QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
|
(I.R.S. EMPLOYER IDENTIFICATION NO.)
|
|
|
|
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
|
(ZIP CODE)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
|
|
|
|
☑
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
|
Emerging growth company
|
|
Item 1.
|
3
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
Item 2.
|
31
|
|
Item 3.
|
46
|
|
Item 4.
|
47
|
|
PART II—OTHER INFORMATION
|
||
Item 1.
|
47
|
|
Item 1A.
|
Risk Factors |
47 |
Item 6.
|
49
|
|
49
|
||
Certifications
|
ITEM 1. |
FINANCIAL STATEMENTS.
|
September 30, 2022
|
December 31, 2021
|
|||||||
ASSETS
|
(unaudited)
|
|||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Patient accounts receivable, less allowance for credit
losses of $
|
|
|
||||||
Accounts receivable - other
|
|
|
||||||
Other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Fixed assets:
|
||||||||
Furniture and equipment
|
|
|
||||||
Leasehold improvements
|
|
|
||||||
Fixed assets, gross
|
|
|
||||||
Less accumulated depreciation and amortization
|
|
|
||||||
Fixed assets, net
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Investment in unconsolidated affiliate |
||||||||
Goodwill
|
|
|
||||||
Other identifiable intangible assets, net
|
|
|
||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST
|
||||||||
Current liabilities:
|
||||||||
Accounts payable - trade
|
$
|
|
$
|
|
||||
Accounts payable - due to seller of acquired business
|
||||||||
Accrued expenses
|
|
|
||||||
Current portion of operating lease liabilities
|
|
|
||||||
Current portion of term loan and notes payable
|
|
|
||||||
Total current liabilities
|
|
|
||||||
Notes payable, net of current portion
|
|
|
||||||
Revolving line of credit
|
|
|
||||||
Term Loan, net of current portion and deferred financing costs |
||||||||
Deferred taxes
|
|
|
||||||
Operating lease liabilities, net of current portion
|
|
|
||||||
Other long-term liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Redeemable non-controlling interest - temporary equity
|
|
|
||||||
Commitments and Contingencies
|
||||||||
U.S. Physical Therapy, Inc. (“USPH”) shareholders’ equity:
|
||||||||
Preferred stock, $
|
|
|
||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated other comprehensive gain
|
||||||||
Retained earnings
|
|
|
||||||
Treasury stock at cost,
|
(
|
)
|
(
|
)
|
||||
Total USPH shareholders’ equity
|
|
|
||||||
Non-controlling interest - permanent equity
|
|
|
||||||
Total USPH shareholders’ equity and non-controlling interest - permanent equity
|
|
|
||||||
Total liabilities, redeemable non-controlling interest, USPH shareholders’ equity and non-controlling interest - permanent
equity
|
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30,2022
|
September 30, 2021
|
|||||||||||||
Net patient revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other revenue
|
|
|
|
|
||||||||||||
Net revenue
|
|
|
|
|
||||||||||||
Operating cost:
|
||||||||||||||||
Salaries and related costs
|
|
|
|
|
||||||||||||
Rent, supplies, contract labor and other
|
|
|
|
|
||||||||||||
Provision for credit losses
|
|
|
|
|
||||||||||||
Total operating cost
|
|
|
|
|
||||||||||||
Gross profit
|
|
|
|
|
||||||||||||
Corporate office costs
|
|
|
|
|
||||||||||||
Operating income
|
|
|
|
|
||||||||||||
Other income and expense
|
||||||||||||||||
Resolution of a payor matter
|
||||||||||||||||
Change in fair value of contingent earn-out consideration
|
||||||||||||||||
Equity in earnings of unconsolidated affiliate
|
||||||||||||||||
Interest and other income, net
|
|
|
|
|
||||||||||||
Gain on revaluation of put-right liability
|
||||||||||||||||
Interest expense - debt and other
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Total other income and expense
|
|
|
|
|
||||||||||||
Income before taxes | ||||||||||||||||
Provision for income taxes
|
|
|
|
|
||||||||||||
Net income
|
|
|
|
|
||||||||||||
Less: net income attributable to non-controlling interest:
|
||||||||||||||||
Redeemable non-controlling interest - temporary equity
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Non-controlling interest - permanent equity
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Net income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Basic and diluted earnings per share attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Shares used in computation - basic and diluted
|
|
|
|
|
||||||||||||
Dividends declared per common share
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Net income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other comprehensive loss
|
||||||||||||||||
Unrealized gain on cash flow hedge
|
|
|
|
|
||||||||||||
Tax effect at statutory rate (federal and state) of
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Comprehensive income
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Comprehensive income attributable to non-controlling interest
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Comprehensive income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
Nine Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
OPERATING ACTIVITIES
|
||||||||
Net income including non-controlling interest and earnings from unconsolidated affiliates, net
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Provision for credit losses
|
|
|
||||||
Equity-based awards compensation expense
|
|
|
||||||
Deferred income taxes
|
|
|
||||||
Change in revaluation of put-right liability
|
( |
) | ||||||
Change in fair value of contingent earn-out consideration
|
