US Physical Therapy Earnings 2019-03-31

USPH 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 form10q.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 March 31, 2019

☐	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

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	☐ (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 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

Securities registered pursuant to Section 12(b) of the Act:

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

As of May 6, 2019, the number of shares outstanding (issued less treasury stock) of the registrant’s common stock, par value $.01 per share, was: 12,761,092.

PART I—FINANCIAL INFORMATION - UNAUDITED

Item 1.	Financial Statements.	3

	Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	3

	Consolidated Statements of Net Income for the three months ended March 31, 2019 and 2018	4

	Consolidated Statements of Cash Flows for the three months ended March 31, 2019, and 2018	5

	Consolidated Statements of Changes in Equity for the three months ended March 31, 2019 and 2018	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	32

Item 4.	Controls and Procedures	32

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 6.	Exhibits	33

	Signatures	34

	Certifications

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ITEM 1.

FINANCIAL STATEMENTS.

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

	March 31, 2019			December 31, 2018
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	20,238		$	23,368
Patient accounts receivable, less allowance for doubtful accounts of $2,692 and $2,672, respectively		48,443			44,751
Accounts receivable - other		7,237			6,742
Other current assets		5,238			4,353
Total current assets		81,156			79,214
Fixed assets:
Furniture and equipment		53,267			52,611
Leasehold improvements		33,089			31,712
Fixed assets, gross		86,356			84,323
Less accumulated depreciation and amortization		65,197			64,154
Fixed assets, net		21,159			20,169
Operating lease right-of-use assets		77,870			-
Goodwill		293,338			293,525
Other identifiable intangible assets, net		48,125			48,828
Other assets		1,439			1,430
Total assets	$	523,087		$	443,166

LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTERESTS
Current liabilities:
Accounts payable - trade	$	1,894		$	2,019
Accrued expenses		39,237			38,493
Current portion of operating lease liabilities		26,733			-
Current portion of notes payable		1,066			1,434
Total current liabilities		68,930			41,946
Notes payable, net of current portion		516			402
Revolving line of credit		29,000			38,000
Deferred taxes		9,872			9,012
Deferred rent		-			2,159
Operating lease liabilities, net of current portion		55,834			-
Other long-term liabilities		566			829
Total liabilities		164,718			92,348

Redeemable non-controlling interests		137,196			133,943

U.S. Physical Therapy, Inc. ("USPH") shareholders’ equity:
Preferred stock, $.01 par value, 500,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $.01 par value, 20,000,000 shares authorized, 14,975,829 and 14,899,233 shares issued, respectively		149			149
Additional paid-in capital		82,295			80,028
Retained earnings		168,952			167,396
Treasury stock at cost, 2,214,737 shares		(31,628	)		(31,628	)
Total USPH shareholders’ equity		219,768			215,945
Non-controlling interests		1,405			930
Total USPH shareholders' equity and non-controlling interests		221,173			216,875
Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests	$	523,087		$	443,166

See notes to consolidated financial statements.

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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)

	For the Three Months Ended
	March 31, 2019			March 31, 2018

Net patient revenues	$	106,650		$	100,552
Other revenues		9,581			7,790
Net revenues		116,231			108,342
Operating costs:
Salaries and related costs		66,267			62,279
Rent, supplies, contract labor and other		22,044			21,776
Provision for doubtful accounts		1,206			1,061
Closure costs		(4	)		12
Total operating costs		89,513			85,128

Gross profit		26,718			23,214

Corporate office costs		11,293			10,163
Operating income		15,425			13,051

Interest and other income, net		16			32
Interest expense - debt and other		(358	)		(553	)

Income before taxes		15,083			12,530

Provision for income taxes		2,708			2,476

Net income		12,375			10,054

Less: net income attributable to non-controlling interests:
Non-controlling interests - permanent equity		(1,537	)		(1,201	)
Redeemable non-controlling interests - temporary equity		(2,395	)		(1,736	)
		(3,932	)		(2,937	)

Net income attributable to USPH shareholders	$	8,443		$	7,117

Basic and diluted earnings per share attributable to USPH shareholders	$	0.39		$	0.27

Shares used in computation - basic and diluted		12,707			12,616

Dividends declared per common share	$	0.27		$	0.23

See notes to consolidated financial statements.

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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(unaudited)

	Three Months Ended
	March 31, 2019			March 31, 2018
OPERATING ACTIVITIES
Net income including non-controlling interests	$	12,375		$	10,054
Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities:
Depreciation and amortization		2,400			2,468
Provision for doubtful accounts		1,206			1,061
Equity-based awards compensation expense		1,728			1,381
Deferred income taxes		2,118			(1,162	)
Other		12			54
Changes in operating assets and liabilities:
Increase in patient accounts receivable		(4,898	)		(2,782	)
Increase in accounts receivable - other		(495	)		(849	)
Increase in other assets		(894	)		(1,238	)
Increase in accounts payable and accrued expenses		274			7,389
Decrease in other liabilities		(263	)		(845	)
Net cash provided by operating activities		13,563			15,531

INVESTING ACTIVITIES
Purchase of fixed assets		(2,497	)		(1,404	)
Purchase of redeemable non-controlling interest		(2,053	)		(761	)
Purchase of non-controlling interest		(139	)		(246	)
Proceeds on sale of fixed assets		59			-
Net cash used in investing activities		(4,630	)		(2,411	)

FINANCING ACTIVITIES
Distributions to non-controlling interests, permanent and temporary equity		(2,576	)		(2,208	)
Proceeds from revolving line of credit		19,000			19,000
Payments on revolving line of credit		(28,000	)		(31,000	)
Payments to settle mandatorily redeemable non-controlling interests		-			(265	)
Principal payments on notes payable		(482	)		(823	)
Other		(5	)		56
Net cash used in financing activities		(12,063	)		(15,240	)

Net decrease in cash and cash equivalents		(3,130	)		(2,120	)
Cash and cash equivalents - beginning of period		23,368			21,933
Cash and cash equivalents - end of period	$	20,238		$	19,813

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes	$	313		$	2,941
Interest	$	343		$	526
Non-cash investing and financing transactions during the period:
Purchase of business - seller financing portion	$	228		$	150

See notes to consolidated financial statements.

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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(IN THOUSANDS)

(unaudited)

	U.S.Physical Therapy, Inc.

	Common Stock				Additional			Retained			Treasury Stock						Total Shareholders’			Non-Controlling
	Shares		Amount		Paid-In Capital			Earnings			Shares			Amount			Equity			Interests			Total

Balance December 31, 2018		14,899	$	149	$	80,028		$	167,396			(2,215	)	$	(31,628	)	$	215,945		$	930		$	216,875
Issuance of restricted stock, net of cancellations		77		-		-			(3,437	)		-			-			(3,437	)		-			(3,437	)
Compensation expense - equity-based awards		-		-		1,728			-			-			-			1,728			-			1,728
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans		-		-		636			-			-			-			636			-			636
Purchase of non-controlling interest		-		-		(97	)		-			-			-			(97	)		(8	)		(105	)
Dividends payable to USPT shareholders		-		-		-			(3,445	)		-			-			(3,445	)		-			(3,445	)
Distributions to non-controlling interest partners, permanent equity		-		-		-			-			-			-			-			(1,054	)		(1,054	)
Other		-		-		-			(5	)		-			-			(5	)		-			(5	)
Net income attributable to non-controlling interests - permanent equity				-		-			-			-			-			-			1,537			1,537
Net income attributable to USPH shareholders		-		-		-			8,443			-			-			8,443			-			8,443
Balance March 31, 2019		14,976		149		82,295			168,952			(2,215	)		(31,628	)	$	219,768			1,405			221,173

	U.S.Physical Therapy, Inc.

