10-Q 1 brhc10043464_10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2022
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

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value
USPH
New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 and 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 and 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
☐
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 to Section 13(a) of the Exchange Act. ☐

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

As of November 8, 2022, the number of shares outstanding (issued less treasury stock) of the registrant’s common stock, par value $.01 per share, was: 13,001,589.

PART I—FINANCIAL INFORMATION - UNAUDITED

Item 1.
3
     
 
3
     
 
4
     
 
5
     
 
6
     
 
7
     
 
8
     
Item 2.
31
     
Item 3.
46
     
Item 4.
47
   
PART II—OTHER INFORMATION
  
   
Item 1.
47
   
Item 1A.
 Risk Factors
 47
   
Item 6.
49
     
 
49
     
 
Certifications
  

2
ITEM 1.
FINANCIAL STATEMENTS.

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

 
September 30, 2022
    
December 31, 2021
  
ASSETS
  
(unaudited)
        
Current assets:
            
Cash and cash equivalents
  
$
37,914
    
$
28,567
  
Patient accounts receivable, less allowance for credit losses of $2,964  and $2,768, respectively
    
49,747
      
46,272
  
Accounts receivable - other
    
19,146
      
16,144
  
Other current assets
    
6,085
      
4,183
  
Total current assets
    
112,892
      
95,166
  
Fixed assets:
                
Furniture and equipment
    
62,006
      
58,743
  
Leasehold improvements
    
41,961
      
39,194
  
Fixed assets, gross
    
103,967
      
97,937
  
Less accumulated depreciation and amortization
    
78,960
      
74,958
  
Fixed assets, net
    
25,007
      
22,979
  
Operating lease right-of-use assets
    
100,967
      
96,427
  
Investment in unconsolidated affiliate
    11,978       12,215  
Goodwill
    
449,548
      
434,679
  
Other identifiable intangible assets, net
    
93,697
      
86,382
  
Other assets
    
5,619
      
1,578
  
Total assets
  
$
799,708
    
$
749,426
  
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST
                
Current liabilities:
                
Accounts payable - trade
  
$
4,471
    
$
3,268
  
Accounts payable - due to seller of acquired business
    3,203       3,203  
Accrued expenses
    
33,784
      
45,705
  
Current portion of operating lease liabilities
    
32,540
      
30,475
  
Current portion of term loan and notes payable
    
7,490
      
830
  
Total current liabilities
    
81,488
      
83,481
  
Notes payable, net of current portion
    
2,912
      
3,587
  
Revolving line of credit
    
-
      
114,000
  
Term Loan, net of current portion and deferred financing costs
     143,778       -  
Deferred taxes
    
23,838
      
14,385
  
Operating lease liabilities, net of current portion
    
76,907
      
74,185
  
Other long-term liabilities
    
4,026
      
7,345
  
Total liabilities
    
332,949
      
296,983
  
                 
Redeemable non-controlling interest - temporary equity
    
148,155
      
155,262
  
                 
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, 15,216,326 and 15,126,160 shares issued, respectively
    
152
      
151
  
Additional paid-in capital
    
108,515
      
102,688
  
Accumulated other comprehensive gain
     4,424     -  
Retained earnings
    
235,683
      
224,395
  
Treasury stock at cost, 2,214,737 shares
    
(31,628
)
    
(31,628
)
Total USPH shareholders’ equity
    
317,146
      
295,606
  
Non-controlling interest - permanent equity
    
1,458
      
1,575
  
Total USPH shareholders’ equity and non-controlling interest - permanent equity
    
318,604
      
297,181
  
Total liabilities, redeemable non-controlling interest, USPH shareholders’ equity and non-controlling interest - permanent equity
  
$
799,708
    
$
749,426
  

See notes to consolidated financial statements.

3
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)

 
Three Months Ended
    
Nine Months Ended
  
   
September 30, 2022
    
September 30, 2021
    
September 30,2022
    
September 30, 2021
  
                         
Net patient revenue
  
$
116,710
    
$
112,327
    
$
344,444
    
$
324,819
  
Other revenue
    
22,892
      
13,566
      
67,518
      
40,370
  
Net revenue
    
139,602
      
125,893
      
411,962
      
365,189
  
Operating cost:
                                
Salaries and related costs
    
81,786
      
70,492
      
236,874
      
203,173
  
Rent, supplies, contract labor and other
    
29,696
      
24,244
      
86,703
      
68,095
  
Provision for credit losses
    
1,336
      
1,358
      
4,192
      
3,922
  
Total operating cost
    
112,818
      
96,094
      
327,769
      
275,190
  
                                 
Gross profit
    
26,784
      
29,799
      
84,193
      
89,999
  
                                 
Corporate office costs
    
11,889
      
12,867
      
34,186
      
35,815
  
Operating income
    
14,895
      
16,932
      
50,007
      
54,184
  
                                 
Other income and expense
                                
Resolution of a payor matter
     -       1,216       -       1,216  
Change in fair value of contingent earn-out consideration
    2,000       -       2,000       -  
Equity in earnings of unconsolidated affiliate
     304       -       983       -  
Interest and other income, net
    
