31, 2023. Accordingly, the Company recognized a gain of $2.6 million on this change in revaluation for the twelve months ended December 31, 2023.

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 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 December 31, 2023, was $3.7 million, of which $2.6 million has been included within Other current assets and $1.1 million has been included in Other assets in the accompanying Consolidated Balance Sheet. The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized loss of $1.2 million, net of tax, for the year ended December 31, 2023.

The redemption value of redeemable non-controlling interests approximates the fair value. See Note 6 for the changes in the fair value of Redeemable non-controlling interest.

The consideration for some of the Company’s acquisitions include future payments that are contingent upon the occurrence of future operational objectives being met. The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates. These fair value measurements are based on significant inputs not observable in the market. Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period.The Company determined the fair value of its contingent consideration obligation to be $9.8 million and $8.3 million on December 31, 2023 and 2022.

Segment Reporting

Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and industrial injury prevention services.

Use of Estimates

In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames, allocations of purchase price, allowance for receivables, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and related disclosures. Actual results may differ from these estimates.

Self-Insurance Program

The Company utilizes a self-insurance plan for its employee group health and dental insurance coverage administered by a third party. Predetermined loss limits have been arranged with the insurance company to minimize the Company’s maximum liability and cash outlay. Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims. Management believes that the current accrued amounts are sufficient to pay claims arising from self-insurance claims incurred through December 31, 2023.

Restricted Stock

Restricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant. Compensation expense for grants of restricted stock is recognized based on the fair value per share on the date of grant amortized over the vesting period. The Company recognizes any forfeitures as they occur. The restricted stock issued is included in basic and diluted shares for the earnings per share computation.

Reclassification of Prior Period Presentation

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.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The objective of ASU 2019-12 is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. The amendments in  this ASU are effective for fiscal years beginning after December 15, 2020, and early adoption was permitted. The Company completed the adoption of ASU 2020-06 effective January 1, 2021 and there was no material impact on the Company’s financial statements.

In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the treasury stock method. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive, regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy.

This pronouncement was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021.The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The use of either the modified retrospective or fully retrospective method of transition is permitted. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements.

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 Company’s Credit Agreement bear interest based on SOFR.

Recently Issued Accounting Guidance

In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-01, Leases (Topic 842): Common Control Arrangements, which requires companies to amortize leasehold improvements associated with related party leases under common control over the useful life of the leasehold improvement to the common control group. The ASU is effective for annual reporting periods beginning on or after December 15, 2023; however, early adoption is permitted. The ASU can either be applied prospectively or retrospectively. The adoption of ASU 2023-01 did not have a material effect on the Company’s financial statements.

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Earnings Per Share

12 Months Ended

Dec. 31, 2023

Earnings Per Share [Abstract]

Earnings Per Share

3. Earnings Per Share

The computations of basic and diluted earnings are as follows.

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
	(In thousands, except per share data)
Computation of earnings per share - USPH shareholders:
Net income attributable to USPH shareholders	$	28,239		$	32,158		$	40,831
Charges to retained earnings:
Revaluation of redeemable non-controlling interest		(13,565	)		(3,890	)		(13,011	)
Tax effect at statutory rate (federal and state)		3,466			994			3,324
	$	18,140		$	29,262		$	31,144
Earnings per share (basic and diluted)	$	1.28		$	2.25		$	2.41
Shares used in computation:
Basic and diluted earnings per share - weighted-average shares		14,188			12,985			12,898

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Acquisitions of Businesses

12 Months Ended

Dec. 31, 2023

Acquisitions of Businesses [Abstract]

Acquisitions of Businesses

4. 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 IIP 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.

The finalized purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2022 and 2021 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, i.e. trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For some of the acquisitions in 2023, the Company is in the process of completing its formal valuation analysis 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 at December 31, 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 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.

For the 2023, 2022 and 2021 acquisitions, total current assets primarily represent patient accounts receivable. Total non-current assets are fixed assets, primarily equipment, used in the practices.

During 2023, 2022 and 2021, the Company acquired a majority interest in the following businesses:

2023 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
October 2023 Acquisition	October 31, 2023		**		*
September 2023 Acquisition1	September 29, 2023		70%		4
September 2023 Acquisition2	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

* IIP business

** On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business (“October 2023 Acquisition”).

On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business. The previous owner of the ergonomics software business retained a 45% equity interest. The total purchase price of the combined businesses was approximately $4.0 million and was paid in cash.

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 was paid in January 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 single 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 purchase prices for the 2023 acquisitions have been preliminarily allocated as follows.

	For the Year Ended December 31, 2023
				Physical Therapy
	IIP			Operations			Total
	(In thousands)
Cash paid, net of cash acquired	$	3,955		$	22,627		$	26,582
Seller note		-			985			985
Deferred payments		-			830			830
Contingent payments		-			200			200
Total consideration	$	3,955		$	24,642		$	28,597
Estimated fair value of net tangible assets acquired:
Total current assets	$	392		$	1,141		$	1,533
Total non-current assets		335			3,149			3,484
Total liabilities		(41	)		(3,163	)		(3,204	)
Net tangible assets acquired		686			1,127			1,813
Customer and referral relationships		757			6,819			7,576
Non-compete agreement		37			329			366
Tradenames		187			1,680			1,867
Goodwill		2,562			25,521			28,083
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(274	)		(10,834	)		(11,108	)
	$	3,955		$	24,642		$	28,597

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 12.0 years. For the non-compete agreements, the weighted-average amortization period is 5.1 years. The values assigned to tradenames are tested annually for impairment.

2022 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
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

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. The note accrues interest at 7.0% per annum and the principal and interest are payable on November 30, 2024. As part of the acquisition, the Company agreed to additional contingent consideration of up to $1.6 million if future operational objectives were met. The additional contingent consideration was valued at $1.6 million on December 31, 2023, and was paid in full in January 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 $9.8 million on December 31, 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 price for the 2022 acquisitions has been allocated as follows.

	Physical Therapy
	Operations
	(In thousands)
Cash paid, net of cash acquired	$	59,788
Seller notes		1,574
Contingent payments		10,000
Total consideration	$	71,362
Estimated fair value of net tangible assets acquired:
Total current assets	$	1,329
Total non-current assets		7,798
Total liabilities		(10,930	)
Net tangible assets acquired		(1,803	)
Customer and referral relationships		18,062
Non-compete agreements		934
Tradenames		5,445
Goodwill		75,525
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(26,801	)
	$	71,362

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 12.2 years. For non-compete agreements, the weighted-average amortization period is 5.0 years. The values assigned to tradenames are tested annually for impairment.

2021 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
December 2021 Acquisition	December 31, 2021		75%		3
November 2021 Acquisition	November 30, 2021		70%		*
September 2021 Acquisition	September 30, 2021		100%		*
June 2021 Acquisition	June 30, 2021		65%		8
March 2021 Acquisition	March 31, 2021		70%		6

* IIP business

On December 31, 2021, the Company acquired a 75% interest in three-clinic physical therapy practice with the practice founder retaining 25%. The purchase price for the 75% interest was approximately $3.7 million, of which $3.5 million was paid in cash and $0.2 million in the form of a note payable. The note accrued interest at 3.25% per annum and the principal and interest was paid on December 31, 2023.

On November 30, 2021, the Company acquired an approximate 70% interest in a leading provider of industrial injury prevention services (“IIP Acquisition”). In each case, the previous owners retained the remaining interest. The purchase price for the approximate 70% equity interest, not inclusive of a contingent payment up to $2.0 million, was approximately $63.2 million of which $60.7 million was paid in cash and $1.0 million in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest is payable on November 30, 2023. As part of the transaction, the Company also agreed to the potential future purchase of a separate company under the same ownership that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area. The current owners have the right to put this transaction to the Company in approximately five years, with such right having a $1.2 million value on December 31, 2023, as reflected on the Company’s consolidated balance sheet in Other long-term liabilities. The value of this right will be adjusted in future periods, as appropriate, with any change in value reflected in the Company’s consolidated statement of income. The Company does not currently possess more than 50% of the controlling interests in this separate company, does not control this company through contract or governance rights and currently does not exercise significant influence over this separate company. Due to the aforementioned reasons, and based on current accounting guidance, the Company did not consolidate the separate company through the variable interest or voting interest model. The Company revalued the contingent earn-out consideration related to the acquisition during the year ended December 31, 2022, resulting in a gain of $2.0 million and the reduction of the liability to $0.

On September 30, 2021, the Company acquired a company that specializes in return-to-work and ergonomic services, among other offerings. The Company acquired the company’s assets at a purchase price of approximately $3.3 million (which includes the obligation to pay an amount up to $0.6 million in contingent payment consideration in conjunction with the acquisition if specified future operational objectives are met), and contributed those assets to Briotix Health. The initial purchase price, not inclusive of the $0.6 million contingent payment, was approximately $2.7 million, of which $2.4 million was paid in cash, and $0.3 million is in the form of a note payable. The note accrued interest at 3.25% per annum and the principal and interest was paid in September 2023. The Company revalued the contingent earn-out consideration related to the acquisition during the year ended December 31, 2022, resulting in the elimination of the $0.6 million liability previously booked to $0.

On June 30, 2021, the Company acquired a 65% interest in an eight-clinic physical therapy with the previous owners retaining 35%. The purchase price was approximately $10.3 million, of which $9.0 million was paid in cash, $1.0 million is payable based on the achievement of certain business criteria and $0.3 million is in the form of a note payable. The note accrued interest at 3.25% per annum and the principal and interest and was paid in June 2023. Additionally, the Company has an obligation to pay an additional amount up to $0.8 million in contingent payment consideration in conjunction with the acquisition if specified future operational objectives are met. The Company recorded acquisition-date fair value of this contingent liability based on the likelihood of the contingent earn-out payment. The earn-out payment valued at $0.8 million on December 31, 2023, will subsequently be remeasured to fair value each reporting date.

On March 31, 2021, the Company acquired a 70% interest in a five-clinic physical therapy practice with the previous owners retaining 30%. When acquired, the practice was developing a sixth clinic which has been completed. The purchase price for the 70% interest was approximately $12.0 million, of which $11.7 million was paid in cash and $0.3 million in the form of a note payable. The note accrued interest at 3.25% per annum and the principal and interest was paid in March 2023.

The purchase price for the 2021 acquisitions has been allocated as follows.

				Physical Therapy
	IIP			Operations			Total
	(In thousands)			(In thousands)			(In thousands)
Cash paid, net of cash acquired	$	63,193		$	23,630		$	86,823
Seller notes		1,250			800			2,050
Contingent payments		2,520			837			3,357
Other payable		-			1,000			1,000
Seller put right		3,522			-			3,522
Total consideration	$	70,485		$	26,267		$	96,752
Estimated fair value of net tangible assets acquired:
Total current assets	$	5,588		$	1,885		$	7,473
Total non-current assets		12,620			7,014			19,634
Total liabilities		(4,842	)		(8,313	)		(13,155	)
Net tangible assets acquired		13,366			586			13,952
Customer and referral relationships		21,127			7,969			29,096
Non-compete agreements		500			415			915
Tradenames		5,141			2,144			7,285
Goodwill		58,257			27,109			85,366
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(27,906	)		(11,956	)		(39,862	)
	$	70,485		$	26,267		$	96,752

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Acquisitions and Sale of Non-Controlling Interests

12 Months Ended

Dec. 31, 2023

Acquisitions and Sale of Non-Controlling Interests [Abstract]

Acquisitions and Sale of Non-Controlling Interests

5. Acquisitions and Sale of Non-Controlling Interests

During 2023, the Company acquired additional interests in three partnerships which are included in non-controlling interests - permanent equity. The additional interests purchased in each of the partnerships ranged from 0.15% to 35.0%. The aggregated purchase price for these acquired interests was $0.5 million. The Company also sold interests in four partnerships for an aggregate price of $0.6 million. The non-controlling interests - permanent equity sold in each of the partnerships ranged from 0.5% to 8.0%.

During 2022, the Company acquired additional interests in three partnerships which are included in non-controlling interest. The additional interests purchased in each of the partnerships ranged from 10% to 35%. The aggregated purchase price for these acquired interests was $0.3 million.

During 2021, the Company acquired additional interests in five partnerships which are included in non-controlling interest. The additional interests purchased in each of the partnerships ranged from 5% to 35%. The aggregated purchase price for these acquired interests was $1.3 million. The Company also sold an interest in a partnership for $0.1 million.

XML

Redeemable Non-Controlling Interest

12 Months Ended

Dec. 31, 2023

REDEEMABLE NON-CONTROLLING INTEREST [Abstract]

Redeemable Non-Controlling Interest

6. Redeemable Non-Controlling Interest

Physical Therapy Practice Acquisitions

When the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic (referred to as “Therapy Practice”), these Therapy Practice transactions occur in a series of steps which are described below.

1. Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals (the “Selling Shareholders”) most of whom are physical therapists that work in the Acquired Therapy Practice and provide physical therapy services to patients.

2. In conjunction with the Acquisition, the Seller Entity contributes the acquired Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one hundred percent (100%) of the limited and general partnership interests in NewCo. Therefore, in this step, NewCo becomes a wholly-owned subsidiary of the Seller Entity.

3. The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from  50% to 90%) of the limited partnership interest and in all cases 100% of the general partnership interest in NewCo. The Company does not purchase 100% of the limited partnership interest because the Selling Shareholders, through the Seller Entity, want to maintain an ownership percentage. The consideration for the Acquisition is primarily payable in the form of cash at closing and a two-year note in lieu of an escrow (the “Purchase Price”). The Purchase Agreement usually does not contain any future earn-out or other contingent consideration that is payable to the Seller Entity or the Selling Shareholders.

4. The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo.

5. As noted above, the Company does not purchase 100% of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“Seller Entity Interest”).

6. In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that ranges from three to five years (the “Employment Term”), with automatic one-year renewals, unless employment is terminated prior to the end of the Employment Term. As a result, a Selling Shareholder becomes an employee (“Employed Selling Shareholder”) of NewCo. The employment of an Employed Selling Shareholder can be terminated by the Employed Selling Shareholder or NewCo, with or without cause, at any time. In a few situations, a Selling Shareholder does not become employed by NewCo and is not involved with NewCo following the closing; in those situations, such Selling Shareholders sell their entire ownership interest in the Seller Entity as of the closing of the Acquisition.

7. The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities based on other employees in similar capacities within NewCo, the Company and the industry.