( |
) | ||||||
(Gain) loss on sale of clinics and fixed assets
|
( |
) | ||||||
Earnings in unconsolidated affiliate
|
( |
) | ||||||
Unrealized gain on cash flow hedge
|
( |
) | ||||||
Changes in operating assets and liabilities:
|
||||||||
Increase in patient accounts receivable
|
(
|
)
|
(
|
)
|
||||
(Increase) decrease in accounts receivable - other
|
(
|
)
|
(
|
)
|
||||
(Decrease) increase in other assets
|
|
(
|
)
|
|||||
(Decrease) Increase in accounts payable and accrued expenses
|
(
|
)
|
|
|||||
(Decrease) increase in other long-term liabilities
|
(
|
)
|
|
|||||
Net cash provided by operating activities
|
|
|
||||||
INVESTING ACTIVITIES
|
||||||||
Purchase of fixed assets
|
(
|
)
|
(
|
)
|
||||
Purchase of majority interest in businesses, net of cash acquired
|
(
|
)
|
(
|
)
|
||||
Purchase of redeemable non-controlling interest, temporary equity
|
(
|
)
|
(
|
)
|
||||
Purchase of non-controlling interest, permanent equity
|
(
|
)
|
(
|
)
|
||||
Proceeds on sales of partnership interest, clinics and fixed assets
|
|
|
||||||
Distributions from unconsolidated affiliate
|
||||||||
Sale of non-controlling interest - permanent
|
||||||||
Proceeds on sales of redeemable non-controlling interest-temporary
|
||||||||
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
||||
FINANCING ACTIVITIES
|
||||||||
Distributions to non-controlling interest, permanent and temporary equity
|
(
|
)
|
(
|
)
|
||||
Cash dividends paid to shareholders
|
(
|
)
|
(
|
)
|
||||
Proceeds from revolving line of credit
|
|
|
||||||
Proceeds from term loan
|
||||||||
Payments on revolving line of credit
|
(
|
)
|
(
|
)
|
||||
Principal payments on notes payable
|
(
|
)
|
(
|
)
|
||||
(Payment) receipt of Medicare Accelerated and Advance Funds
|
|
(
|
)
|
|||||
Payment of deferred financing costs
|
( |
) | ||||||
Other
|
|
|
||||||
Net cash used in financing activities
|
|
(
|
)
|
|||||
Net decrease in cash and cash equivalents
|
|
(
|
)
|
|||||
Cash and cash equivalents - beginning of period
|
|
|
||||||
Cash and cash equivalents - end of period
|
$
|
|
$
|
|
||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||
Cash paid during the period for:
|
||||||||
Income taxes
|
$
|
|
$
|
|
||||
Interest paid
|
$
|
|
$
|
|
||||
Non-cash investing and financing transactions during the period:
|
||||||||
Purchase of businesses - seller financing portion
|
$
|
|
$
|
|
||||
Notes payable related to purchase of redeemable non-controlling interest, temporary equity
|
$ | $ | ||||||
Notes payable related to purchase of non-controlling interest, permanent equity
|
$
|
|
$
|
|
||||
Notes receivable related to sale of partnership interest - redeemable non-controlling interest
|
$ | $ |
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
Common Stock | Additional |
Accumulated Other
|
Retained | Treasury Stock |
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
For the three months ended September 30, 2022 | Shares | Amount |
Paid-In Capital
|
Comprehensive Loss
|
Earnings | Shares | Amount | Equity | Interests | Total | ||||||||||||||||||||||||||||||
Balance June 30, 2022
|
|
|
|
$
|
|
(
|
)
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
(
|
)
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Purchase of partnership interests - non-controlling interest
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||
Dividends paid to USPH shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Deferred taxes related to redeemable non-controlling interest - temporary equity
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other comprehensive gain
|
- |
|
|
-
|
|
|
|
|||||||||||||||||||||||||||||||||
Balance September 30, 2022
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
Common Stock
|
Additional |
Accumulated Other
|
Retained | Treasury Stock |
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
For the nine months ended September 30, 2022
|
Shares |
Amount
|
Paid-In Capital
|
Comprehensive Gain
|
Earnings | Shares | Amount | Equity | Interests | Total | ||||||||||||||||||||||||||||||
Balance December 31, 2021
|
$
|
|
|
$
|
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Purchase of partnership interests - non-controlling interest
|
-
|
|
(
|
)
|
|
|
-
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||
Dividends paid to USPH shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Deferred taxes related to redeemable non-controlling interest - temporary equity
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Other
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other comprehensive gain
|
- |
|
|
- |
|
|
||||||||||||||||||||||||||||||||||
Balance September 30, 2022
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
Common Stock
|
Additional |
Accumulated Other
|
Retained |
Treasury Stock
|
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
For the three months ended September 30, 2021
|
Shares | Amount |
Paid-In Capital
|
Comprehensive Loss
|
Earnings | Shares | Amount | Equity | Interests | Total | ||||||||||||||||||||||||||||||
Balance June 30, 2021
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Purchase of non-controlling interest |
- | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
Sale of non-controlling interest, net of purchases
|
- | |||||||||||||||||||||||||||||||||||||||
Dividends paid to USPT shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Other
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Balance September 30, 2021
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|
U.S.Physical Therapy, Inc.