65
      
58
      
790
      
158
  
Gain on revaluation of put-right liability
     785       -       771       -  
Interest expense - debt and other
    
(2,013
)
    
(268
)
    
(3,540
)
    
(751
)
Total other income and expense
    
1,141
   
1,006
      
1,004
   
623
  
Income before taxes     16,036       17,938       51,011       54,807  
                                 
Provision for income taxes
    
3,215
      
3,815
      
10,952
      
11,326
  
                                 
Net income
    
12,821
      
14,123
      
40,059
      
43,481
  
                                 
Less: net income attributable to non-controlling interest:
                                
Redeemable non-controlling interest - temporary equity
    
(2,037
)
    
(2,605
)
    
(7,220
)
    
(8,669
)
Non-controlling interest - permanent equity
    
(1,227
)
    
(1,509
)
    
(3,288
)
    
(4,194
)
     
(3,264
)
    
(4,114
)
    
(10,508
)
    
(12,863
)
                                 
Net income attributable to USPH shareholders
  
$
9,557
    
$
10,009
    
$
29,551
    
$
30,618
  
                                 
Basic and diluted earnings per share attributable to USPH shareholders
  
$
0.72
    
$
0.66
    
$
2.27
    
$
1.69
  
                                 
Shares used in computation - basic and diluted
    
13,001
      
12,909
      
12,979
      
12,894
  
                                 
Dividends declared per common share
  
$
0.41
    
$
0.38
    
$
1.23
    
$
1.08
  

See notes to consolidated financial statements.

4
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)

   
Three Months Ended
    
For the Nine Months Ended
  
   
September 30, 2022
    
September 30, 2021
    
September 30, 2022
    
September 30, 2021
  
                         
Net income
  
$
12,821
    
$
14,123
    
$
40,059
    
$
43,481
  
Other comprehensive loss
                                
Unrealized gain on cash flow hedge
    
6,473
      
-
      
5,942
      
-
  
Tax effect at statutory rate (federal and state) of 25.55%
    
(1,654
)
    
-
      
(1,518
)
    
-
  
Comprehensive income
  
$
17,640
    
$
14,123
    
$
44,483
    
$
43,481
  
                                 
Comprehensive income attributable to non-controlling interest
    
(3,264
)
    
(4,114
)
    
(10,508
)
    
(12,863
)
Comprehensive income attributable to USPH shareholders
  
$
14,376
    
$
10,009
    
$
33,975
    
$
30,618
  

5
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)

 
Nine Months Ended
  
   
September 30, 2022
    
September 30, 2021
  
OPERATING ACTIVITIES
            
Net income including non-controlling interest and earnings from unconsolidated affiliates, net
  
$
40,059
    
$
43,481
  
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
                
Depreciation and amortization
    
10,950
      
8,519
  
Provision for credit losses
    
4,192
      
3,922
  
Equity-based awards compensation expense
    
5,462
      
6,280
  
Deferred income taxes
    
6,077
      
1,292
  
Change in revaluation of put-right liability
     (771 )     -  
Change in fair value of contingent earn-out consideration
    (2,000 )     -  
(Gain) loss on sale of clinics and fixed assets
     (643 )     113  
Earnings in unconsolidated affiliate
    (983 )     -  
Unrealized gain on cash flow hedge
     (5,942 )     -  
Changes in operating assets and liabilities:
                
Increase in patient accounts receivable
    
(7,585
)
    
(7,513
)
(Increase) decrease in accounts receivable - other
    
(4,551
)
    
(738
)
(Decrease) increase in other assets
    
1,669
      
(195
)
(Decrease) Increase in accounts payable and accrued expenses
    
(4,568
)
    
4,529
  
(Decrease) increase in other long-term liabilities
    
(128
)
    
811
  
Net cash provided by operating activities
    
41,238
      
60,501
  
                 
INVESTING ACTIVITIES
                
Purchase of fixed assets
    
(7,290
)
    
(5,996
)
Purchase of majority interest in businesses, net of cash acquired
    
(18,573
)
    
(22,589
)
Purchase of redeemable non-controlling interest, temporary equity
    
(14,096
)
    
(14,916
)
Purchase of non-controlling interest, permanent equity
    
(280
)
    