8. The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing Therapy Practice activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the Selling Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing Therapy Practice during the Non-Compete Term.

9. The Non-Compete Term commences as of the date of the Acquisition and expires on the later of:

a. Two years after the date an Employed Selling Shareholders’ employment is terminated (if the Selling Shareholder becomes an Employed Selling Shareholder) or

b. Five to six years from the date of the Acquisition, as defined in the Non-Compete Agreement, regardless of whether the Selling Shareholder is employed by NewCo.

10. The Non-Compete Agreement applies to a restricted region which is defined as a mileage radius from the Acquired Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in competing Therapy Practices or activities outside the designated geography (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the competing Therapy Practice or activities outside the designated geography.
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:

1. Put Right

a. In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to the fifth anniversary of the Closing Date, the Seller Entity thereafter may have an irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

b. In the event that any Selling Shareholder is not employed by NewCo as of the fifth anniversary of the Closing Date and the Company has not exercised its Call Right with respect to the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter has the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

c. In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Seller Entity has the Put Right, and upon the exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

2. Call Right

a. If any Selling Shareholder’s employment by NewCo is terminated prior to the fifth anniversary of the Closing Date, the Company thereafter has an irrevocable right to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below.

b. In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Company has the Call Right, and upon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

3. For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on available cash within NewCo; therefore, the undistributed earnings amount is small, if any.

4. The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and the Call Right noted above.

5. The Put Right and the Call Right do not have an expiration date.

6. The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire ownership interest in the Seller Entity at the closing of the Acquisition.
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.

ProgressiveHealth Acquisition

On November 30, 2021, the Company acquired a majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest in certain subsidiaries (“Progressive Subsidiaries”) that operate in the industrial injury prevention and therapy services businesses.  The Progressive transaction was completed in a series of steps which are described below.

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 (100%) of the membership interests in Progressive NewCo. Therefore, in this step, Progressive NewCo became wholly-owned by the Progressive Selling Shareholders.

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 100% of the membership interests in Progressive NewCo and the Progressive Selling Shareholders retained a portion of the membership interest in Progressive NewCo (“Progressive Selling Shareholders’ Interest”).

6. The Company and the Progressive Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”) which restricts the Progressive Selling Shareholders from competing for a specified period of time (the “Progressive Non-Compete Term”).

7. The Progressive Non-Compete Term commences as of the date of the closing of the Progressive acquisition (the “Progressive Closing Date”) and expires on the later of:

a. Two years after the date a Progressive Selling Shareholder no longer is involved in the management of Progressive NewCo or

b. Seven years from the date of the acquisition.

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 30% of their respective residual interests on each of the 4th and 5th anniversaries of the Progressive Closing Date, and then 10% on each of the 6th and 7th anniversaries

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 Progressive Put Right, and upon the exercise of the Progressive Put Right, the Progressive Selling Shareholder’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

2. Progressive Call Right

a. If any Progressive Selling Shareholder’s ceases to perform management services on behalf of Progressive NewCo, the Company thereafter shall have an irrevocable right to purchase from such Progressive Selling Shareholder his Interest, in each case at the purchase price described in “3” below.

3. For the Progressive Put Right and the Progressive Call Right, the purchase price is derived from a formula based on a specified multiple of Progressive NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of Progressive NewCo (the “Progressive Redemption Amount”). Progressive NewCo’s earnings are distributed monthly based on available cash within Progressive NewCo; therefore, the undistributed earnings amount is small, if any.

4. The Progressive Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Progressive Put Right and the Progressive Call Right noted above.

5. The Progressive Put Right and the Progressive Call Right do not have an expiration date.

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 Progressive Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Progressive 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

For the years ended December 31, 2023, 2022 and 2021, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests.

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
	(In thousands)
Beginning balance	$	167,515		$	155,262		$	132,340
Net income allocated to redeemable non-controlling interest		4,426			6,902			11,358
Distributions to redeemable non-controlling interest partners		(11,533	)		(10,102	)		(11,359	)
Changes in the fair value of redeemable non-controlling interest		13,565			3,862			13,011
Purchases of redeemable non-controlling interest		(12,073	)		(16,061	)		(30,204	)
Acquired interest		11,007			26,746			39,862
Contributed capital		-			231			-
Sales of redeemable non-controlling interest		5,012			1,982			982
Changes in notes receivable related to redeemable non-controlling interest		(3,091	)		(1,901	)		(914	)
Adjustments in notes receivables related to the sales of redeemable non-controlling interest		-			594			186
Ending balance	$	174,828		$	167,515		$	155,262

The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests.

	As of the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Contractual time period has lapsed but holder’s employment has not terminated	$	96,876	$	75,688	$	80,781
Contractual time period has not lapsed and holder’s employment has not terminated		77,952		91,827		74,481
Holder’s employment has terminated and contractual time period has expired		-		-		-
Holder’s employment has terminated and contractual time period has not expired		-		-		-
	$	174,828	$	167,515	$	155,262

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Goodwill

12 Months Ended

Dec. 31, 2023

Goodwill [Abstract]

Goodwill

7. Goodwill

The changes in the carrying amount of goodwill consisted of the following.

	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Beginning balance	$	494,101		$	434,679
Acquisitions		28,083			72,674
Adjustments for purchase price allocation of businesses acquired in prior year		3,187			(4,140	)
Impairment of goodwill		(15,800	)		(9,112	)
Ending balance	$	509,571		$	494,101

During the years ended December 31, 2023, and December 31, 2022, the Company recorded a charge for goodwill impairment of $15.8 million and $9.1 million respectively, related to an IIP Acquisition. The impairment is related to a change in an IIP subsidiary’s current and projected operating income as well as various market inputs based on current market conditions.

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Intangible Assets, net

12 Months Ended

Dec. 31, 2023

Intangible Assets, net [Abstract]

Intangible Assets, net

8. Intangible Assets, net

The Company’s intangible assets, net, consisted of the following.

	As of the Year Ended
	December 31, 2023							December 31, 2022
	Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Customer and referral relationships	$	93,658	$	(30,414	)	$	63,244	$	86,974	$	(23,736	)	$	63,238
Tradenames		44,573		-			44,573		43,373		-			43,373
Non-compete agreements		9,459		(7,594	)		1,865		9,143		(6,999	)		2,144
	$	147,690	$	(38,008	)	$	109,682	$	139,490	$	(30,735	)	$	108,755

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 6 to 14 years. Non-compete agreements are amortized over the respective term of the agreements which range from 5 to 6 years. The weighted average amortization period for customer and referral relationships was 12.7 years for the year ended December 31, 2023 and 12.9 years for the year ended December 31, 2022. The weighted average amortization period for non-compete agreements was 5.6 years for the years ended December 31, 2023, and December 31, 2022. During the year ended December 31, 2023, the Company recognized a charge of $1.7 million related to the impairment of a tradename related to an IIP acquisition.

The following table details the amount of amortization expense recorded for intangible assets for the periods presented.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Customer and referral relationships	$	6,678	$	5,974	$	3,240
Non-compete agreements		595		549		458
	$	7,273	$	6,523	$	3,698

The remaining balances of the customer and referral relationships and non-compete agreements are expected to be amortized as follows.

For the Year Ended December 31,	Customer and Referral Relationships		Non-Compete Agreements
	(In thousands)
2024	$	6,967	$	599
2025		6,823		533
2026		6,356		393
2027		6,192		232
2028		5,923		102
Thereafter	$	30,983	$	6

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Accrued Expenses

12 Months Ended

Dec. 31, 2023

Accrued Expenses [Abstract]

Accrued Expenses

9. Accrued Expenses

Accrued expenses consisted of the following.

	As of the Year Ended
	December 31, 2023		December 31, 2022
	(In thousands)
Salaries and related costs	$	25,641	$	22,912
Credit balances due to patients and payors		8,847		8,094
Group health insurance claims		2,301		1,666
Federal income taxes payable		1,006		-
Contingency payable		12,285		620
Other property taxes payable		355		277
Interest payable		235		273
Closure costs		231		243
Other		4,443		3,328
	$	55,344	$	37,413

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Borrowings

12 Months Ended

Dec. 31, 2023

BORROWINGS [Abstract]

Borrowings

10. Borrowings

Amounts outstanding under the Credit Agreement (as defined above) and notes payable consisted of the following.

	As of the Year Ended
	December 31, 2023							December 31, 2022
	Principal Amount		Unamortized Debt Issuance Cost			Net Debt		Principal Amount		Unamortized Debt Issuance Cost			Net Debt
	(In thousands)
Term Facility	$	144,375	$	(1,468	)	$	142,907	$	148,125	$	(1,861	)	$	146,264
Revolving Facilitiy		-		-			-		31,000		-			31,000
Other (1)		3,775		-			3,775		6,430		-			6,430
Total debt		148,150		(1,468	)		146,682		185,555		(1,861	)		183,694
Less: Current portion of long-term debt		8,111		(420	)		7,691		8,271		(408	)		7,863
Long-term debt, net of current portion	$	140,039	$	(1,048	)	$	138,991	$	177,284	$	(1,453	)	$	175,831

(1) The long-term portion is included as part of Other Long-Term Liabilities in the Consolidated Balance Sheet.

Effective December 5, 2013, the Company entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility. This agreement was amended and/or restated in August 2015, January 2016, March 2017, November 2017, 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 million. Such loans were made available through the following facilities (collectively, the “Senior Credit Facilities”):

1) Revolving Facility: $175 million, five-year, revolving credit facility (“Revolving Facility”), which includes a $12 million sublimit for the issuance of standby letters of credit and a $15 million sublimit for swingline loans (each, a “Swingline Loan”).

2) Term Facility: $150 million term loan facility (the “Term Facility”). The Term Facility amortizes in quarterly installments of: (a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year, and (c) 1.875% in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date.

The 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 December 31, 2023, $144.4 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 December 31, 2023, the Company was in compliance with all of the covenants contained in the Credit Agreement.

The Company generally enters into various notes payable as a means of financing a portion of its acquisitions and purchasing of non- controlling interests. In conjunction with these transactions in 2023 and 2022, the Company entered into notes payable in the aggregate amount of $4.7 million of which an aggregate principal payment of $0.9 million was paid in 2023, $2.5 million is due in 2024, and $1.3 million is due in 2025. Interest accrues in the range of 3.25% to 7.0% per annum and is payable with each principal installment.

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Derivative Instruments

12 Months Ended

Dec. 31, 2023

Derivative Instruments [Abstract]

Derivative Instruments

11. Derivative Instruments

The Company is exposed to certain market risks during the ordinary course of business due to adverse changes in interest rates. The exposure to interest rate risk primarily results from the Company’s variable-rate borrowing. The Company may elect to use derivative financial instruments to manage risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile and the Company’s risk management activities do not eliminate these risks.

Interest Rate Swap

In May 2022, the Company entered into an interest rate swap agreement, effective on June 30, 2022, with Bank of America, N.A. The swap has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan. The swap has a maturity date of June 30, 2027. Beginning in July 2022, the Company receives a 1-month SOFR, and pays a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis. The total interest rate in any period will also include an applicable margin based on the Company’s consolidated leverage ratio.

In connection with the swap, no cash was exchanged between the Company and the counterparty.

The Company designated its interest rate swap as a cash flow hedge and structured it to be highly effective. Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax.

Savings from the interest rate swap arrangement totaled $3.3 million for the year ended December 31, 2023, and less than $0.1 million for the year ended December 31, 2022. These savings reduce the amount of interest expense, debt and other in the accompanying consolidated statements of income.

The impacts of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income are presented in the table below.

	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Net income	$	37,220		$	43,407
Other comprehensive (loss) gain
Unrealized (loss) gain on cash flow hedge		(1,642	)		5,378
Tax effect at statutory rate (federal and state)		420			(1,374	)
Comprehensive income	$	35,998		$	47,411
Comprehensive income attributable to non-controlling interest		(8,981	)		(11,249	)
Comprehensive income attributable to USPH shareholders		27,017			36,162

The valuations of the Company’s interest rate derivatives are measured as the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty, which is a Level 2 fair value measurement.

The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as follows:

	As of the Year Ended
	December 31, 2023		December 31, 2022
	(In thousands)
Other current assets	$	2,663	$	2,858
Other assets	$	1,073	$	2,520
		3,736		5,378

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Leases

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Leases

12. 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. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the net present value of the fixed lease payments over the lease term. The Company’s operating lease terms are generally five years or less. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term.Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage are not included in the right-of-use assets or operating lease liabilities. These are expensed as incurred and recorded as variable lease expense.

The components of lease expense were as follows.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Operating lease cost	$	38,559	$	35,154	$	32,021
Short-term lease cost		1,353		1,049		1,160
Variable lease cost		8,912		6,287		7,057
Total lease cost*	$	48,824	$	42,490	$	40,238

* Sublease income was immaterial.

Lease costs are reflected in the consolidated statements of net income in the line item — rent, supplies, contract labor and other.

The supplemental cash flow information related to leases was as follows.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities	$	39,813	$	36,136	$	33,192
Right-of-use assets obtained in exchange for new operating lease liabilities	$	36,264	$	40,502	$	46,088

The aggregate future lease payments for operating leases as of December 31, 2023, were as follows.

Fiscal Year	Amount (In thousands)
2024	$	38,809
2025		30,628
2026		22,845
2027		15,275
2028 and thereafter		13,174
Total lease payments	$	120,731
Less: imputed interest		8,826
Total operating lease liabilities	$	111,905

Average lease terms and discount rates were as follows:

	As of the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
Weighted-average remaining lease term	3.9 years			4.1 Years			4.2 Years
Weighted-average discount rate		4.0	%		2.9	%		2.8	%

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Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

13. Income Taxes

Significant components of deferred tax assets and liabilities included in the consolidated balance sheets as of the periods below were as follows.

	As of the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Deferred tax assets:
Compensation	$	1,680		$	1,464
Allowance for credit losses		574			605
Lease obligations - including closed clinics		28,592			28,525
Deferred tax assets	$	30,846		$	30,594
Deferred tax liabilities:
Depreciation and amortization	$	(27,290	)	$	(23,836	)
Operating lease right-of-use assets		(26,427	)		(26,318	)
Gain on cash flow hedge		(955	)		(1,373	)
Change in revaluation of put-right liability		(586	)		-
Other		(403	)		(370	)
Deferred tax liabilities		(55,661	)		(51,897	)
Net deferred tax liabilities	$	(24,815	)	$	(21,303	)

The deferred tax assets and liabilities related to purchased interests not yet finalized may result in an immaterial adjustment.