|
|||||||||||||||||||||||||||||||||||||||
Common Stock
|
Additional |
Accumulated Other
|
Retained |
Treasury Stock
|
Total Shareholders’
|
Non-Controlling
|
||||||||||||||||||||||||||||||||||
For the nine months ended September 30, 2021
|
Shares
|
Amount |
Paid-In Capital
|
Comprehensive Loss
|
Earnings | Shares |
Amount
|
Equity | Interests | Total | ||||||||||||||||||||||||||||||
Balance December 31, 2020
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
|||||||||||||||||||||
Issuance of restricted stock, net of cancellations
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax
|
|
|
|
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Compensation expense - equity-based awards
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Purchase of non-controlling interest |
- | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
Sale of non-controlling interest, net of purchases
|
- | |||||||||||||||||||||||||||||||||||||||
Dividends paid to USPT shareholders
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity
|
-
|
|
|
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||||||||||
Short swing profit settlement
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Other
|
-
|
|
|
|
(
|
)
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders
|
-
|
|
|
|
|
-
|
|
|
|
|
||||||||||||||||||||||||||||||
Balance September 30, 2021
|
|
|
$
|
|
$
|
|
$
|
|
(
|
)
|
$
|
(
|
)
|
$
|
|
$
|
|
$
|
|
1.
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|
Acquisition
|
Date
|
Acquired
|
Clinics
|
|||||||
September 2022 Acquisition |
% |
|||||||||
August 2022 Acquisition |
% |
|||||||||
March 31, 2022 Acquisition
|
|
|
%
|
|
||||||
December 2021 Acquisition
|
|
|
%
|
|
||||||
November 2021 Acquisition
|
|
|
%
|
|
IIPS* | |||||
September 2021 Acquisition
|
|
|
%
|
|
IIPS* | |||||
June 2021 Acquisition
|
|
|
%
|
|
||||||
March 2021 Acquisition
|
|
|
%
|
|
*
|
|
Physical Therapy
|
||||
Operations
|
||||
Cash paid, net of cash acquired
|
$
|
|
||
Seller notes
|
|
|||
Contingent payments
|
|
|||
Total consideration
|
$
|
|
||
Estimated fair value of net tangible assets acquired:
|
||||
Total current assets
|
$
|
|
||
Total non-current assets
|
|
|||
Total liabilities
|
(
|
)
|
||
Net tangible assets acquired
|
|
|||
Customer and referral relationships
|
|
|||
Non-compete agreements
|
|
|||
Tradenames
|
|
|||
Goodwill
|
|
|||
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
|
(
|
)
|
||
$
|
|
Physical Therapy
|
||||||||||||
IIPS*
|
Operations
|
Total
|
||||||||||
Cash paid, net of cash acquired
|
$
|
|
$
|
|
$
|
|
||||||
Seller notes
|
|
|
|
|||||||||
Contingent payments
|
|
|
|
|||||||||
Other payable
|
|
|
|
|||||||||
Seller put right
|
|
|
|
|||||||||
Total consideration
|
$
|
|
$
|
|
$
|
|
||||||
Estimated fair value of net tangible assets acquired:
|
||||||||||||
Total current assets
|
$
|
|
$
|
|
$
|
|
||||||
Total non-current assets
|
|
|
|
|||||||||
Total liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net tangible assets acquired
|
$
|
|
$
|
|
$
|
|
||||||
Customer and referral relationships
|
|
|
|
|||||||||
Non-compete agreements
|
|
|
|
|||||||||
Tradenames
|
|
|
|
|||||||||
Goodwill
|
|
|
|
|||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
$
|
|
$
|
|
$
|
|
*
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Net patient revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other revenue
|
|
|
|
|
||||||||||||
Physical therapy operations
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Management contract revenue
|
|
|
|
|
|
|
|
|
||||||||
Industrial injury prevention services revenue
|
|
|
|
|
||||||||||||
Total revenue |
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Computation of earnings per share - USPH shareholders:
|
||||||||||||||||
Net income attributable to USPH shareholders
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Charges to retained earnings:
|
||||||||||||||||
Revaluation of redeemable non-controlling interest
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Tax effect at statutory rate (federal and state) of
|
|
|
|
|
||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
Earnings per share (basic and diluted)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Shares used in computation:
|
||||||||||||||||
Basic and diluted earnings per share - weighted-average shares
|
|
|
|
|
1. |
Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals
(the “Selling Shareholders”) most of whom are physical therapists that work in the Therapy Practice and provide physical therapy services to patients.
|
2. |
In conjunction with the Acquisition, the Seller Entity contributes the Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one
hundred percent (
|
3. |
The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from
|
4. |
The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the
limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo.
|
5. |
As noted above, the Company does not purchase
|
6. |
In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that
ranges from
to |
7. |
The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities
based on other employees in similar capacities within NewCo, the Company and the industry.