(1,093
)
Proceeds on sales of partnership interest, clinics and fixed assets
    
740
      
136
  
Distributions from unconsolidated affiliate
    1,220
       -
  
Sale of non-controlling interest - permanent
     -       131  
Proceeds on sales of redeemable non-controlling interest-temporary
     401       69  
Net cash used in investing activities
    
(37,878
)
    
(44,258
)
                 
FINANCING ACTIVITIES
                
Distributions to non-controlling interest, permanent and temporary equity
    
(11,760
)
    
(14,330
)
Cash dividends paid to shareholders
    
(15,990
)
    
(13,934
)
Proceeds from revolving line of credit
    
61,000
      
193,000
  
Proceeds from term loan
     150,000       -  
Payments on revolving line of credit
    
(175,000
)
    
(176,000
)
Principal payments on notes payable
    
(496
)
    
(4,662
)
(Payment) receipt of Medicare Accelerated and Advance Funds
    
-
      
(14,054
)
Payment of deferred financing costs
     (1,779 )     -  
Other
    
12
      
7
  
Net cash used in financing activities
    
5,987
      
(29,973
)
                 
Net decrease in cash and cash equivalents
    
9,347
      
(13,730
)
Cash and cash equivalents - beginning of period
    
28,567
      
32,918
  
Cash and cash equivalents - end of period
  
$
37,914
    
$
19,188
  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                
Cash paid during the period for:
                
Income taxes
  
$
7,529
    
$
10,777
  
Interest paid
  
$
2,159
    
$
1,195
  
Non-cash investing and financing transactions during the period:
                
Purchase of businesses - seller financing portion
  
$
824
    
$
1,800
  
Notes payable related to purchase of redeemable non-controlling interest, temporary equity
  $ 1,074     $ 1,302  
Notes payable related to purchase of non-controlling interest, permanent equity
  
$
576
    
$
-
  
Notes receivable related to sale of partnership interest - redeemable non-controlling interest 
  $ 1,580     $ 914  

See notes to consolidated financial statements.

6
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(IN THOUSANDS)
(unaudited)
 
  
U.S.Physical Therapy, Inc.
              
    Common Stock     Additional    
Accumulated Other
    Retained     Treasury Stock    
Total Shareholders’
    
Non-Controlling
        
For the three months ended September 30, 2022   Shares     Amount    
Paid-In Capital
    
Comprehensive Loss
     Earnings     Shares     Amount     Equity     Interests     Total  
                                                             
Balance June 30, 2022
  

15,219
      
152
    
$
106,801
      
(395
)
  
$
232,247
      
(2,215
)
  
$
(31,628
)
  
$
307,177
    
$
1,756
    
$
308,933
  
Issuance of restricted stock, net of cancellations
    
(3
)
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Revaluation of redeemable non-controlling interest, net of tax
    
-
      
-
      
-
      
-
      
(147
)
    
-
      
-
      
(147
)
    
-
      
(147
)
Compensation expense - equity-based awards
    
-
      
-
      
1,802
      
-
      
-
      
-
      
-
      
1,802
      
-
      
1,802
  
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Purchase of partnership interests -  non-controlling interest
    
-
      
-
      
(88
)
    
-
      
-
      
-
      
-
      
(88
)
    
(6
)
    
(94
)
Dividends paid to USPH shareholders
    
-
      
-
      
-
      
-
      
(5,331
)
    
-
      
-
      
(5,331
)
    
-
      
(5,331
)
Distributions to non-controlling interest partners - permanent equity
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(1,519
)
    
(1,519
)
Deferred taxes related to redeemable non-controlling interest - temporary equity
    
-
      
-
      
-
      
-
      
(643
)
    
-
      
-
      
(643
)
    
-
      
(643
)
Other
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Net income attributable to non-controlling interest - permanent equity
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
1,227
      
1,227
  
Net income attributable to USPH shareholders
    
-
      
-
      
-
      
-
      
9,557
      
-
      
-
      
9,557
      
-
      
9,557
  
Other comprehensive gain
     -       -       -      
4,819
      
-
      
-
       -      
4,819
      
-
      
4,819
  
Balance September 30, 2022
    
15,216
      
152
    
$
108,515
    
$
4,424
    
$
235,683
      
(2,215
)
  
$
(31,628
)
  
$
317,146
    
$
1,458
    
$
318,604
  

 
  
U.S.Physical Therapy, Inc.
              