As of December 31, 2023, the Company has a federal tax payable of $1.0 million and state tax receivables of $2.1 million. The federal and state income tax receivable is included in other current assets on the accompanying consolidated balance sheets.

The differences between the federal tax rate and the Company’s effective tax rate for the years ended December 31, were as follows for the periods presented:

	For the Year Ended
	December 31, 2023				December 31, 2022				December 31, 2021
	(In Thousands)
U. S. tax at statutory rate	$	8,483	21.0	%	$	9,307	21.0	%	$	11,782		21.0	%
State income taxes, net of federal benefit		2,135	5.3	%		2,079	4.7	%		2,478		4.4	%
Shortfall (excess) equity compensation deduction		123	0.3	%		149	0.3	%		(246	)	-0.4	%
Non-deductible expenses		710	1.8	%		629	1.4	%		1,258		2.2	%
Return to provision adjustments		705	1.7	%		-	0.0	%		-		0.0	%
	$	12,156	30.1	%	$	12,164	27.4	%	$	15,272		27.2	%

Significant components of the provision for income taxes were as follows for the periods presented.

	For the Year Ended
	December 31, 2023		December 31, 2022			December 31, 2021
	(In Thousands)
Current:
Federal	$	6,996	$	(770	)	$	7,477
State		512		518			2,107
Total current		7,508		(252	)		9,584
Deferred:
Federal		3,819		9,933			4,866
State		829		2,483			822
Total deferred		4,648		12,416			5,688
Total income tax provision	$	12,156	$	12,164		$	15,272

Each year, the Company performs a detailed reconciliation of its federal and state taxes payable and receivable accounts along with its federal and state deferred tax asset and liability accounts. This process resulted in a $1.0 million increase in income tax expense in 2023. The Company considers this reconciliation process to be an annual control.

The Company is required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income in the periods which the deferred tax assets are deductible, management believes that a valuation allowance is not required, as it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

The Company’s U.S. federal returns remain open to examination for 2020 through 2022 and U.S. state jurisdictions are open for periods ranging from 2019 through 2022.

The Company does not believe that it has any significant uncertain tax positions at December 31, 2023 and December 31, 2022, nor is this expected to change within the next twelve months due to the settlement and expiration of statutes of limitation.

The Company did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the years ended December 31, 2023, 2022 and 2021.

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Segment Information

12 Months Ended

Dec. 31, 2023

Segment Information [Abstract]

Segment Information

14. 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.

Physical Therapy Operations

The physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which the Company generally owns a 1% general partnership interest in all the Clinic Partnerships. The Company’s limited partnership interests generally range from 65% to 75% (the range is 10% - 99%) in the Clinic Partnerships. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most of the clinics (hereinafter referred to as “Clinic Partnerships”). To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries, under profit sharing arrangements with therapists (hereinafter referred to as “Wholly-Owned Facilities”).

The Company continues to seek to attract for employment physical therapists who have established relationships with physicians and other referral sources, by offering these therapists a competitive salary and incentives based on the profitability of the clinic that they manage. For multi-site clinic practices in which a controlling interest is acquired by the Company, the prior owners typically continue on as employees to manage the clinic operations, retain a non-controlling ownership interest in the clinics and receive a competitive salary for managing the clinic operations. In addition, the Company has developed satellite clinic facilities as part of existing Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operate more than one clinic location.

Besides the multi-clinic acquisitions referenced in the table above, during 2023 and 2022, we purchased the assets and businesses of nine and three physical therapy clinics, respectively, in separate transactions.

Clinic Partnerships

For non-acquired Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interests, typically owned by the managing therapist, directly or indirectly, are recorded within the balance sheets and income statements as non-controlling interest—permanent equity. For acquired Clinic Partnerships with redeemable non-controlling interests, the earnings attributable to the redeemable non-controlling interests are recorded within the consolidated balance sheets and income statements as redeemable non-controlling interest—temporary equity.

Wholly-Owned Facilities

For Wholly-Owned Facilities with profit sharing arrangements, an appropriate accrual is recorded for the amount of profit sharing due the clinic partners/directors. The amount is expensed as compensation and included in clinic operating costs—salaries and related costs. The respective liability is included in current liabilities—accrued expenses on the consolidated balance sheets.

Industrial Injury Prevention Services

Services provided in the IIP segment include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacity evaluations, and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors. The Company performs these services through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers (“ATCs”).

On October 31, 2023, the Company purchased a 100% interest in an IIP business and a 55% equity interest in an ergonomics software business for a total purchase price of approximately $4.0 million.

Segment Financials

The Company evaluates the 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. Prior year results presented herein have been changed to conform to the current presentation.

	For the Year Ended December 31,
	2023		2022		2021
	(In thousands)
Net revenue:
Physical therapy operations	$	526,548	$	476,092	$	451,122
Industrial injury prevention services		78,254		77,052		43,900
Total Company	$	604,802	$	553,144	$	495,022
Operating Costs:
Salaries and related costs:
Physical therapy operations	$	302,765	$	272,360	$	251,256
Industrial injury prevention services		50,625		46,831		27,213
Total salaries and related costs	$	353,390	$	319,191	$	278,469
Rent supplies, contract labor and other:
Physical therapy operations	$	112,547	$	102,114	$	88,073
Industrial injury prevention services		11,184		14,267		5,993
Total rent, supplies, contract labor and other	$	123,731	$	116,381	$	94,066
Provision for credit losses:
Physical therapy operations	$	6,129	$	5,517	$	5,249
Industrial injury prevention services		43		31		56
Total provision for credit losses	$	6,172	$	5,548	$	5,305
Total Company	$	483,293	$	441,120	$	377,840
Gross profit:
Physical therapy operations	$	105,064	$	96,057	$	106,488
Industrial injury prevention services		16,445		15,967		10,694
Total Company	$	121,509	$	112,024	$	117,182
Total Assets:
Physical therapy operations	$	857,274	$	708,662	$	587,801
Industrial injury prevention services		139,964		149,492		161,625
Total Company	$	997,238	$	858,154	$	749,426

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Investment in Unconsolidated Affiliate

12 Months Ended

Dec. 31, 2023

Investment in Unconsolidated Affiliate [Abstract]

Investment in Unconsolidated Affiliate

15. 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. The Company is deemed to not have a controlling interest in the company, and therefore the Company’s investment is accounted for using the equity method of accounting. The investment balance of this joint venture as of December 31, 2023, is $12.3 million and the earnings amounted to approximately $1.0 million. The investment balance of this joint venture as of December 31, 2022, was $12.1 million and the earnings amounted to approximately $1.2 million.

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Equity Based Plans

12 Months Ended

Dec. 31, 2023

Equity Based Plans [Abstract]

Equity Based Plans

16. Equity Based Plans

Stock-based compensation expense was approximately $7.2 million, $7.3 million, and $7.8 million for the years ended December 31, 2023, 2022 and 2021 respectively. As of December 31, 2023, the remaining $9.8 million of compensation expense will be recognized over a weighted average period of 1.75 years.

Stock Incentive Plans

Amended and Restated 1999 Employee Stock Option Plan

The Amended and Restated 1999 Employee Stock Option Plan (the “Amended 1999 Plan”) permits the Company to grant to non-employee directors and employees of the Company up to 600,000 non-qualified options to purchase shares of common stock and restricted stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). The exercise prices of options granted under the Amended 1999 Plan are determined by the Compensation Committee. The period within which each option will be exercisable is determined by the Compensation Committee.  As of December 31, 2023, there were less than 0.1 million shares remaining that can be subject to new awards under the Amended 1999 Plan.

Amended and Restated 2003 Stock Option Plan

The Amended and Restated 2003 Stock Option Plan (the “Amended 2003 Plan”) permits the Company to grant to key employees and outside directors of the Company incentive and non-qualified options and shares of restricted stock covering up to 2,600,000 shares of common stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). As of December 31, 2023, there were 0.5 million shares remaining that can be subject to new awards under the Amended 2003 Plan.

Restricted Stock Awards

During 2023, 2022 and 2021, the Company granted the following shares of restricted stock to directors, officers, and employees pursuant to its equity plans as follows:

			Weighted Average Fair
Year Granted	Number of Shares		Value Per Share
2023		73,384	$	102.79
2022		95,316	$	100.08
2021		60,317	$	131.29

During 2023, 2022 and 2021, the following shares were cancelled due to employee terminations prior to restrictions lapsing:

			Weighted Average Fair
Year Cancelled	Number of Shares		Value Per Share
2023		4,086	$	103.99
2022		5,180	$	109.42
2021		439	$	113.80

Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant.

There were 124,638 and 124,939 shares outstanding as of December 31, 2023, and December 31, 2022, respectively, for which restrictions had not lapsed. The restrictions will lapse from 2024 through 2027.

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Preferred and Common Stock

12 Months Ended

Dec. 31, 2023

Preferred and Common Stock [Abstract]

Preferred and Common Stock

17. Preferred and Common Stock

Preferred Stock

The Board is empowered, without approval of the shareholders, to cause shares of preferred stock to be issued in one or more series and to establish the number of shares to be included in each such series and the rights, powers, preferences, and limitations of each series. There are no provisions in the Company’s Articles of Incorporation specifying the vote required by the holders of preferred stock to take action. All such provisions would be set out in the designation of any series of preferred stock established by the Board. The bylaws of the Company specify that, when a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before the meeting, unless a different vote is required by law or the Company’s Articles of Incorporation.

Because the Board has the power to establish the preferences and rights of each series, it may afford the holders of any series of preferred stock, preferences, powers, and rights, voting or otherwise, senior to the right of holders of common stock. The issuance of the preferred stock could have the effect of delaying or preventing a change in control of the Company.

Common Stock

From September 2001 through December 31, 2008, the Board authorized the Company to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of the Company’s common stock. In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of its common stock (“March 2009 Authorization”). Under the March 2009 Authorization, the Company has purchased a total of 859,499 shares. The Company is required to retire shares purchased under the March 2009 Authorization.

In November 2023, the Board terminated the March 2009 Authorization such that any such proposed repurchase of our common stock would be considered and determined by the Board at such time. The Company did not purchase any shares of its common stock during 2023, 2022 or 2021.

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.

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Defined Contribution Plan

12 Months Ended

Dec. 31, 2023

Defined Contribution Plan [Abstract]

Defined Contribution Plan

18. Defined Contribution Plan

The Company has several 401(k) profit sharing plans covering all employees with three months of service. For certain plans, the Company makes matching contributions. The Company may also make discretionary contributions of up to 50% of employee contributions. The Company did not make any discretionary contributions for the years ended December 31, 2023, 2022 and 2021.The Company matching contributions totaled $2.2 million, $2.0 million and $1.9 million, respectively, for the years ended December 31, 2023, 2022 and 2021.

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Contingencies

12 Months Ended

Dec. 31, 2023

Contingencies [Abstract]

Contingencies

19. Contingencies

The Company is a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of our business.

Prior Florida Legal Matter

In 2019, a qui tam lawsuit (“the Complaint”) was filed by a relator on behalf of the United States against the Company and one of our Florida majority-owned subsidiaries (the “Hale Partnership”).   This whistleblower lawsuit was filed in the U.S. District Court for the Southern District of Texas, seeking damages and civil penalties under the federal False Claim Act.  The U.S Government declined to intervene in the case and unsealed the Complaint in July 2019.  The Complaint alleged that the Hale Partnership engaged in conduct to purposely “upcode” its billings for services provided to Medicare patients. The plaintiff-relator also claimed that similar false claims occurred on other days and at other Company-owned partnerships.

In January 2022, the Company entered into a settlement agreement with the plaintiff-relator. In the settlement agreement, the plaintiff-relator released all defendants from liability for all conduct alleged in the Complaint, and the Company admitted no liability or wrongdoing.  In connection with the settlement, the Office of the United States Attorney for the Southern District of Texas agreed to a dismissal of the claims against the Hale Partnership and the Company. Under the terms of the settlement, the Company agreed to make aggregate payments to the government, the plaintiff-relator and her counsel of $2.8 million.

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Related Party Transactions

12 Months Ended

Dec. 31, 2023

Related Party Transactions [Abstract]

Related Party Transactions

20. Related Party Transactions

For the year ended December 31, 2021, the Company recorded approximately $20,000 related to the short swing profit settlement remitted by a shareholder of the Company under Section 16(b) of the Securities Exchange Act of 1934, as amended. The Company recognized the proceeds as an increase to additional paid-in-capital in the consolidated balance sheets as of December 31, 2021, and consolidated statements of stockholder’s equity, as well as in cash provided by financing activities included in Other, in the consolidated statements of cash flows, for the year ended December 31, 2021.

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Subsequent Event

12 Months Ended

Dec. 31, 2023

Subsequent Event [Abstract]

Subsequent Event

21. Subsequent Event

On February 27, 2024, the Company’s Board of Directors declared a dividend of $0.44 per share which will be paid on April 5, 2024 to shareholders of record as of March 12, 2024.

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Insider Trading Arrangements	3 Months Ended
	Dec. 31, 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

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

12 Months Ended

Dec. 31, 2023

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS [Abstract]

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FINANCIAL STATEMENT SCHEDULE*
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

(In Thousands)

	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Additions Charged to Other Accounts		Deductions			Balance at End of Period
YEAR ENDED DECEMBER 31, 2023:
Reserves and allowances deducted from asset accounts:
Allowance for credit losses(1)	$	2,829	$	6,172		-	$	6,265	(2)	$	2,736
YEAR ENDED DECEMBER 31, 2022:
Reserves and allowances deducted from asset accounts:
Allowance for credit losses	$	2,768	$	5,548		-	$	5,487	(2)	$	2,829
YEAR ENDED DECEMBER 31, 2021:
Reserves and allowances deducted from asset accounts:
Allowance for credit losses	$	2,008	$	5,305		-	$	4,545	(2)	$	2,768

(1) Related to patient accounts receivable and accounts receivable-other.

(2) Uncollectible accounts written off, net of recoveries.

* All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial statements or notes thereto.

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2023

Significant Accounting Policies [Abstract]

Cash Equivalents

Cash Equivalents

The Company maintains its cash and cash equivalents at financial institutions. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The combined account balances at several institutions typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes that this risk is not significant.