|
8. |
The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete
agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing business activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the Selling
Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing business during the Non-Compete Term.
|
9. |
The Non-Compete Term commences as of the date of the Acquisition and expires on the later
of :
|
a. |
|
b. |
|
10. |
The Non-Compete Agreement applies to a restricted region which is a defined mile radius from the Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in
competing businesses or activities outside the defined mileage (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the
competing business or activities outside the defined mileage.
|
1. |
Put Right
|
a) |
In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified date (the “Specified Date”), the Seller Entity thereafter may have an
irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.
|
b) |
In the event that any Selling Shareholder is not employed by NewCo as of the Specified Date and the Company has not exercised its Call Right with respect to the Terminated Selling
Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter shall have the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller
Entity’s Interest at the purchase price described in “3” below.
|
c) |
In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the Specified Date, the Seller Entity shall have the Put Right, and upon the
exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.
|
2. |
Call Right
|
a) |
If any Selling Shareholder’s employment by NewCo is terminated prior to the Specified Date, the Company thereafter shall have an irrevocable right to purchase from Seller Entity the
Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below.
|
b) |
In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after Specified Date, the Company shall have the Call Right, and upon the exercise of
the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.
|
3. |
For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes,
depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on available cash within
NewCo. Therefore, the undistributed earnings amount is small, if any.
|
4. |
The Purchase Price for the initial equity interest purchased by the Company is, in almost all cases, also based on the same specified multiple of the trailing twelve-month earnings that
is used in the Put Right and the Call Right noted above.
|
5. |
The Put Right and the Call Right do not have an expiration date, and the Seller Entity Interest is not required to be purchased by the Company or sold by the Seller Entity unless either
the Put Right or the Call Right is exercised.
|
6. |
The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire
ownership interest in the Seller Entity at the closing of the Acquisition.
|
1. |
Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual owners (the “Progressive Selling Shareholders”), who work in and manage the
Progressive business.
|
2. |
In conjunction with the acquisition, the Progressive Selling Shareholders caused the Progressive Parent to transfer its ownership of the Progressive Subsidiaries into a newly-formed limited liability company
(“Progressive NewCo”), in exchange for one hundred percent (
|
3. |
The Company entered into an agreement (the “Progressive Purchase Agreement”) to acquire from the Progressive Selling Shareholders a majority of the membership interest in Progressive NewCo. The consideration for
the acquisition is primarily payable in the form of cash at closing, a relatively small portion paid in cash after the closing contingent on certain performance criteria, and a small note in lieu of an escrow (the “Progressive Purchase
Price”).
|
4. |
The Company and the Progressive Selling Shareholders also executed an operating agreement (the “Progressive Operating Agreement”) for Progressive NewCo that sets forth the rights and obligations of the members of
Progressive NewCo.
|
5. |
As noted above, the Company did not purchase
|
6. |
The Company and the Progressive Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”) which restricts the Progressive Selling Shareholders from competing for a specified
period of time (the “Progressive Non-Compete Term”).
|
7. |
The Progressive Non-Compete Term commences as of the date of the Progressive acquisition and expires on the later of:
|
a. |
|
b. |
|
8. |
The Progressive Non-Compete Agreement applies to the entire United States.
|
9. |
The Progressive Put Right (as defined below) and the Progressive Call Right (as defined below) do not have an expiration date.
|
1. |
Progressive Put Right
|
a.
|
Each of the Progressive Selling Shareholders has the right to sell
|
b.
|
In the event that any Progressive Selling Shareholder terminates his management relationship with Progressive NewCo for any reason on or after the seventh anniversary of the
Closing Date, the Progressive Selling Shareholder has the Put Right, and upon the exercise of the Progressive Put Right, the Progressive Selling Shareholder’s Interest shall be redeemed by the Company at the purchase price described
in “3” below.
|
2. |
Progressive Call Right
|
a.
|
If any Progressive Selling Shareholder’s ceases to perform management services on behalf of Progressive NewCo, the Company thereafter shall have an irrevocable right to purchase
from such Progressive Selling Shareholder his Interest, in each case at the purchase price described in “3” below.
|
3.
|
For the Progressive Put Right and the Progressive Call Right, the purchase price is derived from a formula based on a specified multiple of Progressive NewCo’s trailing twelve
months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of Progressive NewCo (the “Redemption Amount”).