   
Common Stock
     Additional    
Accumulated Other
     Retained     Treasury Stock    
Total Shareholders’
    
Non-Controlling
    
 
For the nine months ended September 30, 2022
   Shares    
Amount
    
Paid-In Capital
    
Comprehensive Gain
     Earnings     Shares     Amount     Equity     Interests     Total  
                                                             
Balance December 31, 2021
  
$
15,126
      
151
    
$
102,688
      
-
    
$
224,395
      
(2,215
)
  
$
(31,628
)
  
$
295,606
    
$
1,575
    
$
297,181
  
Issuance of restricted stock, net of cancellations
    
90
      
1
      
-
      
-
      
-
      
-
      
-
      
1
      
-
      
1
  
Revaluation of redeemable non-controlling interest, net of tax
    
-
      
-
      
-
      
-
      
(144
)
    
-
      
-
      
(144
)
    
-
      
(144
)
Compensation expense - equity-based awards
    
-
      
-
      
5,462
      
-
      
-
      
-
      
-
      
5,462
      
-
      
5,462
  
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
    
-
      
-
      
707
      
-
      
-
      
-
      
-
      
707
      
-
      
707
  
Purchase of partnership interests -  non-controlling interest
    
-
      
-
      
(353
)
    
-
      
-
      
-
      
-
      
(353
)
    
(101
)
    
(454
)
Dividends paid to USPH shareholders
    
-
      
-
      
-
      
-
      
(15,990
)
    
-
      
-
      
(15,990
)
    
-
      
(15,990
)
Distributions to non-controlling interest partners - permanent equity
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(3,990
)
    
(3,990
)
Deferred taxes related to redeemable non-controlling interest - temporary equity
    
-
      
-
      
-
      
-
      
(2,129
)
    
-
      
-
      
(2,129
)
    
-
      
(2,129
)
Other
    
-
      
-
      
11
      
-
      
-
      
-
      
-
      
11
      
686
      
697
  
Net income attributable to non-controlling interest - permanent equity
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
3,288
      
3,288
  
Net income attributable to USPH shareholders
    
-
      
-
      
-
      
-
      
29,551
      
-
      
-
      
29,551
      
-
      
29,551
  
Other comprehensive gain
     -       -       -      
4,424
      
-
       -       -      
4,424
       -      
4,424
  
Balance September 30, 2022
    
15,216
      
152
    
$
108,515
    
$
4,424
    
$
235,683
      
(2,215
)
  
$
(31,628
)
  
$
317,146
    
$
1,458
    
$
318,604
  

 
  
U.S.Physical Therapy, Inc.
              

 
Common Stock
     Additional    
Accumulated Other
     Retained    
Treasury Stock
    
Total Shareholders’
    
Non-Controlling
        
For the three months ended September 30, 2021
   Shares     Amount    
Paid-In Capital
    
Comprehensive Loss
     Earnings     Shares     Amount     Equity     Interests     Total  
                                                             
Balance June 30, 2021
    
15,121
      
151
    
$
99,039
    
$
-
    
$
216,286
      
(2,215
)
  
$
(31,628
)
  
$
283,848
    
$
963
    
$
284,811
  
Issuance of restricted stock, net of cancellations
    
5
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
  
Revaluation of redeemable non-controlling interest, net of tax
    
-
      
-
      
-
      
-
      
(1,542
)
    
-
      
-
      
(1,542
)
    
-
      
(1,542
)
Compensation expense - equity-based awards
    
-
      
-
      
2,877
      
-
      
-
      
-
      
-
      
2,877
      
-
      
2,877
  
Purchase of non-controlling interest
    -       -       -       -       (619 )     -       -       (619 )     (49 )     (668 )
Sale of non-controlling interest, net of purchases
    -       -       -       -       130       -       -       130       131       261  
Dividends paid to USPT shareholders
    
-
      
-
      
-
      
-
      
(4,906
)
    
-
      
-
      
(4,906
)
    
-
      
(4,906
)
Distributions to non-controlling interest partners - permanent equity
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(1,730
)
    
(1,730
)
Other
    
-
      
-
      
6
      
-
      
(20
)
    
-
      
-
      
(14
)
    
10
      
(4
)
Net income attributable to non-controlling interest - permanent equity
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
1,509
      
1,509
  
Net income attributable to USPH shareholders
    
-
      
-
      
-
      
-
      
10,009
      
-
      
-
      
10,009
      
-
      
10,009
  
Balance September 30, 2021
    
15,126
      
151
    
$
101,922
    
$
-
    
$
219,338
      
(2,215
)
  
$
(31,628
)
  
$
289,783
    
$
834
    
$
290,617
  

 
  
U.S.Physical Therapy, Inc.
              
   
Common Stock
     Additional    
Accumulated Other
     Retained    
Treasury Stock
    
Total Shareholders’
    
Non-Controlling
        
For the nine months ended September 30, 2021
  
Shares
     Amount    
Paid-In Capital
    
Comprehensive Loss
     Earnings     Shares    
Amount
     Equity     Interests     Total  
                                                             
Balance December 31, 2020
    
15,065
      
151
    
$
95,622
    
$
-
    
$
212,015
      
(2,215
)
  
$
(31,628
)
  
$
276,160
    
$