	Common Stock				Additional			Retained			Treasury Stock						Total Shareholders’			Non-Controlling
	Shares		Amount		Paid-In Capital			Earnings			Shares			Amount			Equity			Interests			Total

Balance December 31, 2017		14,809	$	148	$	73,940		$	162,406			(2,215	)	$	(31,628	)	$	204,866		$	1,204		$	206,070
Issuance of restricted stock, net of cancellation		76		1		-			-			-			-			1			-			1
Revaluation of redeemable non-controlling interest, net of tax		-		-		-			(3,747	)		-			-			(3,747	)		-			(3,747	)
Compensation expense - equity-based awards		-		-		1,381			-			-			-			1,381			-			1,381
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans		-		-		373			-			-			-			373			-			373
Purchase of non-controlling interest		-		-		(151	)		-			-			-			(151	)		(42	)		(193	)
Dividends payable to USPT shareholders		-		-		-			(2,914	)		-			-			(2,914	)		-			(2,914	)
Distributions to non-controlling interest partners		-		-		-			-			-			-			-			(849	)		(849	)
Other		-		-		-			45			-			-			45			-			45
Net income		-		-		-			7,117			-			-			7,117			1,201			8,318
Balance March 31, 2018		14,885		149		75,543			162,907			(2,215	)		(31,628	)	$	206,971			1,514			208,485

See notes to consolidated financial statements.

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U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 primarily operates through subsidiary clinic partnerships, in which the Company generally owns a 1% general partnership interest in all the Clinic Partnerships. Our limited partnership interests range from 49% to 99% in the Clinic Partnerships. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in the majority 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. The Company also looks for therapists with whom to establish new, de novo clinics to be owned jointly by the Company and such therapists. In these situations, the therapist is offered the opportunity to co-invest in the new clinic and also receives a competitive salary for managing the clinic. 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, retaining a non-controlling ownership interest in the clinics and receiving 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. For the foreseeable future, we intend to continue to acquire clinic practices and continue to focus on developing new clinics and opening satellite clinics where appropriate, along with increasing our patient volume through marketing and new clinical programs.

On April 30, 2018, the Company acquired a 65% interest in a business in the industrial injury prevention business. Previously, a 55% interest in the initial industrial injury prevention business was acquired by the Company in March 2017. On April 30, 2018, the Company combined the two businesses. After the combination, the Company owned a 59.45% interest in the combined business. See Subsequent Event, in this Note 1 for more information on a recent acquisition.

Services provided include onsite injury prevention and rehabilitation, performance optimization 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 of both physical therapists and specialized certified athletic trainers (ATCs).

In addition to the above acquired interests in the injury prevention business, during the year ended December 31, 2018, the Company completed the following multi-clinic acquisition:

	Date	% Interest Acquired		Number of Clinics

	2018
August 2018 Acquisition	August 31		70%		4

Besides the multi-clinic acquisitions above, in 2018, the Company through several of its majority owned Clinic Partnerships, acquired five separate clinic practices. These practices operate as satellites of the respective existing Clinic Partnerships.

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As of March 31, 2019, the Company operated 590 clinics in 41 states, as well as the industrial injury prevention business. The Company also manages physical therapy facilities for third parties, primarily hospital and physicians, with 28 third-party facilities under management as of March 31, 2019.

The results of operations of the acquired clinics have been included in the Company’s consolidated financial statements since the date of their respective acquisition. The Company intends to continue to pursue additional acquisition opportunities, develop new clinics and open satellite clinics.

The accompanying unaudited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions for Form 10-Q. However, the statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Management believes this report contains all necessary adjustments (consisting only of normal recurring adjustments) to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented. For further information regarding the Company’s accounting policies, please read the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 18, 2019 (“2018 Annual Report”).

The Company believes, and the Chief Executive Officer, Chief Financial Officer and Corporate Controller have certified, that the financial statements included in this report present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented.

Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results the Company expects for the entire year. Please also review the Risk Factors section included in our 2019 Annual Report.

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 interests.

For acquired Clinic Partnerships with redeemable non-controlling interests, the earnings attributable to the redeemable non-controlling interests are recorded within the consolidated statements of income line item – net income attributable to non-controlling interests – redeemable non-controlling interests – temporary equity and the equity interests are recorded on the consolidated balance sheet as redeemable non-controlling interests. In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but charged directly to retained earnings and is included in the earnings per basic and diluted share calculation.

Wholly-Owned Facilities

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

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 on deposits in excess of FDIC insurance coverage. Management believes that the risk is not significant.

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Long-Lived Assets

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

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances which indicate that the amounts may be impaired. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

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.

The fair value of goodwill and other identifiable intangible assets with indefinite lives are tested for impairment annually and upon the occurrence of certain events, and are written down to fair value if considered impaired. The Company evaluates goodwill for impairment on at least an annual basis (in its third quarter) by comparing the fair value of its reporting units to the carrying value of each reporting unit including related goodwill. The Company evaluates indefinite lived tradenames using the relief from royalty method in conjunction with its annual goodwill impairment test. The Company operates a business which is made up of various clinics within partnerships. The partnerships are components of regions and are aggregated to the operating segment level for the purpose of determining the Company’s reporting units when performing its annual goodwill impairment test. In 2018, there were six regions for which an impairment test was performed. In addition to the six regions, during 2018, the impairment test included a separate analysis for the industrial injury prevention business, a separate reporting unit.

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 estimated fair value of a reporting unit is determined using two factors: (i) earnings prior to taxes, depreciation and amortization for the reporting unit multiplied by a price/earnings ratio used in the industry and (ii) a discounted cash flow analysis. A weight is assigned to each factor and the sum of each weight times the factor is considered the estimated fair value. For 2018, the factors (i.e., price/earnings ratio, discount rate and residual capitalization rate) were updated to reflect current market conditions. The evaluation of goodwill in 2018 and 2017 did not result in any goodwill amounts that were deemed impaired.

The Company has not identified any triggering events occurring after the testing date that would impact the impairment testing results obtained. The Company will continue to monitor for any triggering events or other indicators of impairment.

Redeemable Non-Controlling Interests

The non-controlling interests that are reflected as redeemable non-controlling interests in the consolidated financial statements consist of those that the owners and the Company have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met. The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements. The redemption rights can be triggered by the owner or the Company at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically 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 interests. 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 income. Although the adjustments are not reflected in the consolidated statements of 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 Interests

The Company recognizes non-controlling interests, in which the Company has 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. Net income is allocated to non-controlling interests (permanent equity), redeemable non-controlling interests (temporary equity) and to USPH shareholders. 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

Revenues are recognized in the period in which services are rendered. See Footnote 3 for further discussion of revenue recognition.

Allowance for Doubtful Accounts

The Company determines allowances for doubtful accounts based on the specific agings and payor classifications at each clinic. The provision for doubtful accounts is included in operating costs in the consolidated statements of net income. Net accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for doubtful accounts, 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.

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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 Company did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the three months ended March 31, 2019. The Company records any interest or penalties, if required, in interest and other expense, as appropriate.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets for cash and cash equivalents, 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 Amended Credit Agreement and the redemption value of Redeemable non-controlling interests approximate the respective fair values. The fair value of the Company’s redeemable non-controlling interests are determined based on “Level 3” inputs. The interest rate on the Amended Credit Agreement, which is tied to LIBOR, is set at various short-term intervals, as detailed in the Amended Credit Agreement.

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 deciding how to allocate resources and in assessing performance. The Company identifies operating segments based on management responsibility and believes it meets the criteria for aggregating its operating segments into a single reporting segment.

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, purchase accounting, goodwill impairment, 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 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 March 31, 2019.

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, other than officers, 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 restricted stock issued is included in basic and diluted shares for the earnings per share computation.

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Recently Adopted Accounting Guidance

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”), which amended prior accounting standards for leases.

