Full Press Release Details
U.S. Physical Therapy, Inc.
Larry McAfee, Chief Financial Officer
Chris Reading, Chief Executive Officer
U.S. Physical Therapy Reports Record Results for 2018
Management Provides 2019 Earnings Guidance and Raises Dividend
Houston, TX, March 7, 2019 -U.S. Physical Therapy, Inc. ("USPH" or
the "Company") (NYSE: USPH), a national operator of outpatient physical therapy clinics, today reported results for the fourth quarter and year ended December 31, 2018.
For the fourth quarter ended December 31, 2018, USPH's Operating Results increased 45.5% to $9.0 million, or $0.71 per diluted share, as compared to $6.2
million, or $0.49 per diluted share, in the fourth quarter of 2017. For the year ended December 31, 2018, USPH's Operating Results increased 28.1% to $33.5 million, or $2.65 per diluted share, as compared to $26.2 million, or $2.08 per diluted
share, for the 2017 year. Operating Results, a non-generally accepted accounting principles ("non-GAAP") measure, for the 2018 fourth quarter and for the 2018 year, equals net income attributable to USPH shareholders less a gain resulting from a
liability no longer deemed payable, net of taxes. For the 2017 fourth quarter and 2017 year, Operating Results is defined as net income attributable to USPH shareholders prior to the benefit due to the revaluation of deferred tax assets and
liabilities due to the 2017 Tax Cuts and Jobs Act ("TCJA"), and prior to charges for interest expense - mandatorily redeemable non-controlling interests - change in redemption value and charges for costs related to restatement of financials - legal
and accounting, both charges net of tax.
For the fourth quarter ended December 31, 2018, USPH's net income attributable to its shareholders, in accordance with GAAP, was $10.4 million, or $0.43 per share, as compared to
$7.3 million, or $0.57 per share for the fourth quarter of 2017. For the year ended December 31, 2018, USPH's net income attributable to its shareholders, in accordance with GAAP, was $34.9 million, $1.31 per share, as compared to $22.3 million, or
$1.76 per share, for the 2017 year. For both periods of 2018, in accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but rather charged directly to retained
earnings, but is included in the earnings per basic and diluted share calculation. See the schedule on page 14 for a computation of diluted earnings per share and a reconciliation of net income attributable to USPH shareholders to Operating Results.
Fourth Quarter 2018 Compared to Fourth Quarter 2017
| U.S. Physical Therapy Press Release | Page 2 |
| March 7, 2019 |
Year 2018 Compared to Year 2017
| U.S. Physical Therapy Press Release | Page 3 |
| March 7, 2019 |
| U.S. Physical Therapy Press Release | Page 4 |
| March 7, 2019 |
Other Financial Measures
For the fourth quarter of 2018 the Company's Adjusted EBITDA increased by 3.1% to $15.5 million from $15.0 million in the fourth quarter of 2017. For
2018, the Company's Adjusted EBITDA increased by 7.1% to $62.1 million from $57.9 million in 2017. See definition and explanation of Adjusted EBITDA in the schedule on page 9.
Management Provides 2019 Earnings Guidance
Management currently expects the Company's Operating Results for 2019 to be in the range of
$35.1 million to $36.4 million or $2.76 to $2.85 per share. This earnings range is based on an assumed annual corporate tax rate of approximately 26.5%. Please note that the earnings guidance represents projected Operating Results from existing
operations but excludes future acquisitions. The annual guidance figures may not be updated unless there is a material development that causes management to believe that Operating Results will be significantly outside the given range.
Management's Comments
Chris Reading, Chief Executive Officer, said, "2018 was another very positive year for our
Company as well as our shareholders. I continue to be very proud of our entire team for the work that they do every day. We made a number of key investments in 2018 which are bearing great fruit. Our industrial injury prevention business has expanded
significantly from our start in early 2017. Our corporate support infrastructure, especially for operations, was also strengthened this past year. We continue to attract amazing people as well as partners which have further enhanced our Company and,
I believe, will facilitate our continued growth into the future."
Larry McAfee, Chief Financial Officer, noted, "Net cash flow from operations ran at a record
level in 2018, funding both de novo clinic development and acquisitions while net debt, that is debt less cash, was reduced by $22.4 million or 58%."
U.S. Physical Therapy Declares Quarterly Dividend
The Company is increasing its dividend by 17.4%. The first quarterly dividend for 2019 of
$0.27 per share will be paid on April 19, 2019 to shareholders of record as of March 20, 2019. U.S. Physical Therapy began paying quarterly dividends in 2011 and has increased the dividend amount every year since.
Redeemable Non-Controlling Interests
Effective December 31, 2017, the Company entered into amendments to its acquired limited
partnership agreements replacing the mandatory redemption feature. No monetary consideration was paid to the partners to amend the agreements. The amended Partnership Agreements provide that, upon certain events, the Company has a call right (the
"Call Right") and the selling entity has a put right (the "Put Right") for the purchase and sale of the limited partnership interest held by the partner. Once the terms are triggered, the Put Right and the Call Right do not expire, even upon an
individual partner's death, and contain no mandatory redemption feature. The purchase price of the partner's limited partnership interest upon the exercise of either the Put Right or the Call Right is calculated per the original terms of the
respective agreements. The Company accounted for the amendment of its Partnership Agreements as an extinguishment of the outstanding Seller Entity Interests classified as liabilities through the issuance of new Seller Entity Interests classified in
temporary equity. Pursuant to ASC 470-50-40-2, the Company removed the outstanding liability-classified Seller Entity Interests at their carrying amounts and recognized the new temporary-equity-classified Seller Entity Interests at their fair value.