Progressive NewCo’s earnings are distributed monthly based on available cash within Progressive NewCo; therefore, the undistributed earnings amount is small, if any.
|
4.
|
The Progressive Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that
is used in the Progressive Put Right and the Progressive Call Right noted above.
|
5.
|
The Progressive Put Right and the Progressive Call Right do not have an expiration date.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Beginning balance
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Operating results allocated to redeemable non-controlling interest partners
|
|
|
|
|
||||||||||||
Distributions to redeemable non-controlling interest partners
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Changes in the fair value of redeemable non-controlling interest
|
|
|
|
|
||||||||||||
Purchases of redeemable non-controlling interest
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Acquired interest
|
|
|
|
|
||||||||||||
Sales of redeemable non-controlling interest - temporary equity
|
|
|
|
|
||||||||||||
Notes receivable related to sales of redeemable non-controlling interest - temporary equity
|
(
|
)
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
Adjustments in notes receivable related to the the sales of redeemable non-controlling interest - temporary equity
|
|
|
|
|
||||||||||||
Ending balance
|
$
|
|
$
|
|
$
|
|
$
|
|
|
Nine Months Ended
|
|||||||
|
September 30, 2022
|
September 30, 2021
|
||||||
|
||||||||
Contractual time period has lapsed but holder’s employment has not terminated
|
$
|
|
$
|
|
||||
Contractual time period has not lapsed and holder’s employment has not terminated
|
|
|
||||||
Holder’s employment has terminated and contractual time period has expired
|
|
|
||||||
Holder’s employment has terminated and contractual time period has not expired
|
|
|
||||||
|
$
|
|
$
|
|
Nine Months Ended
|
Year Ended
|
|||||||
September 30, 2022
|
December 31, 2021
|
|||||||
Beginning balance
|
$
|
|
$
|
|
||||
Goodwill acquired
|
|
|
||||||
Goodwill adjustments for purchase price allocation of businesses acquired in prior year
|
(
|
)
|
(
|
)
|
||||
Ending balance
|
$
|
|
$
|
|
September 30, 2022
|
December 31, 2021
|
|||||||
Tradenames
|
$
|
|
$
|
|
||||
Customer and referral relationships, net of accumulated amortization of $
|
|
|
||||||
Non-compete agreements, net of accumulated amortization of $
|
|
|
||||||
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Customer and referral relationships
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Non-compete agreements
|
|
|
|
|
||||||||||||
$
|
|
$
|
|
$
|
|
$
|
|
Customer and Referral Relationships
|
Non-Compete Agreements
|
||||||||||
Years
|
Annual Amount
|
Years
|
Annual Amount
|
||||||||
Ending December 31,
|
Ending December 31,
|
||||||||||
2022 (excluding the nine months ended September 30, 2022)
|
$
|
|
2022 (excluding the nine months ended September 30, 2022)
|
$
|
|
||||||
2023
|
$
|
|
2023 |
$
|
|
||||||
2024
|
$
|
|
2024 |
$
|
|
||||||
2025
|
$
|
|
2025 |
$
|
|
||||||
2026
|
$
|
|
2026 |
$
|
|
||||||
Thereafter
|
$
|
|
Thereafter
|
$
|
|
September 30, 2022
|
December 31, 2021
|
|||||||
Salaries and related costs
|
$
|
|
$
|
|
||||
Credit balances due to patients and payors
|
|
|
||||||
Group health insurance claims
|
|
|
||||||
Closure costs
|
|
|
||||||
Federal taxes payable
|
|
|
||||||
Contingent payments related to acquisition
|
|
|
||||||
Settlement of a legal matter |
||||||||
Other
|
|
|
||||||
Total
|
$
|
|
$
|
|
|
September 30, 2022
|
December 31, 2021
|
||||||||||||||||||||||
|
Principal
Amount
|
Unamortized discount
and debt issuance cost
|
Net Debt
|
Principal
Amount
|
Unamortized discount
and debt issuance cost
|
Net Debt
|
||||||||||||||||||
Revolving Facilitiy
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Term Facility
|
|
|
|
|
|
|
||||||||||||||||||
Other Debt
|
|
|
|
|
|
|
||||||||||||||||||
Total Debt
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
Less: Current portion of long-term debt
|
|
|
$
|
|
|
|
|
|||||||||||||||||
Total long-term debt, net of current portion
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
1)
|
Revolving Facility: $ |
2)
|
Term Facility: $
|
|
Three Months Ended
|
For the Nine Months Ended
|
||||||||||||||
|
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
||||||||||||
Unrealized loss on cash flow hedge
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
Tax effect at statutory rate (federal and state) of
|
(
|
)
|
|
(
|
)
|
|
||||||||||
Other Comprehensive loss
|
$
|
|
$
|
|
$
|
|
$
|
|
|
September 30, 2022
|
September 30, 2021
|
||||||
Interest rate swap: | ||||||||
Other current assets |
$
|
|
$
|
|
||||
Other assets |
$ |
$ |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30, 2022
|
September 30, 2021
|
|||||||||||||
Operating lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Short-term lease cost
|
|
|
|
|
||||||||||||
Variable lease cost
|
|
|
|
|
||||||||||||
Total lease cost *
|
$
|
|
$
|
|
$
|