The Company implemented the new lease standard, ASC Topic 842 – Leases as of January 1, 2019 using the transition method in ASU 2018-11 issued in July 2018 which allows the Company to initially apply the new leases standard at adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Accordingly, no retrospective adjustments were made to the comparative periods presented. There was no adjustment required to retained earnings. The cumulative adjustment was immaterial, to the opening balance of retained earnings at the adoption date. The Company elected certain of the practical expedients permitted, including the expedient that allows the Company to retain its existing lease assessment and classification.

Adoption of ASC 842 resulted in an increase to total assets and liabilities due to the recording of operating lease right-of-use assets (“ROU”) and operating lease liabilities of approximately $78.0 million and $82.6 million respectively, as of January 1, 2019 for operating leases as a lessee. The adoption did not materially impact the Company’s consolidated statement of income or cash flows. See Footnote 10 for further discussion of leases.

In August 2018, the Securities Exchange Commission (“SEC”) issued Final Rule 33-10532, Disclosure Update and Simplification, which amends certain disclosure requirements that were redundant, duplicative, overlapping or superseded by other SEC disclosure requirements. The amendments generally eliminated or otherwise reduced certain disclosure requirements of various SEC rules and regulations. However, in some cases, the amendments require additional information to be disclosed, including changes in stockholders’ equity in interim periods. The rule is effective 30 days after its publication in the Federal Register. The rule was posted on October 4, 2018. On September 25, 2018, the SEC released guidance advising it will not object to a registrant adopting the requirement to include changes in stockholders’ equity in the Form 10-Q for the first quarter beginning after the effective date of the rule. The Company adopted this standard in this Form 10-Q with no material impact on the Consolidated Financial Statements.

Recently Issued Accounting Guidance

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment change. ASU 2017-04 is effective prospectively for fiscal years, and the interim periods within those years, beginning after December 15, 2019. The Company does not expect adoption of this ASU to have a material impact.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which added a new impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, including trade receivables. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. These changes become effective for the Company on January 1, 2020. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which amended the fair value measurement guidance by removing or clarifying certain existing disclosure requirements, while also adding new disclosure requirements. Specifically, this update removed certain disclosures related to Level 1 and Level 2 transfers and also removed the discussion regarding valuation processes of Level 3 fair value measurements. The update modifies guidance related to investments in certain entities that calculate net asset value to explicitly require disclosure regarding timing of liquidation of the investee’s assets and timing of redemption restrictions. The update adds disclosures around the changes in unrealized gains and losses in other comprehensive income for recurring Level 3 investments held at the end of the reporting period and adds disclosures regarding certain unobservable inputs on Level 3 fair value measurements. These changes become effective for the Company on January 1, 2020. Pursuant to ASC 820, the fair value of the Company’s redeemable non-controlling interests are determined based on “Level 3” inputs. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements.

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Subsequent Event

On April 11, 2019, the Company acquired a third company that is a 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. This relationship-based health delivery system is paid for directly by corporate clients. Clients include large companies across a variety of industries. The total consideration for the acquisition was $23.6 million, derived from the Company’s existing revolving line of credit. The business was then combined with Briotix Health, USPH’s industrial injury prevention operation, increasing U.S. Physical Therapy’s ownership position in the partnership to approximately 76%.

2. ACQUISITIONS OF BUSINESSES

On August 31, 2018, the Company acquired a 70% interest in a four-clinic physical therapy practice. The purchase price for the 70% interest was $7.2 million in cash and $0.4 million in a seller note that is payable in two principal installments totaling $200,000 each, plus accrued interest, in August 2019 and 2020.

On April 30, 2018, the Company acquired a 65% interest in a business in the industrial injury prevention market. Previously, a 55% interest in the initial industrial injury prevention business was acquired by the Company in March 2017. The purchase price for the 55% interest was $6.2 million in cash and $0.4 million in a seller note that is payable, principal plus accrued interest, in September 2018. On April 30, 2018, the Company combined the two businesses. After the combination, the Company owns a 59.45% interest in the combined business. Services provided include onsite injury prevention and rehabilitation, performance optimization 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 of both physical therapists and highly specialized certified athletic trainers (ATCs).

In addition, during 2018, the Company, through several of its majority owned Clinic Partnerships, acquired five separate clinic practices. These practices operate as satellites of the existing Clinic Partnership. The aggregate purchase price was $1.0 million inclusive of cash of $850,000 and a note payable of $150,000. The note accrues interest at 4.5% and is payable, principal and accrued interest, on August 31, 2019.

The purchase price for the 2018 acquisitions has been preliminarily allocated as follows (in thousands):

Cash paid, net of cash acquired	$	16,367
Seller notes		950
Total consideration	$	17,317

Estimated fair value of net tangible assets acquired:
Total current assets	$	1,691
Total non-current assets		305
Total liabilities		(508	)
Net tangible assets acquired	$	1,488
Referral relationships		1,879
Non-compete		386
Tradename		2,172
Goodwill		19,537
Fair value of non-controlling interest (classified as redeemable non-controlling interests)		(8,145	)
	$	17,317

The purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2018 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 estimated fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions in 2018, 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 March 31, 2019 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.

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For the acquisitions in 2018, the values assigned to the referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. For referral relationships, the weighted average amortization period was 10.54 years at December 31, 2018. For non-compete agreements, the weighted average amortization period was 6.00 years at December 31, 2018. The values assigned to tradenames are tested annually for impairment.

For the 2018 acquisitions, total current assets primarily represent accounts receivable. Total non-current assets are fixed assets, primarily equipment, used in the practices.

The consideration paid for each of the acquisitions was derived through arm’s length negotiations. Funding for the cash portions was derived from proceeds from the Company’s revolving credit facility. The results of operations of the acquisitions have been included in the Company’s consolidated financial statements since their respective date of acquisition. Unaudited proforma consolidated financial information for the acquisitions in 2018 acquisitions have not been included as the results, individually and in the aggregate, were not material to current operations.

3. REVENUE RECOGNITION

Categories

Revenues are recognized in the period in which services are rendered.

Net patient revenues 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) 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 for payments to the Company at amounts different from its established rates. The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience.

Management contract revenues, which are included in other revenues in the consolidated statements of net income, are derived from contractual arrangements whereby we manage a clinic owned by a third party. The Company does 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 industrial injury prevention 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 industrial injury prevention 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.

Additionally, other revenues include services the Company provides on-site, such as schools and industrial worksites, for physical or occupational therapy services, and 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.

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The Company determines allowances for doubtful accounts based on the specific agings and payor classifications at each clinic. The provision for doubtful accounts 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 doubtful accounts, includes only those amounts the Company estimates to be collectible.

The following table details the revenue related to the various categories (in thousands):

	Three Months Ended
	March 31, 2019		March 31, 2018
Net patient revenues	$	106,650	$	100,552
Management contract revenues		2,146		2,236
Industrial injury prevention services revenues		6,900		4,852
Other revenues		535		702
	$	116,231	$	108,342

Medicare Reimbursement

The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (‘‘MPFS’’). For services provided in 2018, a 0.5% increase was applied to the fee schedule payment rates; for services provided in 2019, a 0.25% increase has been applied to the fee schedule payment rates before applying the mandatory budget neutrality adjustment. For services provided in 2020 through 2025, a 0.0% percent update will be applied each year to the fee schedule payment rates, before applying the mandatory budget neutrality adjustment. 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. 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 2019 will determine the payment adjustment in 2021. Each year from 2019 through 2024, professionals who receive a significant share of their revenues through an alternate payment model (“APM”), (such as accountable care organizations or bundled payment arrangements) that involves risk of financial losses and a quality measurement component will receive a 5% bonus in the corresponding payment year. The bonus payment for APM participation is intended to encourage participation and testing of new APMs and to promote the alignment of incentives across payors. The specifics of the MIPS and APM adjustments will be subject to future notice and comment rule-making.