Long-Lived Assets

Long-Lived Assets

Fixed assets are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Estimated useful lives for furniture and equipment range from three to eight years and for software purchased from three to seven years. Leasehold improvements are amortized over the shorter of the related lease term or estimated useful lives of the assets, which is generally three to five years.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances that indicate the related amounts may be impaired.

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, if the purchase price of a non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.

Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair value if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite-lived tradenames in conjunction with our annual goodwill impairment test.

The Company operates its business through two segments consisting of physical therapy clinics and an IIP business. For the purposes of goodwill impairment analysis, the segments are further broken down into reporting units.  Reporting units within our physical therapy business are comprised of six regions primarily based on each clinic’s location. In addition to the six regions, in 2023 and 2022, 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. The evaluation of goodwill in 2021 did not result in any goodwill amounts that were deemed impaired.

The Company recorded a charge for goodwill impairment of $15.8 million and $9.1 million in the years ended December 31, 2023, and December 31, 2022, respectively. The Company also recorded a charge of $1.7 million for impairment of a tradename during the year ended December 31, 2023. The charges for impairment related to one reporting unit in the IIP business.

During the year ended December 31, 2023, the Company did not recognize any additional impairment as a result of the Company’s 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 will continue to monitor for any triggering events or other indicators of impairment.

Investment in Unconsolidated Affiliates

Investment in unconsolidated affiliates

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.

Redeemable Non-Controlling Interest

Redeemable Non-Controlling Interest

The non-controlling interest that is reflected as redeemable non-controlling interest in the consolidated financial statements consists of those in which 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 three 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 adjustment in the redemption value, net of tax, directly to retained earnings and are not reflected in the consolidated statements of net income. Although the adjustments are not reflected in the 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 consolidated statements of net income. Management believes the redemption value (i.e. the carrying amount) and fair value are the same.

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 consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the statements of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.

When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. For ASC 606, 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, workers’ compensation) 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, the Company is 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 the Company’s established rate and the anticipated reimbursement rate is accounted for as an offset to revenue—contractual allowance. Payments for services rendered are typically due 30 to 120 days after receipt of the invoice.

Patient revenue

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 revenues (patient revenues less estimated contractual adjustments, see – Contractual Adjustments, for additional information) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as the Company provides physical and occupational therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that provide payments to the Company at amounts different from its established rates.

Other Revenue

Revenue from the IIP business, 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, post-offer employment testing and performance optimization. Revenue from the Company’s IIP business is recognized when obligations under the terms of the contract are satisfied. Revenues are 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.

Management contract revenue, which is also included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for third party owners. 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 a point in time when services are performed. Costs, typically salaries for the Company’s employees, are recorded when incurred. Management contract revenue was $8.6 million, $8.1 million and $9.9 million for the years ended December 31, 2023, December 31, 2022, and December 31, 2021, respectively.

Additionally, other revenue from physical therapy operations includes services the Company provides on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gym membership fees. 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 contract liability over the period of the agreement and recognized at the point in time, when the services are performed.

Contractual Allowances

Contractual Allowances

The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience. 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 for any fiscal year has generally reflected a difference within approximately 1% to 1.5% of net revenues. 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% of gross billings included in accounts receivable each at December 31, 2023 and December 31, 2022.

Allowance for Credit Losses

Allowance for Credit Losses

The Company determines allowances for credit losses based on the specific agings and payor classifications at each clinic. The provision for credit losses is included in operating costs in the consolidated statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for credit losses, includes only those amounts the Company estimates to be collectible.

Income Taxes

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The CARES Act includes changes to certain tax law related to net operating losses and the deductibility of interest expense and depreciation. ASC 740, Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. The legislation had no effect on the Company’s deferred income taxes and current income taxes payable during the year ended December 31, 2023.

The  Company records interest or penalties in interest and other expense, in the consolidated statements of net income. The Company did not have any interest or penalties in each of the years ended December 31, 2023, 2022 and 2021.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date.

• Level 1 – Quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

• Level 3 – Unobservable inputs based on the Company’s own assumptions.

The carrying amounts reported in the balance sheets for cash and cash equivalents, contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturity of these financial instruments. The carrying amount under the Credit Agreement approximates the fair value due to the proximity of the debt issue date and the balance sheet date and the variable component of interest on debt. The interest rate on the Credit Agreement is tied to the Secured Overnight Financing Rate (“SOFR”).

The put right associated with the potential future purchase of the separate company in the November 2021 acquisition are both is also marked to fair value on a recurring basis using Level 3 inputs. The put right associated with the potential future purchase of the separate company in the IIP business is determined using a Monte Carlo simulation model utilizing unobservable inputs such as asset volatility and discount rates. The unobservable inputs in the valuation include asset volatility of 25.0% and a discount rate of 11.22%. The value of the put right associated with the potential future purchase of a company in the IIP business decreased $2.6 million from $3.6 million on December 31, 2022 to approximately $1.0 million on December 31, 2023. Accordingly, the Company recognized a gain of $2.6 million on this change in revaluation for the twelve months ended December 31, 2023.

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 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 December 31, 2023, was $3.7 million, of which $2.6 million has been included within Other current assets and $1.1 million has been included in Other assets in the accompanying Consolidated Balance Sheet. The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized loss of $1.2 million, net of tax, for the year ended December 31, 2023.

The redemption value of redeemable non-controlling interests approximates the fair value. See Note 6 for the changes in the fair value of Redeemable non-controlling interest.

The consideration for some of the Company’s acquisitions include future payments that are contingent upon the occurrence of future operational objectives being met. The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates. These fair value measurements are based on significant inputs not observable in the market. Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period.The Company determined the fair value of its contingent consideration obligation to be $9.8 million and $8.3 million on December 31, 2023 and 2022.

Segment Reporting

Segment Reporting

Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and industrial injury prevention services.

Use of Estimates

Use of Estimates

In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames, allocations of purchase price, allowance for receivables, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and related disclosures. Actual results may differ from these estimates.

Self-Insurance Program

Self-Insurance Program

The Company utilizes a self-insurance plan for its employee group health and dental insurance coverage administered by a third party. Predetermined loss limits have been arranged with the insurance company to minimize the Company’s maximum liability and cash outlay. Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims. Management believes that the current accrued amounts are sufficient to pay claims arising from self-insurance claims incurred through December 31, 2023.

Restricted Stock

Restricted Stock

Restricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant. Compensation expense for grants of restricted stock is recognized based on the fair value per share on the date of grant amortized over the vesting period. The Company recognizes any forfeitures as they occur. The restricted stock issued is included in basic and diluted shares for the earnings per share computation.

Reclassification of Prior Period Presentation

Reclassification of Prior Period Presentation

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.

Recently Issued Accounting Pronouncement

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The objective of ASU 2019-12 is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. The amendments in  this ASU are effective for fiscal years beginning after December 15, 2020, and early adoption was permitted. The Company completed the adoption of ASU 2020-06 effective January 1, 2021 and there was no material impact on the Company’s financial statements.

In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the treasury stock method. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive, regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy.

This pronouncement was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021.The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The use of either the modified retrospective or fully retrospective method of transition is permitted. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements.

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 Company’s Credit Agreement bear interest based on SOFR.

Recently Issued Accounting Guidance

In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-01, Leases (Topic 842): Common Control Arrangements, which requires companies to amortize leasehold improvements associated with related party leases under common control over the useful life of the leasehold improvement to the common control group. The ASU is effective for annual reporting periods beginning on or after December 15, 2023; however, early adoption is permitted. The ASU can either be applied prospectively or retrospectively. The adoption of ASU 2023-01 did not have a material effect on the Company’s financial statements.

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Organization, Nature of Operations and Basis of Presentation (Tables)

12 Months Ended

Dec. 31, 2023

Organization, Nature of Operations and Basis of Presentation [Abstract]

Acquisitions Within Physical Therapy Operations Segment

During the last three years, the Company completed the acquisitions of the following clinic practices and IIP businesses detailed below:

		% Interest	Number of
Acquisition	Date	Acquired	Clinics
October 2023 Acquisition	October 31, 2023	**	*
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
December 2021 Acquisition	December 31, 2021	75%	3
November 2021 Acquisition	November 30, 2021	70%	*
September 2021 Acquisition	September 30, 2021	100%	*
June 2021 Acquisition	June 30, 2021	65%	8
March 2021 Acquisition	March 31, 2021	70%	6

* IIP business

** On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business (“October 2023 Acquisition”).

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2023

Earnings Per Share [Abstract]

Computations of Basic and Diluted Earnings

The computations of basic and diluted earnings are as follows.

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
	(In thousands, except per share data)
Computation of earnings per share - USPH shareholders:
Net income attributable to USPH shareholders	$	28,239		$	32,158		$	40,831
Charges to retained earnings:
Revaluation of redeemable non-controlling interest		(13,565	)		(3,890	)		(13,011	)
Tax effect at statutory rate (federal and state)		3,466			994			3,324
	$	18,140		$	29,262		$	31,144
Earnings per share (basic and diluted)	$	1.28		$	2.25		$	2.41
Shares used in computation:
Basic and diluted earnings per share - weighted-average shares		14,188			12,985			12,898

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Acquisitions of Businesses (Tables)

12 Months Ended

Dec. 31, 2023

Acquisitions of Businesses [Abstract]

Clinic Acquisition

During 2023, 2022 and 2021, the Company acquired a majority interest in the following businesses:

2023 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
October 2023 Acquisition	October 31, 2023		**		*
September 2023 Acquisition1	September 29, 2023		70%		4
September 2023 Acquisition2	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

* IIP business

** On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business (“October 2023 Acquisition”).

2022 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
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

2021 Acquisitions

		% Interest		Number of
Acquisition	Date	Acquired		Clinics
December 2021 Acquisition	December 31, 2021		75%		3
November 2021 Acquisition	November 30, 2021		70%		*
September 2021 Acquisition	September 30, 2021		100%		*
June 2021 Acquisition	June 30, 2021		65%		8
March 2021 Acquisition	March 31, 2021		70%		6

* IIP business

Purchase Price Allocation

The purchase prices for the 2023 acquisitions have been preliminarily allocated as follows.

	For the Year Ended December 31, 2023
				Physical Therapy
	IIP			Operations			Total
	(In thousands)
Cash paid, net of cash acquired	$	3,955		$	22,627		$	26,582
Seller note		-			985			985
Deferred payments		-			830			830
Contingent payments		-			200			200
Total consideration	$	3,955		$	24,642		$	28,597
Estimated fair value of net tangible assets acquired:
Total current assets	$	392		$	1,141		$	1,533
Total non-current assets		335			3,149			3,484
Total liabilities		(41	)		(3,163	)		(3,204	)
Net tangible assets acquired		686			1,127			1,813
Customer and referral relationships		757			6,819			7,576
Non-compete agreement		37			329			366
Tradenames		187			1,680			1,867
Goodwill		2,562			25,521			28,083
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(274	)		(10,834	)		(11,108	)
	$	3,955		$	24,642		$	28,597

The purchase price for the 2022 acquisitions has been allocated as follows.

	Physical Therapy
	Operations
	(In thousands)
Cash paid, net of cash acquired	$	59,788
Seller notes		1,574
Contingent payments		10,000
Total consideration	$	71,362
Estimated fair value of net tangible assets acquired:
Total current assets	$	1,329
Total non-current assets		7,798
Total liabilities		(10,930	)
Net tangible assets acquired		(1,803	)
Customer and referral relationships		18,062
Non-compete agreements		934
Tradenames		5,445
Goodwill		75,525
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(26,801	)
	$	71,362

The purchase price for the 2021 acquisitions has been allocated as follows.

				Physical Therapy
	IIP			Operations			Total
	(In thousands)			(In thousands)			(In thousands)
Cash paid, net of cash acquired	$	63,193		$	23,630		$	86,823
Seller notes		1,250			800			2,050
Contingent payments		2,520			837			3,357
Other payable		-			1,000			1,000
Seller put right		3,522			-			3,522
Total consideration	$	70,485		$	26,267		$	96,752
Estimated fair value of net tangible assets acquired:
Total current assets	$	5,588		$	1,885		$	7,473
Total non-current assets		12,620			7,014			19,634
Total liabilities		(4,842	)		(8,313	)		(13,155	)
Net tangible assets acquired		13,366			586			13,952
Customer and referral relationships		21,127			7,969			29,096
Non-compete agreements		500			415			915
Tradenames		5,141			2,144			7,285
Goodwill		58,257			27,109			85,366
Fair value of non-controlling interest (classified as redeemable non-controlling interest)		(27,906	)		(11,956	)		(39,862	)
	$	70,485		$	26,267		$	96,752

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Redeemable Non-Controlling Interest (Tables)

12 Months Ended

Dec. 31, 2023

REDEEMABLE NON-CONTROLLING INTEREST [Abstract]

Changes in Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest

For the years ended December 31, 2023, 2022 and 2021, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests.

	For the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
	(In thousands)
Beginning balance	$	167,515		$	155,262		$	132,340
Net income allocated to redeemable non-controlling interest		4,426			6,902			11,358
Distributions to redeemable non-controlling interest partners		(11,533	)		(10,102	)		(11,359	)
Changes in the fair value of redeemable non-controlling interest		13,565			3,862			13,011
Purchases of redeemable non-controlling interest		(12,073	)		(16,061	)		(30,204	)
Acquired interest		11,007			26,746			39,862
Contributed capital		-			231			-
Sales of redeemable non-controlling interest		5,012			1,982			982
Changes in notes receivable related to redeemable non-controlling interest		(3,091	)		(1,901	)		(914	)
Adjustments in notes receivables related to the sales of redeemable non-controlling interest		-			594			186
Ending balance	$	174,828		$	167,515		$	155,262

Carrying Amount of (Fair Value) Redeemable Non-Controlling Interest

The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests.

	As of the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Contractual time period has lapsed but holder’s employment has not terminated	$	96,876	$	75,688	$	80,781
Contractual time period has not lapsed and holder’s employment has not terminated		77,952		91,827		74,481
Holder’s employment has terminated and contractual time period has expired		-		-		-
Holder’s employment has terminated and contractual time period has not expired		-		-		-
	$	174,828	$	167,515	$	155,262

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Goodwill (Tables)

12 Months Ended

Dec. 31, 2023

Goodwill [Abstract]

Changes in Carrying Amount of Goodwill

The changes in the carrying amount of goodwill consisted of the following.