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30,
2022
|
September 30,
2021
|
|||||||||||||
Cash paid for amounts included in the measurement of operating lease liabilities (in thousands)
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities (in thousands)
|
$
|
|
$
|
|
$
|
|
$
|
|
Fiscal Year
|
Amount
|
|||
2022
(excluding the nine months ended September 30, 2022)
|
$
|
|
||
2023
|
|
|||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027 and
therafter
|
|
|||
Total lease payments
|
$
|
|
||
Less: imputed interest
|
|
|||
Total operating lease liabilities
|
$
|
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2022
|
September 30, 2021
|
September 30,
2022
|
September 30,
2021
|
|||||||||||||
Weighted-average remaining lease term - Operating leases
|
|
|
|
|
||||||||||||
Weighted-average discount rate - Operating leases
|
|
%
|
|
%
|
|
%
|
|
%
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2022
|
2021
|
2022
|
2021
|
|||||||||||||
Net operating revenue:
|
||||||||||||||||
Physical therapy operations
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Industrial injury prevention services
|
|
|
|
|
||||||||||||
Total Company
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
||||||||||||||||
Gross profit:
|
||||||||||||||||
Physical therapy operations
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Industrial injury prevention services
|
|
|
|
|
||||||||||||
Gross profit
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
||||||||||||||||
Total Assets:
|
||||||||||||||||
Physical therapy operations
|
$
|
|
$
|
|
||||||||||||
Industrial injury prevention services
|
|
|
||||||||||||||
Total Company
|
$
|
|
$
|
|
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
Acquisition
|
Date
|
Acquired
|
Clinics
|
|||
September 2022 Acquisition
|
September 30, 2022
|
80%
|
2
|
|||
August 2022 Acquisition
|
August 31, 2022
|
70%
|
6
|
|||
March 31, 2022
|
March 31, 2022
|
70%
|
6
|
|||
December 2021 Acquisition
|
December 31, 2021
|
75%
|
3
|
|||
November 2021 Acquisition
|
November 30, 2021
|
70%
|
IIPS
|
|||
September 2021 Acquisition
|
September 30, 2021
|
100%
|
IIPS
|
|||
June 2021 Acquisition
|
June 30, 2021
|
65%
|
8
|
|||
March 2021 Acquisition
|
March 31, 2021
|
70%
|
6
|
|
Three Months Ended September 30,
|
|||||||
2022
|
2021
|
|||||||
Computation of earnings per share - USPH shareholders:
|
||||||||
Net income attributable to USPH shareholders
|
$
|
9,557
|
$
|
10,009
|
||||
Charges to retained earnings:
|
||||||||
Revaluation of redeemable non-controlling interest
|
(196
|
)
|
(2,070
|
) |
||||
Tax effect at statutory rate (federal and state) of 25.55%
|
50
|
529
|
||||||
$
|
9,411
|
$
|
8,468
|
|||||
Earnings per share (basic and diluted)
|
$
|
0.72
|
$
|
0.66
|
||||
Adjustments:
|
||||||||
Change in revaluation of put-right liability
|
(785
|
)
|
-
|
|||||
Change in fair value of contingent earn-out consideration
|
(2,000 |
) |
- |
|||||
Revaluation of redeemable non-controlling interest
|
196
|
2,070
|
||||||
Tax effect at statutory rate (federal and state)
|
661
|
(529
|
) |
|||||
Operating Results (a non-GAAP measure)
|
$
|
7,483
|
$
|
10,009
|
||||
Basic and diluted Operating Results per share (a non-GAAP measure)
|
$
|
0.58
|
$
|
0.78
|
||||
Shares used in computation - basic and diluted
|
13,001
|
12,909
|
|
Nine Months Ended September 30,
|
|||||||
2022
|
2021
|
|||||||
Computation of earnings per share - USPH shareholders:
|
||||||||
Net income attributable to USPH shareholders
|
$
|
29,551
|
$
|
30,618
|
||||
Credit (charges) to retained earnings:
|
||||||||
Revaluation of redeemable non-controlling interest
|
(193
|
)
|
(11,889
|
)
|
||||
Tax effect at statutory rate (federal and state) of 25.55%
|
49
|
3,038
|
||||||
$
|
29,407
|
$
|
21,767
|
|||||
Earnings per share (basic and diluted)
|
$
|
2.27
|
$
|
1.69
|
||||
Adjustments:
|
||||||||
Change in revaluation of put-right liability
|
(771
|
)
|
-
|
|||||
Change in fair value of contingent earn-out consideration
|
(2,000 |
) |
- |
|||||
Revaluation of redeemable non-controlling interest
|
193
|
11,889
|
||||||
Tax effect at statutory rate (federal and state)
|
659 |
(3,038
|
)
|
|||||
Operating Results (a non-GAAP measure)
|
$
|
27,488
|
$
|
30,618
|
||||
Basic and diluted Operating Results per share (a non-GAAP measure)
|
$
|
2.12
|
$
|
2.37
|
||||
Shares used in computation - basic and diluted
|
12,979
|
12,894
|
Three Months Ended September 30,
|
||||||||
2022
|
2021
|
|||||||
Net operating revenue:
|
||||||||
Physical therapy operations
|
$
|
119,447
|
$
|
115,399
|
||||
Industrial injury prevention services
|
20,155
|
10,494
|
||||||
Total Company
|
$
|
139,602
|
$
|
125,893
|
||||
Gross profit:
|
||||||||
Physical therapy operations
|
$
|
22,379
|
$
|
27,123
|
||||
Industrial injury prevention services
|
4,405
|
2,676
|
||||||
Gross profit
|
$
|
26,784
|
$
|
29,799
|
||||
Total Assets:
|
||||||||
Physical therapy operations
|
$
|
432,683
|
$
|
583,785
|
||||
Industrial injury prevention services
|
367,025
|
46,313
|
||||||
Total Company
|
$
|