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. On April 1, 2013, a 2% reduction to Medicare payments was implemented. The Bipartisan Budget Act of 2015, enacted on November 2, 2015, extended the 2% reductions to Medicare payments through fiscal year 2025. The Bipartisan Budget Act of 2018, enacted on February 9, 2018, extends the 2% reductions to Medicare payments through fiscal year 2027.

Historically, the total amount paid by Medicare in any one year for outpatient physical therapy, occupational therapy, and/or speech-language pathology services provided to any Medicare beneficiary was subject to an annual dollar limit (i.e., the ‘‘Therapy Cap’’ or ‘‘Limit’’). For 2017, the annual Limit on outpatient therapy services was $1,980 for combined Physical Therapy and Speech Language Pathology services and $1,980 for Occupational Therapy services. As a result of Bipartisan Budget Act of 2018, the Therapy Caps have been eliminated, effective as of January 1, 2018.

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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 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 extends 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. Since 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%.

Medicare claims for outpatient therapy services furnished by therapy assistants on or after January 1, 2022 must include a modifier indicating the service was furnished by a therapy assistant. CMS was required to develop a modifier to mark services provided by a therapy assistant by January 1, 2019, and then submitted claims have to report the modifier mark starting January 1, 2020. Outpatient therapy services furnished on or after January 1, 2022 in whole or part by a therapy assistant will be paid at an amount equal to 85% of the payment amount otherwise applicable for the service.

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 the our financial statements as of March 31, 2019. 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 three months ended March 31, 2019 and 2018, net patient revenue from Medicare were approximately $28.3 million and $24.6 million, respectively.

Contractual Allowances

Contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third party payors and managed care contracts are often complex and may include multiple reimbursement mechanisms payable for the services provided in Company clinics. The Company estimates contractual allowances based on its interpretation of the applicable regulations, payor contracts and historical calculations. Each month the Company estimates its contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and applies an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic. Based on the Company’s historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow the Company to provide the necessary detail and accuracy with its collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from the Company’s estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. The Company’s billing system does not capture the exact change in its contractual allowance reserve estimate from period to period in order to assess the accuracy of its revenues and hence its contractual allowance reserves. Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, historically the difference between net revenues and corresponding cash collections has generally reflected a difference within approximately 1% of net revenues. Additionally, analysis of subsequent periods’ contractual write-offs on a payor basis reflects a difference within approximately 1% 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% at March 31, 2019.

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A contract’s transaction price is allocated to each distinct performance obligation and recognized when, or as, the performance obligation is satisfied. To determine the transaction price, the Company includes the effects of any variable consideration, such as the probability of collecting that amount. The Company applies established rates to the services provided, and adjusts for the terms of payor contracts, as applicable. These contracted amounts are different from the Company’s established rates. The Company has established a “contractual allowance” for this difference. The allowance is based on the terms of payor contracts, historical and current reimbursement information and current experience with the clinic and partners. The Company’s established rates less the contractual allowance is the revenue that is recognized in the period in which the service is rendered. This revenue is deemed the transaction price and stated as “Net Patient Revenue” on the Company’s consolidated statements of income.

The Company’s performance obligations are satisfied at a point in time. After the clinic has provided services and satisfied its obligation to the customer for the reimbursement rates stipulated in the payor contracts (i.e. the transaction price), the Company recognizes the revenue, net of contractual allowances, in the period in which the services are rendered. The Company recognizes the full amount of revenue and reports the contractual allowances as a contra (or offset) revenue account to report a net revenue number based on the expected collections.

4. EARNINGS PER SHARE

In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest (see Footnote 6), net of tax, charged directly to retained earnings is included in the earnings per basic and diluted share calculation. The following table provides a detail of the basic and diluted earnings per share computation (in thousands, except per share data).

	Three Months Ended March 31,
	2019			2018
Computation of earnings per share - USPH shareholders:
Net income attributable to USPH shareholders	$	8,443		$	7,117
Charges to retained earnings:
Revaluation of redeemable non-controlling interest		(4,661	)		(5,081	)
Tax effect at statutory rate (federal and state) of 26.25%		1,224			1,334
	$	5,006		$	3,370

Basic and diluted per share		0.39		$	0.27

Shares used in computation:
Basic and diluted earnings per share - weighted-average shares		12,707			12,616

5. Redeemable Non-Controlling Interest

Since October 2017, when the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic business (referred to as “Therapy Practice”), these Acquisitions occur in a series of steps which are described below.

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

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

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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 small two-year note in lieu of an escrow (the “Purchase Price”). The Purchase Agreement does not contain any future earn-out or other contingent consideration that is payable to the Seller Entity or the Selling Shareholders.

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.

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”).

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.

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.

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

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

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

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 15-mile radius from the Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in competing businesses or activities outside the 15-mile radius (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the competing business or activities outside the 15-mile radius.

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:

Put Right

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.

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 shall have the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

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

Call Right

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

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 shall have the Call Right, and upon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

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.

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.

The Put Right and the Call Right do not have an expiration date, but the Seller Entity Interest is not required to be purchased by the Company or sold by the Seller Entity.

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.

For the three months ended March 31, 2019 and for the year ended December 31, 2018, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests (in thousands):

	Three Months Ended March 31, 2019			Year Ended December 31, 2018

Beginning balance	$	133,943		$	102,572
Operating results allocated to redeemable non-controlling interest partners		2,395			8,433
Distributions to redeemable non-controlling interest partners		(1,522	)		(9,835	)
Changes in the fair value of redeemable non-controlling interest		4,661			24,770
Purchases of redeemable non-controlling interest		(2,281	)		8,145
Other		-			(142	)
Ending balance	$	137,196		$	133,943

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

	March 31, 2019		December 31, 2018

Contractual time period has lapsed but holder's employment has not been terminated	$	48,058	$	42,624
Contractual time period has not lapsed and holder's employment has not been terminated	$	89,138	$	91,319
Holder's employment has terminated and contractual time period has expired	$	-	$	-
Holder's employment has terminated and contractual time period has not expired	$	-	$	-
	$	137,196	$	133,943

6. GOODWILL

The changes in the carrying amount of goodwill consisted of the following (in thousands):

	Three Months Ended March 31, 2019			Year Ended December 31, 2018

Beginning balance	$	293,525		$	271,338
Goodwill acquired	$	-		$	19,778
Goodwill adjustments for purchase price allocation of businesses acquired in prior year		(241	)		2,409
Other		54			-
Ending balance	$	293,338		$	293,525

7. INTANGIBLE ASSETS, NET

Intangible assets, net as of March 31, 2019 and December 31, 2018 consisted of the following (in thousands):

	March 31, 2019		December 31, 2018
Tradenames	$	30,256	$	30,256
Referral relationships, net of accumulated amortization of $9,903 and $$9,370, respectively		16,361		16,895
Non-compete agreements, net of accumulated amortization of $4,885 and $4,716, respectively		1,508		1,677
	$	48,125	$	48,828

Tradenames, 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 referral relationships is being amortized over their respective estimated useful lives which range from six to sixteen years. Non-compete agreements are amortized over the respective term of the agreements which range from five to six years.