	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Beginning balance	$	494,101		$	434,679
Acquisitions		28,083			72,674
Adjustments for purchase price allocation of businesses acquired in prior year		3,187			(4,140	)
Impairment of goodwill		(15,800	)		(9,112	)
Ending balance	$	509,571		$	494,101

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Intangible Assets, net (Tables)

12 Months Ended

Dec. 31, 2023

Intangible Assets, net [Abstract]

Intangible Assets, Net

The Company’s intangible assets, net, consisted of the following.

	As of the Year Ended
	December 31, 2023							December 31, 2022
	Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Customer and referral relationships	$	93,658	$	(30,414	)	$	63,244	$	86,974	$	(23,736	)	$	63,238
Tradenames		44,573		-			44,573		43,373		-			43,373
Non-compete agreements		9,459		(7,594	)		1,865		9,143		(6,999	)		2,144
	$	147,690	$	(38,008	)	$	109,682	$	139,490	$	(30,735	)	$	108,755

Amortization Expenses

The following table details the amount of amortization expense recorded for intangible assets for the periods presented.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Customer and referral relationships	$	6,678	$	5,974	$	3,240
Non-compete agreements		595		549		458
	$	7,273	$	6,523	$	3,698

Amortization of Customer and Referral Relationships and Non-compete Agreements

The remaining balances of the customer and referral relationships and non-compete agreements are expected to be amortized as follows.

For the Year Ended December 31,	Customer and Referral Relationships		Non-Compete Agreements
	(In thousands)
2024	$	6,967	$	599
2025		6,823		533
2026		6,356		393
2027		6,192		232
2028		5,923		102
Thereafter	$	30,983	$	6

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Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2023

Accrued Expenses [Abstract]

Accrued Expenses

Accrued expenses consisted of the following.

	As of the Year Ended
	December 31, 2023		December 31, 2022
	(In thousands)
Salaries and related costs	$	25,641	$	22,912
Credit balances due to patients and payors		8,847		8,094
Group health insurance claims		2,301		1,666
Federal income taxes payable		1,006		-
Contingency payable		12,285		620
Other property taxes payable		355		277
Interest payable		235		273
Closure costs		231		243
Other		4,443		3,328
	$	55,344	$	37,413

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Borrowings (Tables)

12 Months Ended

Dec. 31, 2023

BORROWINGS [Abstract]

Credit Agreement and Notes Payable

Amounts outstanding under the Credit Agreement (as defined above) and notes payable consisted of the following.

	As of the Year Ended
	December 31, 2023							December 31, 2022
	Principal Amount		Unamortized Debt Issuance Cost			Net Debt		Principal Amount		Unamortized Debt Issuance Cost			Net Debt
	(In thousands)
Term Facility	$	144,375	$	(1,468	)	$	142,907	$	148,125	$	(1,861	)	$	146,264
Revolving Facilitiy		-		-			-		31,000		-			31,000
Other (1)		3,775		-			3,775		6,430		-			6,430
Total debt		148,150		(1,468	)		146,682		185,555		(1,861	)		183,694
Less: Current portion of long-term debt		8,111		(420	)		7,691		8,271		(408	)		7,863
Long-term debt, net of current portion	$	140,039	$	(1,048	)	$	138,991	$	177,284	$	(1,453	)	$	175,831

(1) The long-term portion is included as part of Other Long-Term Liabilities in the Consolidated Balance Sheet.

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Derivative Instruments (Tables)

12 Months Ended

Dec. 31, 2023

Derivative Instruments [Abstract]

Impacts of Derivative Instruments on Consolidated Statements of Comprehensive Income

The impacts of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income are presented in the table below.

	For the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Net income	$	37,220		$	43,407
Other comprehensive (loss) gain
Unrealized (loss) gain on cash flow hedge		(1,642	)		5,378
Tax effect at statutory rate (federal and state)		420			(1,374	)
Comprehensive income	$	35,998		$	47,411
Comprehensive income attributable to non-controlling interest		(8,981	)		(11,249	)
Comprehensive income attributable to USPH shareholders		27,017			36,162

Carrying and Fair Value of Interest Rate Derivatives

The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as follows:

	As of the Year Ended
	December 31, 2023		December 31, 2022
	(In thousands)
Other current assets	$	2,663	$	2,858
Other assets	$	1,073	$	2,520
		3,736		5,378

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Leases (Tables)

12 Months Ended

Dec. 31, 2023

Leases [Abstract]

Components of Lease Expense

The components of lease expense were as follows.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Operating lease cost	$	38,559	$	35,154	$	32,021
Short-term lease cost		1,353		1,049		1,160
Variable lease cost		8,912		6,287		7,057
Total lease cost*	$	48,824	$	42,490	$	40,238

* Sublease income was immaterial.

Supplemental Information Related to Leases

The supplemental cash flow information related to leases was as follows.

	For the Year Ended
	December 31, 2023		December 31, 2022		December 31, 2021
	(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities	$	39,813	$	36,136	$	33,192
Right-of-use assets obtained in exchange for new operating lease liabilities	$	36,264	$	40,502	$	46,088

Future Lease Payments for Operating Leases

The aggregate future lease payments for operating leases as of December 31, 2023, were as follows.

Fiscal Year	Amount (In thousands)
2024	$	38,809
2025		30,628
2026		22,845
2027		15,275
2028 and thereafter		13,174
Total lease payments	$	120,731
Less: imputed interest		8,826
Total operating lease liabilities	$	111,905

Average Lease Terms and Discount Rates

Average lease terms and discount rates were as follows:

	As of the Year Ended
	December 31, 2023			December 31, 2022			December 31, 2021
Weighted-average remaining lease term	3.9 years			4.1 Years			4.2 Years
Weighted-average discount rate		4.0	%		2.9	%		2.8	%

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Components of Deferred Tax Assets and Liabilities Included in Consolidated Balance Sheets

Significant components of deferred tax assets and liabilities included in the consolidated balance sheets as of the periods below were as follows.

	As of the Year Ended
	December 31, 2023			December 31, 2022
	(In thousands)
Deferred tax assets:
Compensation	$	1,680		$	1,464
Allowance for credit losses		574			605
Lease obligations - including closed clinics		28,592			28,525
Deferred tax assets	$	30,846		$	30,594
Deferred tax liabilities:
Depreciation and amortization	$	(27,290	)	$	(23,836	)
Operating lease right-of-use assets		(26,427	)		(26,318	)
Gain on cash flow hedge		(955	)		(1,373	)
Change in revaluation of put-right liability		(586	)		-
Other		(403	)		(370	)
Deferred tax liabilities		(55,661	)		(51,897	)
Net deferred tax liabilities	$	(24,815	)	$	(21,303	)

Differences Between Federal Tax Rate and Company's Effective Tax Rate for Results of Continuing Operations

The differences between the federal tax rate and the Company’s effective tax rate for the years ended December 31, were as follows for the periods presented:

	For the Year Ended
	December 31, 2023				December 31, 2022				December 31, 2021
	(In Thousands)
U. S. tax at statutory rate	$	8,483	21.0	%	$	9,307	21.0	%	$	11,782		21.0	%
State income taxes, net of federal benefit		2,135	5.3	%		2,079	4.7	%		2,478		4.4	%
Shortfall (excess) equity compensation deduction		123	0.3	%		149	0.3	%		(246	)	-0.4	%
Non-deductible expenses		710	1.8	%		629	1.4	%		1,258		2.2	%
Return to provision adjustments		705	1.7	%		-	0.0	%		-		0.0	%
	$	12,156	30.1	%	$	12,164	27.4	%	$	15,272		27.2	%

Significant Components of Provision for Income Taxes for Continuing Operations

Significant components of the provision for income taxes were as follows for the periods presented.

	For the Year Ended
	December 31, 2023		December 31, 2022			December 31, 2021
	(In Thousands)
Current:
Federal	$	6,996	$	(770	)	$	7,477
State		512		518			2,107
Total current		7,508		(252	)		9,584
Deferred:
Federal		3,819		9,933			4,866
State		829		2,483			822
Total deferred		4,648		12,416			5,688
Total income tax provision	$	12,156	$	12,164		$	15,272

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2023

Segment Information [Abstract]

Selected Financial Data for Reportable Segments

The following table summarizes selected financial data for the Company’s reportable segments. Prior year results presented herein have been changed to conform to the current presentation.

	For the Year Ended December 31,
	2023		2022		2021
	(In thousands)
Net revenue:
Physical therapy operations	$	526,548	$	476,092	$	451,122
Industrial injury prevention services		78,254		77,052		43,900
Total Company	$	604,802	$	553,144	$	495,022
Operating Costs:
Salaries and related costs:
Physical therapy operations	$	302,765	$	272,360	$	251,256
Industrial injury prevention services		50,625		46,831		27,213
Total salaries and related costs	$	353,390	$	319,191	$	278,469
Rent supplies, contract labor and other:
Physical therapy operations	$	112,547	$	102,114	$	88,073
Industrial injury prevention services		11,184		14,267		5,993
Total rent, supplies, contract labor and other	$	123,731	$	116,381	$	94,066
Provision for credit losses:
Physical therapy operations	$	6,129	$	5,517	$	5,249
Industrial injury prevention services		43		31		56
Total provision for credit losses	$	6,172	$	5,548	$	5,305
Total Company	$	483,293	$	441,120	$	377,840
Gross profit:
Physical therapy operations	$	105,064	$	96,057	$	106,488
Industrial injury prevention services		16,445		15,967		10,694
Total Company	$	121,509	$	112,024	$	117,182
Total Assets:
Physical therapy operations	$	857,274	$	708,662	$	587,801
Industrial injury prevention services		139,964		149,492		161,625
Total Company	$	997,238	$	858,154	$	749,426

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Equity Based Plans (Tables)

12 Months Ended

Dec. 31, 2023

Equity Based Plans [Abstract]

Restricted Stock Granted and Cancelled

During 2023, 2022 and 2021, the Company granted the following shares of restricted stock to directors, officers, and employees pursuant to its equity plans as follows:

			Weighted Average Fair
Year Granted	Number of Shares		Value Per Share
2023		73,384	$	102.79
2022		95,316	$	100.08
2021		60,317	$	131.29

During 2023, 2022 and 2021, the following shares were cancelled due to employee terminations prior to restrictions lapsing:

			Weighted Average Fair
Year Cancelled	Number of Shares		Value Per Share
2023		4,086	$	103.99
2022		5,180	$	109.42
2021		439	$	113.80

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Organization, Nature of Operations and Basis of Presentation - Acquisition (Details) $ / shares in Units, $ in Thousands			1 Months Ended	12 Months Ended
		May 31, 2023 USD ($) $ / shares shares	May 31, 2023 USD ($) $ / shares shares	Dec. 31, 2023 USD ($) Clinic Segment	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Oct. 31, 2023
Business Combination, Description [Abstract]
Number of reportable segments | Segment				2
Shares issued (in shares) | shares		1,916,667	1,916,667
Offering price (in dollars per share) | $ / shares		$ 90	$ 90
Net proceeds from issuance of common stock | $		$ 163,600	$ 163,600	$ 163,646	$ 0	$ 0
Underwriting discount | $		8,600	8,600
Offering fees and expenses | $		200	200
Repayment of revolving credit facility | $		$ 35,000	$ 35,000	$ 55,000	$ 184,000	$ 218,000
IIP Business [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired							100.00%
Ergonomics Software Business [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired							55.00%
October 2023 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	[1],[2]			Oct. 31, 2023
Percentage of interest acquired	[2]
Number of clinics	[1]
September 2023 Acquisition 1 [Member]
Business Combination, Description [Abstract]
Acquisition date				Sep. 29, 2023
Percentage of interest acquired				70.00%
Number of clinics				4
September 2023 Acquisition 2 [Member]
Business Combination, Description [Abstract]
Acquisition date				Sep. 29, 2023
Percentage of interest acquired				70.00%
Number of clinics				1
July 2023 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Jul. 31, 2023
Percentage of interest acquired				70.00%
Number of clinics				7
May 2023 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				May 31, 2023
Percentage of interest acquired				45.00%
Number of clinics				4
February 2023 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Feb. 28, 2023
Percentage of interest acquired				80.00%
Number of clinics				1
November 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Nov. 30, 2022
Percentage of interest acquired				80.00%
Number of clinics				13
October 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Oct. 31, 2022
Percentage of interest acquired				60.00%
Number of clinics				14
September 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Sep. 30, 2022
Percentage of interest acquired				80.00%
Number of clinics				2
August 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Aug. 31, 2022
Percentage of interest acquired				70.00%
Number of clinics				6
March 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Mar. 31, 2022
Percentage of interest acquired				70.00%
Number of clinics				6
December 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Dec. 31, 2021
Percentage of interest acquired				75.00%
Number of clinics				3
November 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Nov. 30, 2021
Percentage of interest acquired				70.00%
Number of clinics	[1]
September 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Sep. 30, 2021
Percentage of interest acquired				100.00%
Number of clinics	[1]
June 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Jun. 30, 2021
Percentage of interest acquired				65.00%
Number of clinics				8
March 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date				Mar. 31, 2021
Percentage of interest acquired				70.00%
Number of clinics				6

[1] IIP business

[2] On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business (“October 2023 Acquisition”).