799,708
|
$
|
630,098
|
Three Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Revenue related to Mature Clinics
|
$
|
106,485
|
$
|
106,631
|
||||
Revenue related to 2022 Clinic Additions
|
3,707
|
-
|
||||||
Revenue related to 2021 Clinic Additions
|
6,481
|
4,869
|
||||||
Revenue from clinics sold or closed in 2022
|
37
|
762
|
||||||
Revenue from clinics sold or closed in 2021
|
-
|
65
|
||||||
Net patient revenue from physical therapy operations
|
116,710
|
112,327
|
||||||
Other revenue
|
753
|
759
|
||||||
Revenue from physical therapy operations
|
117,463
|
113,086
|
||||||
Revenue - Management contracts
|
1,984
|
2,313
|
||||||
Revenue - Industrial injury prevention services
|
20,155
|
10,494
|
||||||
Total revenue
|
$
|
139,602
|
$
|
125,893
|
Three Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Operating cost related to Mature Clinics
|
$
|
86,177
|
$
|
81,911
|
||||
Operating cost related to 2022 Clinic Additions
|
3,267
|
-
|
||||||
Operating cost related to 2021 Clinic Additions
|
5,366
|
3,748
|
||||||
Operating cost related to clinics sold or closed in 2022
|
721
|
504
|
||||||
Operating cost related to clinics sold or closed in 2021
|
- |
69
|
||||||
Operating cost related to physical therapy operations
|
95,531
|
86,232
|
||||||
Operating cost related to management contracts
|
1,537
|
2,044
|
||||||
Operating cost related to industrial injury prevention services
|
15,750
|
7,818
|
||||||
Total operating cost
|
$
|
112,818
|
$
|
96,094
|
Three Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Physical therapy operations
|
$
|
21,932
|
$
|
26,854
|
||||
Management contracts
|
447
|
269
|
||||||
Industrial injury prevention services
|
4,405
|
2,676
|
||||||
Gross profit
|
$
|
26,784
|
$
|
29,799
|
Three Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Income before taxes
|
$
|
16,036
|
$
|
17,938
|
||||
Less: net income attributable to non-controlling interest:
|
||||||||
Redeemable non-controlling interest - temporary equity
|
(2,037
|
)
|
(2,605
|
)
|
||||
Non-controlling interest - permanent equity
|
(1,227
|
)
|
(1,509
|
)
|
||||
$
|
(3,264
|
)
|
$
|
(4,114
|
)
|
|||
Income before taxes less net income attributable to non-controlling interest
|
$
|
12,772
|
$
|
13,824
|
||||
Provision for income taxes
|
$
|
3,215
|
$
|
3,815
|
||||
Percentage
|
25.2
|
%
|
27.6
|
%
|
|
Nine Months Ended September 30,
|
|||||||
|
2022
|
2021
|
||||||
|
||||||||
Net operating revenue:
|
||||||||
Physical therapy operations
|
$
|
353,302
|
$
|
334,652
|
||||
Industrial injury prevention services
|
58,660
|
30,537
|
||||||
Total Company
|
$
|
411,962
|
$
|
365,189
|
||||
|
||||||||
Gross profit:
|
||||||||
Physical therapy operations
|
$
|
71,513
|
$
|
82,058
|
||||
Industrial injury prevention services
|
12,680
|
7,941
|
||||||
Gross profit
|
$
|
84,193
|
$
|
89,999
|
||||
|
||||||||
Total Assets:
|
||||||||
Physical therapy operations
|
$
|
432,683
|
$
|
583,785
|
||||
Industrial injury prevention services
|
367,025
|
46,313
|
||||||
Total Company
|
$
|
799,708
|
$
|
630,098
|
For the Nine Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Revenue related to Mature Clinics
|
$
|
317,514
|
$
|
314,969
|
||||
Revenue related to 2022 Clinic Additions
|
7,019
|
-
|
||||||
Revenue related to 2021 Clinic Additions
|
18,827
|
7,334
|
||||||
Revenue from clinics sold or closed in 2022
|
1,084
|
2,058
|
||||||
Revenue from clinics sold or closed in 2021
|
-
|
458
|
||||||
Net patient revenue from physical therapy operations
|
344,444
|
324,819
|
||||||
Other revenue
|
2,523
|
2,222
|
||||||
Revenue from physical therapy operations
|
346,967
|
327,041
|
||||||
Revenue - Management contracts
|
6,335
|
7,611
|
||||||
Revenue - Industrial injury prevention services
|
58,660
|
30,537
|
||||||
Total revenue
|
$
|
411,962
|
$
|
365,189
|
Nine Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Operating cost related to Mature Clinics
|
$
|
253,899
|
$
|
237,982
|
||||
Operating cost related to 2022 Clinic Additions
|
6,271
|
-
|
||||||
Operating cost related to 2021 Clinic Additions
|
15,393
|
5,877
|
||||||
Operating cost related to clinics sold or closed in 2022
|
1,233
|
1,733
|
||||||
Operating cost related to clinics sold or closed in 2021
|
2
|
510
|
||||||
Operating cost related to physical therapy operations
|
276,798
|
246,102
|
||||||
Operating cost related to management contracts
|
4,991
|
6,492
|
||||||
Operating cost related to industrial injury prevention services
|
45,980
|
22,596
|
||||||
Total operating cost
|
$
|
327,769
|
$
|
275,190
|
Nine Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Physical therapy operations
|
$
|
70,169
|
$
|
80,939
|
||||
Management contracts
|
1,344
|
1,119
|
||||||
Industrial injury prevention services
|
12,680
|
7,941
|
||||||
Gross profit
|
$
|
84,193
|
$
|
89,999
|
For the Nine Months Ended
|
||||||||
September 30, 2022
|
September 30, 2021
|
|||||||
Income before taxes
|
$
|
51,011
|
$
|
54,807
|
||||
Less: net income attributable to non-controlling interest:
|
||||||||