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The following table details the amount of amortization expense recorded for intangible assets for the three months ended March 31, 2019 and 2018 (in thousands):

	Three Months Ended		Three Months Ended
	March 31, 2019		March 31, 2018
Referral relationships	$	533	$	520
Non-compete agreements		169		197
	$	702	$	717

Based on the balance of referral relationships and non-compete agreements as of March 31, 2019, the expected amount to be amortized in 2019 and thereafter by year is as follows (in thousands):

Referral Relationships			Non-Compete Agreements
Years Ending December 31,	Annual Amount		Years Ending December 31,		Annual Amount
2019	$	2,132		2019	$	632
2020	$	2,132		2020	$	418
2021	$	2,132		2021	$	340
2022	$	2,084		2022	$	163
2023	$	1,977		2023	$	94
2024	$	1,791		2024	$	30
Thereafter	$	4,646

8. ACCRUED EXPENSES

Accrued expenses as of March 31, 2019 and December 31, 2018 consisted of the following (in thousands):

	March 31, 2019		December 31, 2018
Salaries and related costs	$	21,131	$	21,726
Credit balances due to patients and payors		7,662		7,293
Group health insurance claims		2,815		3,124
Other		7,629		6,350
Total	$	39,237	$	38,493

9. NOTES PAYABLE AND AMENDED CREDIT AGREEMENT

Amounts outstanding under the Amended Credit Agreement and notes payable as of March 31, 2019 and December 31, 2018 consisted of the following (in thousands):

	March 31, 2019			December 31, 2018
Credit Agreement average effective interest rate of 4.4% inclusive of unused fee	$	29,000		$	38,000
Various notes payable with $1,066 plus accrued interest due in the next year,interest accrues in the range of 3.25% through 5.50% per annum		1,582			1,836
		30,582			39,836
Less current portion		(1,066	)		(1,434	)
Long term portion	$	29,516		$	38,402

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 in August 2015, January 2016, March 2017 and November 2017 (hereafter referred to as “Amended Credit Agreement”). The Amended Credit Agreement is unsecured and has loan covenants, including requirements that the Company comply with a consolidated fixed charge coverage ratio and consolidated leverage ratio. Proceeds from the Amended Credit Agreement may be used for working capital, acquisitions, purchases of the Company’s common stock, dividend payments to the Company’s common stockholders, capital expenditures and other corporate purposes. The pricing grid which is based on the Company’s consolidated leverage ratio with the applicable spread over LIBOR ranging from 1.25% to 2.0% or the applicable spread over the Base Rate ranging from 0.1% to 1%. Fees under the Amended Credit Agreement include an unused commitment fee ranging from 0.25% to 0.3% depending on the Company’s consolidated leverage ratio and the amount of funds outstanding under the Amended Credit Agreement.

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The January 2016 amendment to the Amended Credit Agreement increased the cash and noncash consideration that the Company could pay with respect to acquisitions permitted under the Amended Credit Agreement to $50.0 million for any fiscal year, and increased the amount the Company may pay in cash dividends to its shareholders in an aggregate amount not to exceed $10.0 million in any fiscal year. The March 2017 amendment, among other items, increased the amount the Company may pay in cash dividends to its shareholders in an aggregate amount not to exceed $15.0 million in any fiscal year. The November 2017 amendment, among other items, adjusted the pricing grid as described above, increased the aggregate amount the Company may pay in cash dividends to its shareholders to an amount not to exceed $20.0 million and extended the maturity date to November 30, 2021.

On March 31, 2019, $29.0 million was outstanding on the Amended Credit Agreement resulting in $96.0 million of availability. As of March 31, 2019 and the date of this report, the Company was in compliance with all of the covenants thereunder.

The Company generally enters into various notes payable as a means of financing a portion of its acquisitions and purchases of non-controlling interests. In March 4, 2019, in conjunction with the purchase of a redeemable non-controlling interest, the Company entered into a note payable in the amount of $228,120 that is payable in two principal installments of $114,080 each, plus accrued interest, in March 2020 and 2021. In conjunction with the acquisition of the four clinic practices on August 31, 2018, the Company entered into a note payable in the amount of $400,000 that is payable in two principal installments of $200,000 each, plus accrued interest, on August 2019 and August 2020. Interest accrues at the rate of 5.00% per annum. In conjunction with the acquisition of the industrial injury prevention business on April 30, 2018, the Company entered into a note payable in the amount of $400,000 that is payable in two principal installments of $200,000 each, plus accrued interest. The first installment was paid in April 2019 and the second is due in April 2020. Interest accrues at the rate of 4.75% per annum. In conjunction with the acquisition of the two clinic practices on February 28, 2018, the Company entered into a note payable in the amount of $150,000, which is payable on August 31, 2019. Interest accrues at the rate of 4.5% per annum and is payable on August 31, 2019.

Subsequent aggregate annual payments of principal required pursuant to the Amended Credit Agreement and outstanding notes payable at March 31, 2019 are as follows (in thousands):

During the twelve months ended March 31, 2020	$	1,066
During the twelve months ended March 31, 2021		516
During the twelve months ended March 31, 2022		29,000
	$	30,582

The revolving credit facility (balance at March 31, 2019 of $29.0 million) matures on November 30, 2021.

10. 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. Effective January 1, 2019, right-of-use assets and operating lease liabilities are included in its consolidated balance sheet. 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.

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In accordance with ASC 842, the Company records on its consolidated balance sheet leases with a term greater than 12 months. The Company has elected, in compliance with current accounting standards, not to record leases with an initial terms of 12 months or less in the consolidated balance sheet. ASC 842 requires the separation of the fixed lease components from the variable lease components. The Company has elected the practical expedient to account for separate lease components of a contract as a single lease cost thus causing all fixed payments to be capitalized. Non-lease and variable cost components are not included in the measurement of the right-of-use assets or operating lease liabilities. The Company also elected the package of practical expedients permitted within ASC 842, which among other things, allows the Company to carry forward historical lease classification. 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 (in thousands):

	Three Months Ended March 31, 2019
Operating lease cost	$	7,587
Short-term lease cost		371
Variable lease cost		1,581
Total lease cost *	$	9,539

* Sublease income was immaterial

Lease cost is reflected in the consolidated statement of net income in the line item – rent, supplies, contract labor and other.

Supplemental information related to leases was as follows (in thousands):

Other Information	Three Months Ended March 31, 2019

Cash paid for amounts included in the measurement of operating lease liabilities	$	7,706

Right-of-use assets obtained in exchange for new operating lease liabilities**	$	89,885

** Includes the right-of-use assets obtained in exchange for lease liabilities of $82.6 million which were recognized upon adoption of ASC 842 at January 1, 2019.

The aggregate future lease payments for operating leases as of March 31, 2019 were as follows (in thousands):

Fiscal Year	Amount
2019 (excluding the three months ended March, 31, 2019)	$	22,498
2020		24,890
2021		18,329
2022		11,499
2023		6,678
2024 and thereafter		4,734
Total lease payments	$	88,628
Less: imputed interest		6,061
Total operating lease liabilities	$	82,567

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Average lease terms and discount rates were as follows:

	Three Months Ended March 31, 2019
Weighted-average remaining lease term - Operating leases	3.7 Years

Weighted-average discount rate - Operating leases		3.8%

11. 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”). The Amended Credit Agreement permits share repurchases of up to $15,000,000, subject to compliance with covenants. The Company is required to retire shares purchased under the March 2009 Authorization.

Under the March 2009 Authorization, the Company has purchased a total of 859,499 shares. There is no expiration date for the share repurchase program. There are currently an additional estimated 142,816 shares (based on the closing price of $105.03 on March 31, 2019) that may be purchased from time to time in the open market or private transactions depending on price, availability and the Company’s cash position. The Company did not purchase any shares of its common stock during the three months ended March 31, 2019.

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Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following is a discussion of our historical consolidated financial condition and results of operations, and should be read in conjunction with (i) our historical consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q; (ii) our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on March 18, 2019 (“2018 Annual Report”); and (iii) our management’s discussion and analysis of financial condition and results of operations included in our 2018 Annual Report. This discussion includes forward-looking statements that are subject to risk and uncertainties. Actual results may differ substantially from the statements we make in this section due to a number of factors that are discussed in “Forward-Looking Statements” herein and “Part I – Item 1A. Risk Factors” of our 2018 Annual Report.