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Organization, Nature of Operations and Basis of Presentation - Summary (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Change Due to Net Income Attributable to Parent and Effects of Changes, Net [Abstract]
Relief funds	$ 467	$ 0	$ 4,597
Public Health and Social Services Emergency Fund [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Change Due to Net Income Attributable to Parent and Effects of Changes, Net [Abstract]
Grants and other funds	$ 100,000,000
Relief funds			$ 4,600

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Significant Accounting Policies, Long-Lived Assets (Details)	Dec. 31, 2023
Furniture and Equipment [Member] | Minimum [Member]
Long-Lived Assets [Abstract]
Estimated useful lives	3 years
Furniture and Equipment [Member] | Maximum [Member]
Long-Lived Assets [Abstract]
Estimated useful lives	8 years
Software [Member] | Minimum [Member]
Long-Lived Assets [Abstract]
Estimated useful lives	3 years
Software [Member] | Maximum [Member]
Long-Lived Assets [Abstract]
Estimated useful lives	7 years
Leasehold Improvements [Member] | Minimum [Member]
Long-Lived Assets [Abstract]
Estimated useful lives	3 years
Leasehold Improvements [Member] | Maximum [Member]
Long-Lived Assets [Abstract]
Estimated useful lives	5 years

XML

Significant Accounting Policies, Goodwill and Other Indefinite-Lived Intangible Assets (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($) ReportingUnit Region Segment	Dec. 31, 2022 USD ($) Region ReportingUnit	Dec. 31, 2021 USD ($)
Goodwill and Other Indefinite-Lived Intangible Assets [Abstract]
Number of business segments | Segment	2
Number of regions | Region	6	6
Goodwill impairment	$ 15,800	$ 9,112
Impairment of goodwill and tradenames	17,495	$ 9,112	$ 0
Impairment of long-lived assets	$ 0
Industrial Injury Prevention Services [Member]
Goodwill and Other Indefinite-Lived Intangible Assets [Abstract]
Number of reporting units | ReportingUnit	2	2
Goodwill impairment	$ 15,800	$ 9,100
Impairment of tradename	$ 1,700
Impairment, Intangible Asset, Indefinite-Lived (Excluding Goodwill), Statement of Income or Comprehensive Income [Extensible Enumeration]	Impairment of goodwill and tradenames
Other [Member]
Goodwill and Other Indefinite-Lived Intangible Assets [Abstract]
Number of reporting units | ReportingUnit	7
Impairment of goodwill and tradenames	$ 0

XML

Significant Accounting Policies, Redeemable Non-Controlling Interest (Details)	12 Months Ended
	Dec. 31, 2023
Minimum [Member]
Redeemable Non-Controlling Interest [Abstract]
Redeemable non-controlling interest, redemption rights, commencement period	3 years
Maximum [Member]
Redeemable Non-Controlling Interest [Abstract]
Redeemable non-controlling interest, redemption rights, commencement period	5 years

XML

Significant Accounting Policies, Revenue Recognition (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Revenue Recognition [Abstract]
Revenue	$ 604,802	$ 553,144	$ 495,022
Minimum [Member]
Revenue Recognition [Abstract]
Terms for payments due for services rendered	30 days
Maximum [Member]
Revenue Recognition [Abstract]
Terms for payments due for services rendered	120 days
Management Contract Revenue [Member]
Revenue Recognition [Abstract]
Revenue	$ 8,600	$ 8,100	$ 9,900

XML

Significant Accounting Policies, Contractual Allowances (Details)	12 Months Ended
	Dec. 31, 2023
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%

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Significant Accounting Policies, Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Taxes [Abstract]
Interest or penalties	$ 0	$ 0	$ 0

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Significant Accounting Policies, Fair Value of Financial Instruments (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Fair Values of Financial Instruments [Abstract]
Decrease in put right		$ (2,600)
Put right value	$ 1,000	3,600
Gain on change in revaluation of put-right liability	2,582	(5)	$ 0
Interest rate derivative	3,700
Unrealized loss from interest rate swap	(1,200)
Fair value of contingent consideration	9,800	$ 8,300
Other Current Assets [Member]
Fair Values of Financial Instruments [Abstract]
Interest rate derivative	2,600
Other Assets [Member]
Fair Values of Financial Instruments [Abstract]
Interest rate derivative	$ 1,100
Volatility [Member]
Fair Values of Financial Instruments [Abstract]
Debt instrument, measurement input	0.25
Discount Rate [Member]
Fair Values of Financial Instruments [Abstract]
Debt instrument, measurement input	0.1122

XML

Significant Accounting Policies, Segment Reporting (Details)	12 Months Ended
	Dec. 31, 2023 Segment
Segment Reporting [Abstract]
Number of business segments	2

XML

Significant Accounting Policies, Restricted Stock (Details)	12 Months Ended
	Dec. 31, 2023
Employees [Member]
Restricted Stock [Abstract]
Period in which restrictions lapse on stock granted	4 years
Directors [Member]
Restricted Stock [Abstract]
Period in which restrictions lapse on stock granted	1 year
Officers [Member]
Restricted Stock [Abstract]
Period in which restrictions lapse on stock granted	4 years

XML

Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Computation of earnings per share - USPH shareholders [Abstract]
Net income attributable to USPH shareholders	$ 28,239	$ 32,158	$ 40,831
Charges to retained earnings [Abstract]
Revaluation of redeemable non-controlling interest	(13,565)	(3,890)	(13,011)
Tax effect at statutory rate (federal and state)	3,466	994	3,324
Net income attributable to common shareholders	$ 18,140	$ 29,262	$ 31,144
Earnings per share basic (in dollars per share)	$ 1.28	$ 2.25	$ 2.41
Earnings per share diluted (in dollars per share)	$ 1.28	$ 2.25	$ 2.41
Shares used in computation [Abstract]
Basic earnings per share - weighted-average shares (in shares)	14,188	12,985	12,898
Diluted earnings per share - weighted-average shares (in shares)	14,188	12,985	12,898

XML

Acquisitions of Businesses, 2023 Acquired Majority Interest (Details)	12 Months Ended
	Dec. 31, 2023 Clinic
October 2023 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Oct. 31, 2023	[1],[2]
Percentage of interest acquired		[2]
Number of clinics		[1]
September 2023 Acquisition 1 [Member]
Business Combination, Description [Abstract]
Acquisition date	Sep. 29, 2023
Percentage of interest acquired	70.00%
Number of clinics	4
September 2023 Acquisition 2 [Member]
Business Combination, Description [Abstract]
Acquisition date	Sep. 29, 2023
Percentage of interest acquired	70.00%
Number of clinics	1
July 2023 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Jul. 31, 2023
Percentage of interest acquired	70.00%
Number of clinics	7
May 2023 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	May 31, 2023
Percentage of interest acquired	45.00%
Number of clinics	4
February 2023 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Feb. 28, 2023
Percentage of interest acquired	80.00%
Number of clinics	1

[1] IIP business

[2] On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in the ergonomics software business (“October 2023 Acquisition”).

XML

Acquisitions of Businesses, 2023 Acquisitions (Details) $ in Thousands														12 Months Ended
	Oct. 31, 2023 USD ($)	Sep. 29, 2023 USD ($) Clinic Installment	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	Dec. 31, 2021 USD ($) Clinic	Jun. 30, 2021 USD ($) Clinic	Mar. 31, 2021 USD ($) Clinic	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)
Business Combination, Description [Abstract]
Contingent payments														$ 9,800	$ 8,300
Customer and Referral Relationships [Member]
Estimated fair value of net tangible assets acquired [Abstract]
Estimated useful lives of acquired intangibles														12 years	12 years 2 months 12 days
Non-compete Agreements [Member]
Estimated fair value of net tangible assets acquired [Abstract]
Estimated useful lives of acquired intangibles														5 years 1 month 6 days	5 years
Physical Therapy Operations [Member]
Business Combination, Description [Abstract]
Deferred payments														$ 830
Contingent payments											$ 837			200
Cash paid, net of cash acquired														22,627
Seller notes											800			985
Total consideration											26,267			24,642
Estimated fair value of net tangible assets acquired [Abstract]
Total current assets											1,885			1,141
Total non-current assets											7,014			3,149
Total liabilities											(8,313)			(3,163)
Net tangible assets acquired											586			1,127
Customer and referral relationships											7,969			6,819
Non-compete agreements											415			329
Tradenames											2,144			1,680
Goodwill											27,109			25,521
Fair value of non-controlling interest (classified as redeemable non-controlling interest)											(11,956)			(10,834)
Total consideration											26,267			24,642
IIP Business [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired	100.00%
Deferred payments														0
Contingent payments														0
Cash paid, net of cash acquired														3,955
Seller notes														0
Total consideration														3,955
Estimated fair value of net tangible assets acquired [Abstract]
Total current assets														392
Total non-current assets														335
Total liabilities														(41)
Net tangible assets acquired														686
Customer and referral relationships														757
Non-compete agreements														37
Tradenames														187
Goodwill														2,562
Fair value of non-controlling interest (classified as redeemable non-controlling interest)														(274)
Total consideration														3,955
Ergonomics Software Business [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired	55.00%
Percentage of interest retained by practice founder	45.00%
IIP and Ergonomics Software Business [Member]
Business Combination, Description [Abstract]
Aggregate purchase price for the acquisition	$ 4,000
Acquisitions [Member]
Business Combination, Description [Abstract]
Deferred payments														830
Contingent payments											3,357			200	$ 10,000
Cash paid, net of cash acquired														26,582
Seller notes											2,050			985	1,574
Total consideration											96,752			28,597	71,362
Estimated fair value of net tangible assets acquired [Abstract]
Total current assets											7,473			1,533	1,329
Total non-current assets											19,634			3,484	7,798
Total liabilities											(13,155)			(3,204)	(10,930)
Net tangible assets acquired											13,952			1,813	(1,803)
Customer and referral relationships											29,096			7,576	18,062
Non-compete agreements											915			366	934
Tradenames											7,285			1,867	5,445
Goodwill											85,366			28,083	75,525
Fair value of non-controlling interest (classified as redeemable non-controlling interest)											(39,862)			(11,108)	(26,801)
Total consideration											$ 96,752			28,597	$ 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%	75.00%	65.00%	70.00%
Number of clinics | Clinic			5	4	1	13	14	2	6	6	3	8	5
Deferred payments			$ 300
Contingent payments							$ 9,800					$ 800		$ 1,600
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%	25.00%
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	$ 3,700	10,300	$ 12,000
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	3,500	9,000	11,700
Seller notes				$ 300	$ 400	$ 800		$ 300	$ 200	$ 300	$ 200	$ 300	$ 300
Percentage of interest accrued					4.50%	7.00%		5.50%	5.50%	3.50%	3.25%	3.25%	3.25%
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
Seller notes		$ 600
Percentage of interest accrued		5.00%
Number of installments of payment of consideration due | Installment		2
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

XML

Acquisitions of Businesses, 2022 Acquired Majority Interest (Details)	12 Months Ended
	Dec. 31, 2023 Clinic
November 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Nov. 30, 2022
Percentage of interest acquired	80.00%
Number of clinics	13
October 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Oct. 31, 2022
Percentage of interest acquired	60.00%
Number of clinics	14
September 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Sep. 30, 2022
Percentage of interest acquired	80.00%
Number of clinics	2
August 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Aug. 31, 2022
Percentage of interest acquired	70.00%
Number of clinics	6
March 2022 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Mar. 31, 2022
Percentage of interest acquired	70.00%
Number of clinics	6

XML

Acquisitions of Businesses, 2022 Acquisition (Details) $ in Thousands												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	Dec. 31, 2021 USD ($) Clinic	Jun. 30, 2021 USD ($) Clinic	Mar. 31, 2021 USD ($) Clinic	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Business Combination, Description [Abstract]
Cash paid, net of cash acquired												$ 26,582	$ 59,788	$ 86,823
Contingent payments												$ 9,800	$ 8,300
Customer and Referral Relationships [Member]
Estimated fair value of net tangible assets acquired [Abstract]
Estimated useful lives of acquired intangibles												12 years	12 years 2 months 12 days
Non-compete Agreements [Member]
Estimated fair value of net tangible assets acquired [Abstract]
Estimated useful lives of acquired intangibles												5 years 1 month 6 days	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%	75.00%	65.00%	70.00%			75.00%
Number of clinics | Clinic	5	4	1	13	14	2	6	6	3	8	5
Percentage of interest retained by practice founder	30.00%		20.00%	20.00%	40.00%	20.00%	30.00%	30.00%	25.00%					25.00%
Aggregate purchase price for the acquisition	$ 2,100	$ 3,100	$ 6,200	$ 25,000	$ 19,500	$ 4,200	$ 3,500	$ 11,500	$ 3,700	$ 10,300	$ 12,000
Cash paid for acquisition	$ 1,800	1,700	$ 5,800	$ 24,200		$ 3,900	$ 3,300	$ 11,200	$ 3,500	$ 9,000	$ 11,700
Percentage of interest accrued			4.50%	7.00%		5.50%	5.50%	3.50%	3.25%	3.25%	3.25%			3.25%
Seller notes		$ 300	$ 400	$ 800		$ 300	$ 200	$ 300	$ 200	$ 300	$ 300			$ 200
Contingent payments					$ 9,800					$ 800		$ 1,600
Clinic Practice [Member] | Maximum [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired									35.00%			35.00%	35.00%	35.00%
Contingent payments				$ 1,600
Acquisitions [Member]
Business Combination, Description [Abstract]
Cash paid for acquisition												$ 26,582
Cash paid, net of cash acquired													$ 59,788	$ 86,823
Seller notes									$ 2,050			985	1,574	2,050
Contingent payments									3,357			200	10,000	3,357
Total consideration									96,752			28,597	71,362	96,752
Estimated fair value of net tangible assets acquired [Abstract]
Total current assets									7,473			1,533	1,329	7,473
Total non-current assets									19,634			3,484	7,798	19,634
Total liabilities									(13,155)			(3,204)	(10,930)	(13,155)
Net tangible assets acquired									13,952			1,813	(1,803)	13,952
Customer and referral relationships									29,096			7,576	18,062	29,096
Non-compete agreements									915			366	934	915
Tradenames									7,285			1,867	5,445	7,285
Goodwill									85,366			28,083	75,525	85,366
Fair value of non-controlling interest (classified as redeemable non-controlling interest)									(39,862)			(11,108)	(26,801)	(39,862)
Total consideration									$ 96,752			$ 28,597	$ 71,362	$ 96,752

XML

Acquisitions of Businesses, 2021 Acquired Majority Interest (Details)	12 Months Ended
	Dec. 31, 2023 Clinic
December 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Dec. 31, 2021
Percentage of interest acquired	75.00%
Number of clinics	3
November 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Nov. 30, 2021
Percentage of interest acquired	70.00%
Number of clinics		[1]
September 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Sep. 30, 2021
Percentage of interest acquired	100.00%
Number of clinics		[1]
June 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Jun. 30, 2021
Percentage of interest acquired	65.00%
Number of clinics	8
March 2021 Acquisition [Member]
Business Combination, Description [Abstract]
Acquisition date	Mar. 31, 2021
Percentage of interest acquired	70.00%
Number of clinics	6