Redeemable non-controlling interest - temporary equity
|
(7,220
|
)
|
(8,669
|
)
|
||||
Non-controlling interest - permanent equity
|
(3,288
|
)
|
(4,194
|
)
|
||||
$
|
(10,508
|
)
|
$
|
(12,863
|
)
|
|||
Income before taxes less net income attributable to non controlling interest
|
$
|
40,503
|
$
|
41,944
|
||||
Provision for income taxes
|
$
|
10,952
|
$
|
11,326
|
||||
Percentage
|
27.0
|
%
|
27.0
|
%
|
1) |
Revolving Facility: $175 million, five-year, revolving credit facility (“Revolving Facility”), which includes a $12 million sublimit for the issuance of standby letters of credit and a $15 million sublimit
for swingline loans (each, a “Swingline Loan”).
|
2) |
Term Facility: $150 million term loan facility (the “Term Facility”). The Term Facility amortizes in quarterly installments of: (a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth
year, and (c) 1.875% in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date.
|
•
|
the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19 and its variants, for which the total financial magnitude
cannot be currently estimated;
|
•
|
changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;
|
•
|
revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction;
|
•
|
changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients;
|
•
|
compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for failure to
comply;
|
•
|
competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs including
the possible write-down or write-off of goodwill and other intangible assets;
|
•
|
the impact of COVID-19 related vaccination and/or testing mandates at the federal, state and/or local level, which could have an adverse impact on staffing, revenue, costs and the
results of operations;
|
•
|
changes as the result of government enacted national healthcare reform;
|
• |
business and regulatory conditions including federal and state regulations;
|
•
|
governmental and other third party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs;
|
•
|
revenue and earnings expectations;
|
•
|
some of our acquisition agreements contain contingent consideration, the value of which may impact future financial results;
|
•
|
one of our acquisition agreements includes a Put Right for a potential purchase of a company and we may or may not have
the capital necessary to satisfy this obligation;
|
•
|
legal actions, which could subject us to increased operating costs and uninsured liabilities;
|
•
|
general economic conditions, including but not limited to inflationary and recessionary periods;
|
•
|
availability and cost of qualified physical therapists;
|
•
|
personnel productivity and hiring, training and retaining key personnel;
|
•
|
competitive environment in the IIPS business, which could result in the termination or nonrenewal of contractual service arrangements and other adverse financial consequences for
that service line;
|
•
|
acquisitions, and the successful integration of the operations of the acquired businesses;
|
•
|
impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interest (minority interests);
|
•
|
maintaining our information technology systems with adequate safeguards to protect against cyber-attacks;
|
•
|
a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of
the Health Insurance Portability and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act;
|
•
|
maintaining clients for which we perform management and other services, as a breach or termination of those contractual arrangements by such clients could cause operating results to
be less than expected;
|
•
|
maintaining adequate internal controls;
|
•
|
our business depends upon hiring, training and retaining qualified personnel;
|
•
|
maintaining necessary insurance coverage;
|
•
|
availability, terms, and use of capital; and
|
•
|
weather and other seasonal factors.
|
(a) |
Evaluation of Disclosure Controls and Procedures
|
(b) |
Changes in Internal Control over Financial Reporting
|
• |
require us to maintain a quarterly fixed charge coverage ratio and minimum working capital ratio;
|
• |
limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions, to fund growth or for general corporate purposes;
|
• |
limit our future ability to refinance our indebtedness on terms acceptable to us or at all;
|
• |
limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan; and
|
• |
impose on us financial and operational restrictions.
|
Exhibit
Number
|
Description
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
|
|
Certification Pursuant to 18 U.S.C 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS*
|
XBRL Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith
|
U.S. PHYSICAL THERAPY, INC.
|
||
Date: November 8, 2022
|
By:
|
/s/ CAREY HENDRICKSON
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Carey Hendrickson
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Chief Financial Officer
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(Principal financial and accounting officer)
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