References to “we,” “us,” “our” and the “Company” shall mean U.S. Physical Therapy, Inc. and its subsidiaries.

EXECUTIVE SUMMARY

Our Business

We operate outpatient physical therapy clinics that provide pre- and post-operative care and treatment for a variety of orthopedic-related disorders and sports-related injuries, neurologically-related injuries and rehabilitation of injured workers. At March 31, 2019, we operated 590 clinics in 41 states. In addition to our ownership and operation of outpatient physical therapy clinics, we also manage physical therapy facilities for third parties, such as physicians and hospitals, with 28 such third-party facilities under management as of March 31, 2019.

In March 2017, we purchased a 55% interest in our initial industrial injury prevention business. On April 30, 2018, we made a second acquisition and subsequently combined the two businesses. After the combination, we owned a 59.45% interest in the combined business. On April 11, 2019, the Company acquired a third company that is a 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, USPH’s industrial injury prevention operation, increasing U.S. Physical Therapy’s ownership position in the partnership to approximately 76%.

Services provided include onsite injury prevention and rehabilitation, performance optimization 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. We perform these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and highly specialized certified athletic trainers (ATCs).

In addition to the above acquired interests in the industrial injury prevention businesses, during the year ended 2018, we acquired the following clinic group.

	Date	% Interest Acquired	Number of Clinics

	2018
August 2018 Acquisition	August 31	70%	4

On August 31, 2018 we acquired a 70% interest in a four-clinic physical therapy practice. The purchase price for the 70% interest was $7.3 million in cash and $400,000 in a seller note that is payable in two principal installments totaling $200,000 each, plus accrued interest, in August 2019 and August 2020.

In addition, during 2018, through several of our majority owned Clinic Partnerships, we acquired five separate clinic practices. These practices operate as satellites of the existing Clinic Partnership. The aggregate purchase price was $1.0 million inclusive of cash of $850,000 and a note payable of $150,000. The note accrues interest at 4.5% and is payable, principal and accrued interest, on August 31, 2019.

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We adopted ASC 842 as of January 1, 2019, which resulted in an increase to total assets and liabilities due to the recording of operating lease right-of-use assets and operating lease liabilities of approximately $78.0 million and $82.6 million respectively, as of January 1, 2019 for operating leases as a lessee. The adoption did not materially impact the Company’s consolidated statement of income or cash flows.

Selected Operating and Financial Data

The following table presents selected operating and financial data that we believe are key indicators of our operating performance.

	For the Three Months Ended
	March 31, 2019		March 31, 2018
Number of clinics, at the end of period		590		580
Working Days		63		64
Average visits per day per clinic		26.9		25.7
Total patient visits		1,001,510		956,237
Net patient revenue per visit	$	106.49	$	105.15

RESULTS OF OPERATIONS

Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018

•

For the first quarter ended March 31, 2019 (“2019 First Quarter”), USPH’s Operating Results increased 18.6% to $8.4 million, or $0.66 per diluted share, as compared to $7.1 million, or $0.56 per diluted share, in the first quarter ended March 31, 2018 (“2018 First Quarter”). Operating Results, per share, a non-GAAP measure, equals net income attributable to USPH shareholders per the consolidated statement of net income, and excludes the impact of the revaluation of redeemable non-controlling interest, net of tax to calculate earnings per share.

•

For the 2019 First Quarter, USPH’s net income attributable to its shareholders was $8.4 million as compared to $7.1 million in the first quarter of 2018. Inclusive of the charge for revaluation of non-controlling interest, net of tax, in accordance with GAAP, in the recent quarter, the amount is $5.0 million, or $0.39 per share, as compared to $3.4 million, or $0.27 per share for the 2018 First Quarter. In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but charged directly to retained earnings and is included in the earnings per basic and diluted share calculation.

The following tables provide detail of the diluted earnings per share computation and reconcile net income attributable to USPH shareholders calculated in accordance with GAAP to Operating Results. Management believes providing Operating Results to investors is useful information for comparing the Company's period-to-period results. Operating Results (as defined below), a non-generally accepted accounting principles (“non-GAAP”) measure, equals net income attributable to USPH shareholders. In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but charged directly to retained earnings and is included in the earnings per basic and diluted share calculation. Management uses Operating Results, which eliminates the non-current cash item related to the revaluation of redeemable non-controlling interest that can be subject to volatility and unusual costs, as one of the principal measures to evaluate and monitor financial performance period over period. Management believes that Operating Results is useful information 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 mandatorily redeemable instruments and therefore have different liability and equity structures.

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Operating Results is not a measure of financial performance under GAAP. Operating Results should not be considered in isolation or as an alternative to, or substitute for, net income attributable to USPH shareholders presented in the consolidated financial statements.

	Three Months Ended March 31,
	2019			2018
Computation of earnings per share - USPH shareholders
Net income attributable to USPH shareholders	$	8,443		$	7,117
Charges to retained earnings:
Revaluation of redeemable non-controlling interest		(4,661	)		(5,081	)
Tax effect at statutory rate (federal and state) of 26.25%		1,224			1,334
	$	5,006		$	3,370

Basic and diluted per share		0.39		$	0.27

Adjustments:
Tax benefit - revaluation of deferred tax assets and liabilities		-			-
Revaluation of redeemable non-controlling interest		4,661			5,081
Tax effect at statutory rate (federal and state) of 26.25%		(1,224	)		(1,334	)
Operating results	$	8,443		$	7,117

Basic and diluted operating results per share	$	0.66		$	0.56

Shares used in computation - basic and diluted		12,707			12,616

Revenues

•

Net revenues increased $7.9 million or 7.3% from $108.3 million in the 2018 First Quarter to $116.2 million in the 2019 First Quarter, primarily due to an increase in net patient revenues from physical therapy operations and an increase in the revenue from the industrial injury prevention business. Both increases are due to internal growth and acquisitions. The 2019 First Quarter had 63 business days versus 64 in the 2018 First Quarter.

•

Net patient revenues from physical therapy operations increased approximately $6.1 million, or 6.1%, to $106.7 million in the 2019 First Quarter from $100.6 million in the 2018 First Quarter due to an increase in total patient visits of 4.7% from 956,000 to 1,001,500 and an increase in the average net patient revenue per visit to $106.49 from $105.15. Of the $6.1 million increase in net patient revenues, $3.3 million related to an increase in business of clinics opened or acquired prior to April 1, 2018 (“Mature Clinics”) and $2.8 million related to clinics opened or acquired after March 31, 2018 (“New Clinics”). Revenue from physical therapy management contracts was $2.1 million for the first quarter of 2019 and $2.2 million for the comparable 2018 period.

•

Revenue from the industrial injury prevention business increased 42.2% to $6.9 million in the first quarter of 2019 compared to $4.9 million in the first quarter 2018 due to internal growth and an April 2018 acquisition.

•

Other miscellaneous revenue was $0.5 million in the 2019 First Quarter and $0.7 million in the 2018 First Quarter.

Net patient revenues are based on established billing rates less allowances for patients covered by contractual programs and workers’ compensation. Net patient revenues are determined after contractual and other adjustments relating to patient discounts from certain payors. Payments received under contractual programs and workers’ compensation are based on predetermined rates and are generally less than the established billing rates.

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Operating Costs

Total operating costs were $89.5 million, or 77.0% of net revenues, in the 2019 First Quarter as compared to $85.1 million, or 78.6% of net revenues, in the 2018 First Quarter. The $4.4 million increase was attributable to $1.4 million in operating costs related to New Clinics, and an increase of $1.9 million related to Mature Clinics, an increase of $1.3 million in the industrial injury prevention business and a reduction in management contract costs of $0.2 million. Each component of operating costs is discussed below:

Operating Costs—Salaries and Related Costs

Salaries and related costs increased to $66.3 million for the 2019 First Quarter from $62.3 million for the 2018 First Quarter, an increase of $4.0 million. Salaries and related costs for New Clinics amounted to $1.7 million for the 2019 First Quarter. Salaries and related costs for the industrial injury prevention business was $4.3 million in the 2019 First Quarter compared to $3.2 million 2018 First Quarter, an increase of $1.1 million. For Mature Clinics, salaries and related costs increased by $1.2 million for the 2019 First Quarter compared to the 2018 First Quarter. Salaries and related costs as a percentage of net revenues were 57.0% for the 2019 First Quarter and 57.5% for the 2018 First Quarter.