[1] IIP business

XML

Acquisitions of Businesses, 2021 Acquisition (Details) $ in Thousands														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	Dec. 31, 2021 USD ($) Clinic	Nov. 30, 2021 USD ($)	Sep. 30, 2021 USD ($)	Jun. 30, 2021 USD ($) Clinic	Mar. 31, 2021 USD ($) Clinic	Dec. 31, 2023 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Business Combination, Description [Abstract]
Contingent payment consideration														$ 9,800	$ 8,300
Elimination of contingent consideration liability after revaluation														$ (1,550)	2,520	$ 0
IIPS [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired										70.00%
Aggregate purchase price for the acquisition										$ 63,200
Contingent payment consideration									$ 2,520							2,520
Cash paid for acquisition										60,700
Seller notes									$ 1,250	$ 1,000						1,250
Percentage of interest accrued										3.25%
Remaining contract term														5 years
Ownership rights														$ 1,200		$ 3,522
Elimination of contingent consideration liability after revaluation															2,000
Reduction of liability															0
IIPS [Member] | Maximum [Member]
Business Combination, Description [Abstract]
Contingent payment consideration										$ 2,000
Return-to-work and Ergonomic Services [Member]
Business Combination, Description [Abstract]
Aggregate purchase price for the acquisition											$ 2,700
Contingent payment consideration											600
Aggregate purchase price for the acquisition including contingent consideration											3,300
Cash paid for acquisition											2,400
Seller notes											$ 300
Percentage of interest accrued											3.25%
Elimination of contingent consideration liability after revaluation															600
Reduction of liability															$ 0
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%	75.00%			65.00%	70.00%			75.00%
Number of clinics | Clinic	5	4	1	13	14	2	6	6	3			8	5
Percentage of interest retained by practice founder	30.00%		20.00%	20.00%	40.00%	20.00%	30.00%	30.00%	25.00%							25.00%
Aggregate purchase price for the acquisition	$ 2,100	$ 3,100	$ 6,200	$ 25,000	$ 19,500	$ 4,200	$ 3,500	$ 11,500	$ 3,700			$ 10,300	$ 12,000
Contingent payment consideration					$ 9,800							800		1,600
Cash paid for acquisition	$ 1,800	1,700	5,800	24,200		3,900	3,300	11,200	3,500			9,000	11,700
Amount payable upon achievement of certain business criteria												1,000
Seller notes		$ 300	$ 400	$ 800		$ 300	$ 200	$ 300	$ 200			$ 300	$ 300			$ 200
Percentage of interest accrued			4.50%	7.00%		5.50%	5.50%	3.50%	3.25%			3.25%	3.25%			3.25%
Earn-out payment														$ 800
Clinic Practice [Member] | Maximum [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired									35.00%					35.00%	35.00%	35.00%
Contingent payment consideration				$ 1,600
Clinic Practice [Member] | Pre-Closing Practice Owners [Member]
Business Combination, Description [Abstract]
Percentage of retained interest by previous owners												35.00%	30.00%

XML

Acquisition of Business, 2021 Preliminary Purchase Prices Allocation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Nov. 30, 2021
Business Combination, Description [Abstract]
Cash paid, net of cash acquired	$ 26,582	$ 59,788	$ 86,823
Contingent payments	9,800	8,300
Physical Therapy Operations [Member]
Business Combination, Description [Abstract]
Cash paid, net of cash acquired			23,630
Seller notes	985		800
Contingent payments	200		837
Other payable			1,000
Seller put right			0
Total consideration	24,642		26,267
Estimated fair value of net tangible assets acquired [Abstract]
Total current assets	1,141		1,885
Total non-current assets	3,149		7,014
Total liabilities	(3,163)		(8,313)
Net tangible assets acquired	1,127		586
Customer and referral relationships	6,819		7,969
Non-compete agreements	329		415
Tradenames	1,680		2,144
Goodwill	25,521		27,109
Fair value of non-controlling interest (classified as redeemable non-controlling interest)	(10,834)		(11,956)
Total consideration	24,642		26,267
IIPS [Member]
Business Combination, Description [Abstract]
Cash paid, net of cash acquired			63,193
Seller notes			1,250	$ 1,000
Contingent payments			2,520
Other payable			0
Seller put right	1,200		3,522
Total consideration			70,485
Estimated fair value of net tangible assets acquired [Abstract]
Total current assets			5,588
Total non-current assets			12,620
Total liabilities			(4,842)
Net tangible assets acquired			13,366
Customer and referral relationships			21,127
Non-compete agreements			500
Tradenames			5,141
Goodwill			58,257
Fair value of non-controlling interest (classified as redeemable non-controlling interest)			(27,906)
Total consideration			70,485
Acquisitions [Member]
Business Combination, Description [Abstract]
Cash paid, net of cash acquired		59,788	86,823
Seller notes	985	1,574	2,050
Contingent payments	200	10,000	3,357
Other payable			1,000
Seller put right			3,522
Total consideration	28,597	71,362	96,752
Estimated fair value of net tangible assets acquired [Abstract]
Total current assets	1,533	1,329	7,473
Total non-current assets	3,484	7,798	19,634
Total liabilities	(3,204)	(10,930)	(13,155)
Net tangible assets acquired	1,813	(1,803)	13,952
Customer and referral relationships	7,576	18,062	29,096
Non-compete agreements	366	934	915
Tradenames	1,867	5,445	7,285
Goodwill	28,083	75,525	85,366
Fair value of non-controlling interest (classified as redeemable non-controlling interest)	(11,108)	(26,801)	(39,862)
Total consideration	$ 28,597	$ 71,362	$ 96,752

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Acquisitions and Sale of Non-Controlling Interests (Details) $ in Millions	12 Months Ended
	Dec. 31, 2023 USD ($) Partnership	Dec. 31, 2022 USD ($) Partnership	Dec. 31, 2021 USD ($) Partnership	Jul. 31, 2023	May 31, 2023	Feb. 28, 2023	Nov. 30, 2022	Oct. 31, 2022	Sep. 30, 2022	Aug. 31, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021
Business Combination, Description [Abstract]
Number of partnerships in which interest acquired | Partnership	3	3	5
Purchase price for additional non controlling interest | $	$ 0.5	$ 0.3	$ 1.3
Number of partnerships in which the company sold interest | Partnership	4
Cash proceeds from sale of non-controlling interest | $	$ 0.6		$ 0.1
Clinic Practice [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired			75.00%	70.00%	75.00%	80.00%	80.00%	60.00%	80.00%	70.00%	70.00%	65.00%	70.00%
Clinic Practice [Member] | Minimum [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired	0.15%	10.00%	5.00%
Percentage of non-controlling interests - permanent equity sold in each partnership	0.50%
Clinic Practice [Member] | Maximum [Member]
Business Combination, Description [Abstract]
Percentage of interest acquired	35.00%	35.00%	35.00%
Percentage of non-controlling interests - permanent equity sold in each partnership	8.00%

XML

Redeemable Non-Controlling Interest (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Changes in Carrying Amount (Fair Value) of Redeemable Non-Controlling Interests [Roll Forward]
Beginning balance	$ 167,515
Net income allocated to redeemable non-controlling interest	4,426	$ 6,902	$ 11,358
Ending balance	174,828	167,515
Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest [Abstract]
Fair value	174,828	167,515
Redeemable Non-Controlling Interest [Member]
Changes in Carrying Amount (Fair Value) of Redeemable Non-Controlling Interests [Roll Forward]
Beginning balance	167,515	155,262	132,340
Net income allocated to redeemable non-controlling interest	4,426	6,902	11,358
Distributions to redeemable non-controlling interest partners	(11,533)	(10,102)	(11,359)
Changes in the fair value of redeemable non-controlling interest	13,565	3,862	13,011
Purchases of redeemable non-controlling interest	(12,073)	(16,061)	(30,204)
Acquired interest	11,007	26,746	39,862
Contributed capital	0	231	0
Sales of redeemable non-controlling interest	5,012	1,982	982
Changes in notes receivable related to redeemable non-controlling interest	(3,091)	(1,901)	(914)
Adjustments in notes receivables related to the sales of redeemable non-controlling interest	0	594	186
Ending balance	174,828	167,515	155,262
Carrying Amount (Fair Value) of Redeemable Non-Controlling Interest [Abstract]
Contractual time period has lapsed but holder's employment has not been terminated	96,876	75,688	80,781
Contractual time period has not lapsed and holder's employment has not been terminated	77,952	91,827	74,481
Holder's employment has terminated and contractual time period has expired	0	0	0
Holder's employment has terminated and contractual time period has not expired	0	0	0
Fair value	$ 174,828	$ 167,515	$ 155,262
Therapy Practice [Member] | Minimum [Member]
Business Combination, Description [Abstract]
Business acquisition, percentage of limited partnership acquired	50.00%
Therapy Practice [Member] | Maximum [Member]
Business Combination, Description [Abstract]
Business acquisition, percentage of limited partnership acquired	90.00%
Therapy Practice [Member] | NewCo. [Member]
Business Combination, Description [Abstract]
Percentage of equity interest of subsidiary contributed for acquisition	100.00%
Business acquisition, percentage of general partnership interest acquired	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%
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%
Percentage of right to sell equity interest on each of the 6th and 7th anniversaries	10.00%

XML

Goodwill (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Goodwill [Roll Forward]
Beginning balance	$ 494,101	$ 434,679
Acquisitions	28,083	72,674
Adjustments for purchase price allocation of businesses acquired in prior year	3,187	(4,140)
Impairment of goodwill	(15,800)	(9,112)
Ending balance	$ 509,571	$ 494,101

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Intangible Assets, net, Intangible Assets, Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets, Net [Abstract]
Gross amount	$ 147,690	$ 139,490
Accumulated amortization	(38,008)	(30,735)
Net carrying amount	109,682	108,755
Customer and Referral Relationships [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Gross amount	93,658	86,974
Accumulated amortization	(30,414)	(23,736)
Net carrying amount	$ 63,244	$ 63,238
Customer and Referral Relationships [Member] | Minimum [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Estimated useful life	6 years
Weighted average amortization period	12 years 8 months 12 days
Customer and Referral Relationships [Member] | Maximum [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Estimated useful life	14 years
Weighted average amortization period		12 years 10 months 24 days
Tradenames [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Gross amount	$ 44,573	$ 43,373
Accumulated amortization	0	0
Net carrying amount	44,573	43,373
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Impairment of tradename	$ 1,700
Impairment, Intangible Asset, Indefinite-Lived (Excluding Goodwill), Statement of Income or Comprehensive Income [Extensible Enumeration]	Impairment of goodwill and tradenames
Non-compete Agreements [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Gross amount	$ 9,459	9,143
Accumulated amortization	(7,594)	(6,999)
Net carrying amount	$ 1,865	$ 2,144
Non-compete Agreements [Member] | Minimum [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Estimated useful life	5 years
Weighted average amortization period	5 years 7 months 6 days
Non-compete Agreements [Member] | Maximum [Member]
Finite-Lived Intangible Assets, Net [Abstract]
Estimated useful life	6 years
Weighted average amortization period		5 years 7 months 6 days

XML

Intangible Assets, net, Amortization Expenses (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Amortization of Deferred Charges [Abstract]
Amortization expenses	$ 7,273	$ 6,523	$ 3,698
Customer and Referral Relationships [Member]
Amortization of Deferred Charges [Abstract]
Amortization expenses	6,678	5,974	3,240
Non-compete Agreements [Member]
Amortization of Deferred Charges [Abstract]
Amortization expenses	$ 595	$ 549	$ 458

XML

Intangible Assets, net, Amortization of Referral Relationships and Non-Competition Agreements (Details) $ in Thousands	Dec. 31, 2023 USD ($)
Customer and Referral Relationships [Member]
Finite-Lived Intangible Assets, Amortization Expense, Maturity [Abstract]
2024	$ 6,967
2025	6,823
2026	6,356
2027	6,192
2028	5,923
Thereafter	30,983
Non-compete Agreements [Member]
Finite-Lived Intangible Assets, Amortization Expense, Maturity [Abstract]
2024	599
2025	533
2026	393
2027	232
2028	102
Thereafter	$ 6

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Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Salaries and related costs	$ 25,641	$ 22,912
Credit balances due to patients and payors	8,847	8,094
Group health insurance claims	2,301	1,666
Federal income taxes payable	1,006	0
Contingency payable	12,285	620
Other property taxes payable	355	277
Interest payable	235	273
Closure costs	231	243
Other	4,443	3,328
Total	$ 55,344	$ 37,413

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Borrowings, Amended Credit Agreement and Credit Agreement (Details) - USD ($) $ in Thousands		Dec. 31, 2023	Dec. 31, 2022
Debt Instruments [Abstract]
Principal amount		$ 148,150	$ 185,555
Principal amount, current portion		8,111	8,271
Principal amount, net of current portion		140,039	177,284
Unamortized debt issuance cost [Abstract]
Unamortized debt issuance cost		(1,468)	(1,861)
Unamortized debt issuance cost, current portion		(420)	(408)
Unamortized debt issuance cost, net of current portion		(1,048)	(1,453)
Net debt [Abstract]
Net debt		146,682	183,694
Net debt, less current portion		7,691	7,863
Net debt, net of current portion		138,991	175,831
Revolving Facility [Member]
Debt Instruments [Abstract]
Principal amount		0	31,000
Unamortized debt issuance cost [Abstract]
Unamortized debt issuance cost		0	0
Net debt [Abstract]
Net debt		0	31,000
Term Facility [Member]
Debt Instruments [Abstract]
Principal amount		144,375	148,125
Unamortized debt issuance cost [Abstract]
Unamortized debt issuance cost		(1,468)	(1,861)
Net debt [Abstract]
Net debt		142,907	146,264
Other [Member]
Debt Instruments [Abstract]
Principal amount	[1]	3,775	6,430
Unamortized debt issuance cost [Abstract]
Unamortized debt issuance cost	[1]	0	0
Net debt [Abstract]
Net debt	[1]	$ 3,775	$ 6,430

[1] The long-term portion is included as part of Other Long-Term Liabilities in the Consolidated Balance Sheet.

