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
 

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.

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.

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
 

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.

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
   
$