Operating Costs—Rent, Supplies, Contract Labor and Other

Rent, supplies, contract labor and other were $22.0 million for the 2019 First Quarter and $21.7 million for the 2018 First Quarter. For New Clinics, rent, supplies, contract labor and other amounted to $0.9 million for the 2019 First Quarter. For Mature Clinics, rent, supplies, contract labor and other decreased by $0.9 million in the 2019 First Quarter compared to the 2018 First Quarter and for the industrial injury prevention business increased by $$0.3 million for the respective periods. Rent, supplies, contract labor and other as a percentage of net revenues was 19.0% for the 2019 First Quarter and 20.1% for the 2018 First Quarter.

Operating Costs—Provision for Doubtful Accounts

The provision for doubtful accounts was $1.2 million for the 2019 First Quarter and $1.0 million for the 2018 First Quarter. The provision for doubtful accounts for patient accounts receivable as a percentage of net patient revenues was 1.0% for the 2019 First Quarter and 1.0% for the 2018 First Quarter.

Our provision for doubtful accounts for patient accounts receivable as a percentage of total patient accounts receivable was 5.3% at March 31, 2019, as compared to 5.6% at December 31, 2018. Our day’s sales outstanding remained at 37 days at March 31, 2019 and December 31, 2018.

Gross Profit

The gross profit for the 2019 First Quarter grew by 15.1% or $3.5 million to $26.7 million, as compared to $23.2 million in the 2018 First Quarter. The gross profit percentage was 23.0% of net revenue in the most recent period as compared to 21.4% in the 2018 First Quarter. The gross profit percentage for our physical therapy clinics was 23.1% in the recent quarter as compared to 21.9% in the 2018 First Quarter. The gross profit percentage on physical therapy management contracts was 18.5% in the 2019 First Quarter as compared to 13.8% in the 2018 First Quarter. The gross profit percentage for the industrial injury prevention business was 22.3% in the recent quarter as compared to 15.8% in the 2018 First Quarter.

Corporate Office Costs

Corporate office costs, consisting primarily of salaries, incentive compensation, and benefits of corporate office personnel, rent, insurance costs, depreciation and amortization, travel, legal, accounting, professional, and recruiting fees, were $11.3 million for the 2019 First Quarter and $10.2 million for the 2018 First Quarter. As a percentage of net revenues, corporate office costs were 9.7% for the 2019 First Quarter and 9.4% for the 2018 First Quarter.

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Operating Income

Operating income for the 2019 First Quarter increased 18.2% to $15.4 million as compared to $13.1 million in the 2018 First Quarter.

Interest Expense – debt and other

Interest expense – debt and other was $358,000 in the 2019 First Quarter and $553,000 in the 2018 First Quarter due to reduced borrowings under our revolving credit line. At March 31, 2019, $29.0 million was outstanding under our Amended Credit Agreement. See “—Liquidity and Capital Resources” below for a discussion of the terms of our Amended Credit Agreement.

Provision for Income Taxes

The provision for income taxes for the 2019 First Quarter was $2.7 million and for the 2018 First Quarter was $2.5 million. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 24.3% and 25.8%, respectively, for the 2019 First Quarter and 2018 First Quarter.

See table below detailing calculation of the provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest ($ in thousands):

	For the Three Months Ended
	March 31, 2019			March 31, 2018

Income before taxes	$	15,083		$	12,530

Less: net income attributable to non-controlling interests:
Non-controlling interests - permanent equity		(1,537	)		(1,201	)
Redeemable non-controlling interests - temporary equity		(2,395	)		(1,736	)
		(3,932	)		(2,937	)

Income before taxes less net income attributable to non-controlling interests		11,151			9,593

Provision for income taxes		2,708			2,476

Percentage		24.3	%		25.8	%

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests (permanent equity) was $1.5 million in the 2019 First Quarter and $1.2 million in the 2018 First Quarter. Net income attributable to redeemable non-controlling interests (temporary equity) was $2.4 million in the 2019 First Quarter and $1.7 million in the 2018 First Quarter.

LIQUIDITY AND CAPITAL RESOURCES

We believe that our business is generating sufficient cash flow from operations to allow us to meet our short-term and long-term cash requirements, other than those with respect to future acquisitions. At March 31, 2019 and December 31, 2018, we had $20.2 million and $23.4 million, respectively, in cash. Although the start-up costs associated with opening new clinics and our planned capital expenditures are significant, we believe that our cash and unused availability under our revolving credit agreement are sufficient to fund the working capital needs of our operating subsidiaries, future clinic development and acquisitions and investments through at least March 2020. Significant acquisitions would likely require additional financing.

Effective 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 in August 2015, January 2016, March 2017 and November 2017 (hereafter referred to as “Amended Credit Agreement”). The Amended Credit Agreement is unsecured and has loan covenants, including requirements that we comply with a consolidated fixed charge coverage ratio and consolidated leverage ratio. Proceeds from the Amended Credit Agreement may be used for working capital, acquisitions, purchases of our common stock, dividend payments to our common stockholders, capital expenditures and other corporate purposes. The pricing grid is based on our consolidated leverage ratio with the applicable spread over LIBOR ranging from 1.25% to 2.0% or the applicable spread over the Base Rate ranging from 0.1% to 1%. Fees under the Amended Credit Agreement include an unused commitment fee ranging from 0.25% to 0.3% depending on the Company’s consolidated leverage ratio and the amount of funds outstanding under the Amended Credit Agreement.

The January 2016 amendment to the Amended Credit Agreement increased the cash and noncash consideration that we could pay with respect to acquisitions permitted under the Amended Credit Agreement to $50.0 million for any fiscal year, and increased the amount we may pay in cash dividends to our shareholders in an aggregate amount not to exceed $10.0 million in any fiscal year. The March 2017 amendment, among other items, increased the amount we may pay in cash dividends to our shareholders in an aggregate amount not to exceed $15.0 million in any fiscal year. The November 2017 amendment, among other items, adjusted the pricing grid as described above, increased the aggregate amount we may pay in cash dividends to $20.0 million to our shareholders and extended the maturity date to November 30, 2021.

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Cash and cash equivalents decreased by $3.1 million from December 31, 2018 to March 31, 2019. During the three months ended March 31, 2019, $13.6 million was provided by operations. The major uses of cash for investing and financing activities included: net payments of outstanding balance under our Amended Credit Agreement ($9.0 million), distributions to non-controlling interests inclusive of those classified as redeemable non-controlling interests ($2.6 million), purchase of fixed assets ($2.5 million), purchase of redeemable non-controlling interests ($2.0 million) and payments on notes payable ($0.5 million).

On March 4, 2019, in conjunction with the purchase of a redeemable non-controlling interest, we entered into a note payable in the amount of $228,120 that is payable in two principal installments of $114,080 each, plus accrued interest, in March 2020 and 2021.

On February 28, 2018, through one of our majority owned partnerships, we acquired the assets and business of two physical therapy clinics, for an aggregate purchase price of $760,000 in cash and $150,000 in seller note that is payable, plus accrued interest, on August 31, 2019.