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Borrowings, Credit Facilities (Details) - USD ($)	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 05, 2013
Debt Instruments [Abstract]
Aggregate amount of notes payable	$ 148,150,000	$ 185,555,000
Payment of debt	3,750,000	1,875,000	$ 0
Notes Payable [Member]
Debt Instruments [Abstract]
Aggregate amount of notes payable	4,700,000
Payment of debt	900,000
Aggregate principal payment due in 2024	2,500,000
Aggregate principal payment due in 2025	$ 1,300,000
Notes Payable [Member] | Minimum [Member]
Debt Instruments [Abstract]
Average effective interest rate	3.25%
Notes Payable [Member] | Maximum [Member]
Debt Instruments [Abstract]
Average effective interest rate	7.00%
Term Facility [Member]
Debt Instruments [Abstract]
Revolving credit facility commitment	$ 150,000,000
Frequency of term facility	quarterly
Interest rate on credit facility in first two years	0.625%
Interest rate on credit facility in third and fourth year	1.25%
Interest rate on credit facility in fifth year	1.875%
Outstanding amount	$ 144,400,000
Aggregate amount of notes payable	144,375,000	148,125,000
Revolving Facility [Member]
Debt Instruments [Abstract]
Revolving credit facility commitment	$ 175,000,000			$ 125,000,000
Term of credit facility	5 years
Outstanding amount	$ 0
Aggregate amount of notes payable	$ 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
Swingline Loans [Member]
Debt Instruments [Abstract]
Revolving credit facility commitment	$ 15,000,000
Swingline Loans [Member] | SOFR [Member] | Minimum [Member]
Debt Instruments [Abstract]
Applicable margin for SOFR borrowings rate	1.50%
Swingline Loans [Member] | SOFR [Member] | Maximum [Member]
Debt Instruments [Abstract]
Applicable margin for SOFR borrowings rate	2.25%
Swingline Loans [Member] | Alternate Base Rate [Member] | Minimum [Member]
Debt Instruments [Abstract]
Spread on variable rate	0.50%
Swingline Loans [Member] | Alternate Base Rate [Member] | Maximum [Member]
Debt Instruments [Abstract]
Spread on variable rate	1.25%
Senior Credit Facility [Member]
Debt Instruments [Abstract]
Debt instrument, maturity date	Jun. 17, 2027
Aggregate principal amount	$ 325,000,000
Increase on limit of credit facility	$ 100,000,000
Leverage ratio	2
Remaining revolving credit outstanding	$ 175,000,000

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Derivative Instruments (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Jul. 31, 2022	Jun. 30, 2022
Derivative Instrument, Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 37,220	$ 43,407	$ 57,924
Other comprehensive (loss) gain [Abstract]
Unrealized (loss) gain on cash flow hedge	(1,642)	5,378	0
Tax effect at statutory rate (federal and state)	420	(1,374)	0
Comprehensive income	35,998	47,411	57,924
Comprehensive income attributable to non-controlling interest	(8,981)	(11,249)	(17,093)
Comprehensive income attributable to USPH shareholders	27,017	36,162	$ 40,831
Carrying and Fair Value of Interest Rate Derivatives [Abstract]
Interest rate derivative	3,736	5,378
Other Current Assets [Member]
Carrying and Fair Value of Interest Rate Derivatives [Abstract]
Interest rate derivative	2,663	2,858
Other Assets [Member]
Carrying and Fair Value of Interest Rate Derivatives [Abstract]
Interest rate derivative	$ 1,073	2,520
Interest Rate Swap [Member]
Derivative Instruments [Abstract]
Notional value					$ 150,000
Debt instrument, maturity date	Jun. 30, 2027
Savings from interest rate swap arrangements	$ 3,300
Interest Rate Swap [Member] | Maximum [Member]
Derivative Instruments [Abstract]
Savings from interest rate swap arrangements		$ 100
Interest Rate Swap [Member] | SOFR [Member]
Derivative Instruments [Abstract]
Term of variable rate	1 month
Debt instrument, fixed rate of interest				2.815%

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Leases (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Components of Lease Expense [Abstract]
Operating lease cost		$ 38,559	$ 35,154	$ 32,021
Short-term lease cost		1,353	1,049	1,160
Variable lease cost		8,912	6,287	7,057
Total lease cost	[1]	48,824	42,490	40,238
Supplemental Information Related to Leases [Abstract]
Cash paid for amounts included in the measurement of operating lease liabilities		39,813	36,136	33,192
Right-of-use assets obtained in exchange for new operating lease liabilities		36,264	$ 40,502	$ 46,088
Future Lease Payments for Operating Leases [Abstract]
2024		38,809
2025		30,628
2026		22,845
2027		15,275
2028 and thereafter		13,174
Total lease payments		120,731
Less: imputed interest		8,826
Total operating lease liabilities		$ 111,905
Weighted Average Discount Rates [Abstract]
Weighted-average remaining lease term		3 years 10 months 24 days	4 years 1 month 6 days	4 years 2 months 12 days
Weighted-average discount rate		4.00%	2.90%	2.80%
Maximum [Member]
Operating Lease [Abstract]
Lease term		5 years

[1] Sublease income was immaterial.

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Income Taxes, Components of Deferred Tax Assets and Liabilities Included in Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Deferred tax assets [Abstract]
Compensation	$ 1,680	$ 1,464
Allowance for credit losses	574	605
Lease obligations - including closed clinics	28,592	28,525
Deferred tax assets	30,846	30,594
Deferred tax liabilities [Abstract]
Depreciation and amortization	(27,290)	(23,836)
Operating lease right-of-use assets	(26,427)	(26,318)
Gain on cash flow hedge	(955)	(1,373)
Change in revaluation of put-right liability	(586)	0
Other	(403)	(370)
Deferred tax liabilities	(55,661)	(51,897)
Net deferred tax liabilities	$ (24,815)	$ (21,303)

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Income Taxes, Summary (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Tax Examination [Abstract]
Increase in income tax expense from adjustment through reconciliation process	$ 1,000
Accrued interest and penalties associated with any unrecognized tax benefits	0	$ 0	$ 0
Interest expense recognized	0	$ 0	$ 0
Federal [Member]
Income Tax Examination [Abstract]
Tax payable	$ 1,000
Periods open for examination	2020 2021 2022
State [Member]
Income Tax Examination [Abstract]
Tax receivable included in other current assets	$ 2,100
Periods open for examination	2019 2020 2021 2022

XML

Income Taxes, Differences Between Federal Tax Rate and Company's Effective Tax Rate for Results of Continuing Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Taxes [Abstract]
U.S. tax at statutory rate	$ 8,483	$ 9,307	$ 11,782
State income taxes, net of federal benefit	2,135	2,079	2,478
Shortfall (excess) equity compensation deduction	123	149	(246)
Non-deductible expenses	710	629	1,258
Return to provision adjustments	705	0	0
Total income tax provision	$ 12,156	$ 12,164	$ 15,272
U.S. tax at statutory rate	21.00%	21.00%	21.00%
State income taxes, net of federal benefit and tax reform	5.30%	4.70%	4.40%
Shortfall (excess) equity compensation deduction	0.30%	0.30%	(0.40%)
Nondeductible expenses	1.80%	1.40%	2.20%
Return to provision adjustments	1.70%	0.00%	0.00%
Total	30.10%	27.40%	27.20%

XML

Income Taxes, Significant Components of Provision for Income Taxes for Continuing Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Current [Abstract]
Federal	$ 6,996	$ (770)	$ 7,477
State	512	518	2,107
Total current	7,508	(252)	9,584
Deferred [Abstract]
Federal	3,819	9,933	4,866
State	829	2,483	822
Total deferred	4,648	12,416	5,688
Total income tax provision	$ 12,156	$ 12,164	$ 15,272

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Segment Information, Summary (Details) $ in Millions		12 Months Ended
	Oct. 31, 2023 USD ($)	Dec. 31, 2023 Location
Segment Information [Abstract]
Percentage of general partnership interest owned		1.00%
IIP Business [Member]
Segment Information [Abstract]
Percentage of interest acquired	100.00%
Ergonomics Software Business [Member]
Segment Information [Abstract]
Percentage of interest acquired	55.00%
IIP and Ergonomics Software Business [Member]
Segment Information [Abstract]
Purchase price | $	$ 4.0
Minimum [Member]
Segment Information [Abstract]
Percentage of limited partnership interest owned		65.00%
Percentage range of limited partnership interest owned		10.00%
Number of operating clinic locations | Location		1
Maximum [Member]
Segment Information [Abstract]
Percentage of limited partnership interest owned		75.00%
Percentage range of limited partnership interest owned		99.00%

XML

Segment Information, Segment Financials (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Segment Information [Abstract]
Net revenue	$ 604,802	$ 553,144	$ 495,022
Operating Costs [Abstract]
Salaries and related costs	353,390	319,191	278,469
Rent, supplies, contract labor and other	123,731	116,381	94,066
Provision for credit losses	6,172	5,548	5,305
Total operating cost	483,293	441,120	377,840
Gross profit	121,509	112,024	117,182
Total assets	997,238	858,154	749,426
Reportable Segments [Member] | Physical Therapy Operations [Member]
Segment Information [Abstract]
Net revenue	526,548	476,092	451,122
Operating Costs [Abstract]
Salaries and related costs	302,765	272,360	251,256
Rent, supplies, contract labor and other	112,547	102,114	88,073
Provision for credit losses	6,129	5,517	5,249
Gross profit	105,064	96,057	106,488
Total assets	857,274	708,662	587,801
Reportable Segments [Member] | Industrial Injury Prevention Services [Member]
Segment Information [Abstract]
Net revenue	78,254	77,052	43,900
Operating Costs [Abstract]
Salaries and related costs	50,625	46,831	27,213
Rent, supplies, contract labor and other	11,184	14,267	5,993
Provision for credit losses	43	31	56
Gross profit	16,445	15,967	10,694
Total assets	$ 139,964	$ 149,492	$ 161,625

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Investment in Unconsolidated Affiliate (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Investments in Unconsolidated Affiliate [Abstract]
Investment in unconsolidated affiliate	$ 12,256	$ 12,131
Earnings from investment in unconsolidated affiliate	$ 955	1,175	$ 112
Joint Venture Interest [Member]
Investments in Unconsolidated Affiliate [Abstract]
Percentage of ownership in joint venture interest	49.00%
Investment in unconsolidated affiliate	$ 12,300	12,100
Earnings from investment in unconsolidated affiliate	$ 1,000	$ 1,200

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Equity Based Plans, Stock-based Compensation Expense (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Equity Based Plans [Abstract]
Stock-based compensation expense	$ 7.2	$ 7.3	$ 7.8
Compensation not yet recognized	$ 9.8
Weighted average period	1 year 9 months

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Equity Based Plans, Amended and Restated Employee Stock Option Plans (Details)	Dec. 31, 2023 shares
Amended 2003 Plan [Member]
Share-based Compensation [Abstract]
Number of common shares available for grant (in shares)	500,000
Maximum [Member] | Amended 2003 Plan [Member] | Non Qualified Stock Options [Member]
Share-based Compensation [Abstract]
Number of shares authorized (in shares)	2,600,000
Maximum [Member] | Amended 1999 Plan [Member]
Share-based Compensation [Abstract]
Number of common shares available for grant (in shares)	100,000
Maximum [Member] | Amended 1999 Plan [Member] | Non Qualified Stock Options [Member]
Share-based Compensation [Abstract]
Number of shares authorized (in shares)	600,000

XML

Equity Based Plans, Restricted Stock Granted to Directors, Officers and Employees Pursuant to its Equity Plans (Details) - Restricted Stock [Member] - $ / shares	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Share-based Compensation [Abstract]
Number of shares (in shares)	73,384	95,316	60,317
Weighted average fair value (in dollars per share)	$ 102.79	$ 100.08	$ 131.29

XML

Equity Based Plans, Restricted Stock Cancelled Due to Employee Terminations Prior to Restrictions Lapsing (Details) - Restricted Stock [Member] - $ / shares	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Share-based Compensation [Abstract]
Number of shares (in shares)	4,086	5,180	439
Weighted average fair value (in dollars per share)	$ 103.99	$ 109.42	$ 113.8

XML

Equity Based Plans, Summary (Details) - shares	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Share-based Compensation [Abstract]
Shares outstanding for which restrictions had not lapsed (in shares)	124,638	124,939
Employees [Member]
Share-based Compensation [Abstract]
Restricted period on the stock granted	4 years
Executive Officer [Member]
Share-based Compensation [Abstract]
Restricted period on the stock granted	4 years
Minimum [Member]
Share-based Compensation [Abstract]
Restrictions will lapse in	2024
Maximum [Member]
Share-based Compensation [Abstract]
Restrictions will lapse in	2027

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Preferred and Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended		12 Months Ended
	May 31, 2023	May 31, 2023	Mar. 31, 2009	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2008
Class of Stock Disclosures [Abstract]
Total purchased shares (in shares)			859,499	0	0	0
Shares issued (in shares)	1,916,667	1,916,667
Offering price (in dollars per share)	$ 90	$ 90
Net proceeds from issuance of common stock	$ 163,600	$ 163,600		$ 163,646	$ 0	$ 0
Underwriting discount	8,600	8,600
Offering fees and expenses	200	200
Repayment of revolving credit facility	$ 35,000	$ 35,000		$ 55,000	$ 184,000	$ 218,000
Maximum [Member]
Class of Stock Disclosures [Abstract]
Common stock authorized by the Board of Directors (in shares)			1,200,000				2,250,000
Percentage of repurchase of common stock			10.00%

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Defined Contribution Plan (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Defined Contribution Plan [Abstract]
Required time period for employees for profit sharing plan	3 months
Maximum employer contribution as a percentage of employee contribution	50.00%
Contribution expense recognized	$ 0.0	$ 0.0	$ 0.0
Employer matching contribution amount	$ 2.2	$ 2.0	$ 1.9

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Contingencies (Details) $ in Millions	1 Months Ended
	Jan. 31, 2022 USD ($)
Contingency Settlement [Abstract]
Payments to plaintiff-relator and her counsel	$ 2.8

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Related Party Transactions (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)
Settlement of Short Swing Profit Claim [Abstract]
Short swing profit settlement	$ 20

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Subsequent Event (Details) - $ / shares		12 Months Ended
	Feb. 27, 2024	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Dividends [Abstract]
Dividends declared per common share (in dollars per share)		$ 1.72	$ 1.64	$ 1.46
Subsequent Event [Member]
Dividends [Abstract]
Dividends declared per common share (in dollars per share)	$ 0.44
Dividend payable	Apr. 05, 2024
Dividend recorded	Mar. 12, 2024

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SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) - Allowance for Credit Losses [Member] - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2023	[1]	Dec. 31, 2022		Dec. 31, 2021
Movement in Valuation Allowances and Reserves [Roll Forward]
Beginning Balance		$ 2,829		$ 2,768		$ 2,008
Additions Charged to Cost and Expenses		6,172		5,548		5,305
Additions Charged to Other Accounts		0		0		0
Deductions	[2]	6,265		5,487		4,545
Ending Balance		$ 2,736		$ 2,829	[1]	$ 2,768

[1] Related to patient accounts receivable and accounts receivable-other.

[2] Uncollectible accounts written off, net of recoveries.