On April 30, 2018, we purchased a 65% interest in the assets and business of industrial injury prevention services, for an aggregate purchase price of $8.6 million in cash and $400,000 in seller note that is payable, plus accrued interest, on April 30, 2019. The initial industrial injury prevention business was acquired in March 2017 and, on April 30, 2018, we made a second acquisition with the two businesses then combined. After the combination, we own a 59.45% interest in the combined business.

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 also from time to time purchase the non-controlling interests in our Clinic Partnerships. Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using a combination of cash and financing. Any large acquisition would likely require financing.

We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts, in a consistent manner for all payor types. 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 Medicare Rehab Agency status approval initially may not be submitted for nine 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 accounts receivable has been outstanding for at least 120 days.

We generally enter into various notes payable as a means of financing our acquisitions. Our outstanding notes payable as of March 31, 2019 relate to certain of the acquisitions of businesses and purchases of redeemable non-controlling interests that occurred in 2017 through March 2019. Typically, the notes are 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 5.5% per annum, subject to adjustment. At March 31, 2019, the balance on these notes payable was $1.6 million. In addition, we assumed leases with remaining terms of 1 month to 6 years for the operating facilities.

In conjunction with the above mentioned acquisitions, in the event that a limited minority 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 minority partners to exercise its right to trigger our repurchase of that partner’s non-controlling interest at a predetermined multiple of earnings before interest and taxes.

As of March 31, 2019, we have accrued $7.7 million related to credit balances due to patients and payors. This amount is expected to be paid in the next twelve months.

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From September 2001 through December 31, 2008, our Board of Directors (“Board”) authorized us to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of our common stock. In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of our common stock (“March 2009 Authorization”). Our Amended Credit Agreement permits share repurchases of up to $15,000,000, subject to compliance with covenants. We are required to retire shares purchased under the March 2009 Authorization.

There is no expiration date for the share repurchase program. As of March 31, 2019, there are currently an additional estimated 142,816 shares (based on the closing price of $105.03 on March 31, 2019) that may be purchased from time to time in the open market or private transactions depending on price, availability and our cash position. We did not purchase any shares of our common stock during the three months ended March 31, 2019.

FACTORS AFFECTING FUTURE RESULTS

The risks related to our business and operations include:

•

changes as the result of government enacted national healthcare reform;

•

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

•

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

•

business and regulatory conditions including federal and state regulations;

•

governmental and other third party payor inspections, reviews, investigations and audits;

•

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;

•

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

•

revenue and earnings expectations;

•

legal actions, which could subject us to increased operating costs and uninsured liabilities;

•

general economic conditions;

•

availability and cost of qualified physical therapists;

•

personnel productivity and retaining key personnel;

•

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;

•

acquisitions, purchase of non-controlling interests (minority interests) and the successful integration of the operations of the acquired businesses;

•

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

•

maintaining adequate internal controls;

•

maintaining necessary insurance coverage;

•

availability, terms, and use of capital; and

•

weather and other seasonal factors.

See Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018.

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Forward-Looking Statements

We make statements in this report that are considered to be 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 are those relating to opening new clinics, availability of personnel and the 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 the risks listed above.

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.

ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not maintain any derivative instruments, interest rate swap arrangements, hedging contracts, futures contracts or the like. Our primary market risk exposure is the changes in interest rates obtainable on our Amended Credit Agreement. The interest on our Amended Credit Agreement is based on a variable rate. At March 31, 2019, $29.0 million was outstanding under our Amended Credit Agreement. Based on the balance of the Amended Credit Agreement at March 31, 2019, any change in the interest rate of 1% would yield a decrease or increase in annual interest expense of $290,000.

ITEM 4.
CONTROLS AND PROCEDURES.

(a)	Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company’s management completed an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded (i) that our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure and (ii) that our disclosure controls and procedures are effective.

(b)	Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the first quarter of 2019, we implemented internal controls to ensure we have adequately evaluated our contracts and properly assessed the impact of new accounting standards related to leases on our financial statements to facilitate the adoption on January 1, 2019. There were no significant changes to our internal control over financial reporting due to the adoption of the new standards.

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PART II—OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS.

We are involved in litigation and other proceedings arising in the ordinary course of business.

While the ultimate outcome of lawsuits or other proceedings cannot be predicted with certainty, we do not believe the impact of existing lawsuits or other proceedings will have a material impact on our business, financial condition or results of operations.

ITEM 6.
EXHIBITS.

Exhibit Number	Description

10.1+	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.]
10.2+	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.]
10.3+	Objective Cash/RSA Bonus Plan for Senior Management [incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.]
10.4+	Discretionary Cash/RSA Bonus Plan for Senior Management [incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.]
31.1*	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31.2*	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
31.3*	Rule 13a-14(a)/15d-14(a) Certification of Corporate Controller.
32*	Certification Pursuant to 18 U.S.C 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith

+	Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.

	U.S. PHYSICAL THERAPY, INC.

Date: May 6, 2019	By:	/s/ LAWRANCE W. MCAFEE
		Lawrance W. McAfee
		Chief Financial Officer
		(duly authorized officer and principal financial and accounting officer)

	By:	/s/ JON C. BATES
		Jon C. Bates
		Vice President/Corporate Controller

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INDEX OF EXHIBITS

Exhibit Number	Description

10.1+	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.]
10.2+	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.]
10.3+	Objective Cash/RSA Bonus Plan for Senior Management [incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.]
10.4+	Discretionary Cash/RSA Bonus Plan for Senior Management [incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.]
31.1*	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2*	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

31.3*	Rule 13a-14(a)/15d-14(a) Certification of Corporate Controller.

32*	Certification Pursuant to 18 U.S.C 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	XBRL Instance Document

101.SCH*	XBRL Taxonomy Extension Schema Document

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith

+	Management contract or compensatory plan or arrangement

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$117.06	13	$1,490

10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-05-02	Earnings, Other Events, Exhibits
8-K	2019-04-11	Other Events, Exhibits
8-K	2019-04-05	Regulation FD, Exhibits
8-K	2019-03-25	Regulation FD, Exhibits
8-K	2019-03-14	Regulation FD, Exhibits
8-K	2019-03-11	Regulation FD, Exhibits
8-K	2019-03-08	Officers, Exhibits
8-K	2018-11-07	Regulation FD, Exhibits
8-K	2018-11-02	Regulation FD, Exhibits
8-K	2018-11-01	Earnings, Other Events, Exhibits
8-K	2018-09-04	Other Events, Exhibits
8-K	2018-08-23	Regulation FD, Exhibits
8-K	2018-08-02	Earnings, Other Events, Exhibits
8-K	2018-07-23	Other Events, Exhibits
8-K	2018-05-31	Regulation FD, Exhibits
8-K	2018-05-23	Shareholder Vote
8-K	2018-05-21	Regulation FD, Exhibits
8-K	2018-05-16	Regulation FD, Exhibits
8-K	2018-05-04	Regulation FD, Exhibits
8-K	2018-05-03	Earnings, Other Events, Exhibits
8-K	2018-05-01	Other Events, Exhibits
8-K	2018-04-12	Officers, Exhibits
8-K	2018-04-05	Regulation FD, Exhibits
8-K	2018-03-13	Regulation FD, Exhibits
8-K	2018-03-08	Regulation FD, Exhibits
8-K	2018-03-07	Officers, Exhibits
8-K	2018-02-09	Exhibits
8-K	2018-01-09	Earnings, Regulation FD, Exhibits

CTAS	Cintas	23,160
G	Genpact	6,840
JHX	James Hardie Industries	5,750
CVA	Covanta Holding	2,320
FSBW	FS Bancorp	231
TSQ	Townsquare Media	117
FEPI	First Equity Properties	0
SOV	Santander Holdings	0
NNUP	Nocopi Technologies	0
SVTE	Service Team	0

EX-31.1	ex31_1.htm
EX-31.2	ex31_2.htm
EX-31.3	ex31_3.htm
EX-32	ex32.htm