In summary, the redemption values of the mandatorily redeemable non-controlling interest (previously classified as liabilities) were reclassified as redeemable non-controlling interest (temporary equity) on the December 31, 2017 consolidated balance
sheet. For 2018, in accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not charged to net income but is charged to retained earnings and is included in the earnings per basic and
diluted share calculation.
Fourth Quarter and Year End 2018 Conference Call
U.S. Physical Therapy's Management will host a conference call at 10:30 a.m. Eastern Time,
9:30 a.m. Central Time, on March 7, 2019 to discuss the Company's Fourth Quarter and Year Ended December 31, 2018 results. Interested parties may participate in the call by dialing 1-888-335-5539 or 973-582-2857 and entering reservation number
1948767 approximately 10 minutes before the call is scheduled to begin. To listen to the live call via web-cast, go to the Company's website at www.usph.com at least 15 minutes early to register, download and install any necessary audio software. The
conference call will be archived and can be accessed until June 7, 2019 at U.S. Physical Therapy's website.
| U.S. Physical Therapy Press Release | Page 5 |
| March 7, 2019 |
Forward-Looking Statements
This press release contains statements that are considered to be forward-looking within the meaning under Section 21E of the Securities Exchange Act of
1934, as amended. 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 expect. Included among such statements may be those relating to 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:
Many factors are beyond our control. Given these uncertainties, you should not place undue reliance on our forward-looking statements. Please see our periodic reports filed with the Securities and Exchange Commission
for more information on these factors. Our forward-looking statements represent our estimates and assumptions only as of the date of this press release. Except as required by law, we are under no obligation to update any forward-looking
statement, regardless of the reason the statement is no longer accurate.
About U.S. Physical Therapy, Inc.
Founded in 1990, U.S. Physical Therapy, Inc. operates 591 outpatient physical therapy clinics in 42 states. The Company's clinics provide preventative and
post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurologically-related injuries and rehabilitation of injured workers. In addition to owning and operating clinics, the Company manages 28
physical therapy facilities for unaffiliated third parties, including hospitals and physician groups. The Company also has an industrial injury prevention business which provides onsite services for clients' employees including injury prevention,
rehabilitation, ergonomic assessments and performance optimization.
More information about U.S. Physical Therapy, Inc. is available at www.usph.com. The information included on that website is not incorporated into this
| U.S. Physical Therapy Press Release | Page 6 |
| March 7, 2019 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| For the Three Months Ended | For the Year Ended | |||||||||||||||
| December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | |||||||||||||
| Net patient revenues | $ | 107,808 | $ | 101,642 | $ | 417,703 | $ | 389,226 | ||||||||
| Other revenues | 9,541 | 7,561 | 36,208 | 24,825 | ||||||||||||
| Net revenues | 117,349 | 109,203 | 453,911 | 414,051 | ||||||||||||
| Operating costs: | ||||||||||||||||
| Salaries and related costs | 67,818 | 62,155 | 259,228 | 237,067 | ||||||||||||
| Rent, supplies, contract labor and other | 22,828 | 21,376 | 88,426 | 82,096 | ||||||||||||
| Provision for doubtful accounts | 1,501 | 956 | 4,603 | 3,672 | ||||||||||||
| Closure costs | (17 | ) | 572 | (9 | ) | 599 | ||||||||||
| Total operating costs | 92,130 | 85,059 | 352,248 | 323,434 | ||||||||||||
| Gross profit | 25,219 | 24,144 | 101,663 | 90,617 | ||||||||||||
| Corporate office costs | 10,415 | 10,182 | 41,349 | 35,889 | ||||||||||||
| Operating income | 14,804 | 13,962 | 60,314 | 54,728 | ||||||||||||
| Gain on derecognition of debt | 1,846 | - | 1,846 | - | ||||||||||||
| Interest and other income, net | 23 | 30 | 93 | 88 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Mandatorily redeemable non-controlling interests - change in redemption value | - | (5,055 | ) | - | (12,894 | ) | ||||||||||
| Mandatorily redeemable non-controlling interests - earnings allocable | - | (1,689 | ) | - | (6,055 | ) | ||||||||||
| Debt and other | (365 | ) | (539 | ) | (2,042 | ) | (2,111 | ) | ||||||||
| Total interest expense | (365 | ) | (7,283 | ) | (2,042 | ) | (21,060 | ) | ||||||||
| Income before taxes | 16,308 | 6,709 | 60,211 | 33,756 | ||||||||||||
| Provision for income taxes | 2,635 | (1,997 | ) | 11,369 | 6,032 | |||||||||||
| Net income | 13,673 | 8,706 | 48,842 | 27,724 | ||||||||||||
| Less: net income attributable to non-controlling interests | (3,265 | ) | (1,357 | ) | (13,969 | ) | (5,468 | ) | ||||||||
| Net income attributable to USPH shareholders | $ | 10,408 | $ | 7,349 | $ | 34,873 | $ | 22,256 | ||||||||
| Basic and diluted earnings per share attributable to USPH shareholders | $ | 0.43 | $ | 0.57 | $ | 1.31 | $ | 1.76 | ||||||||
| Shares used in computation - basic and diluted | 12,685 | 12,593 | 12,666 | 12,570 | ||||||||||||
| Dividends declared per common share | $ | 0.23 | $ | 0.20 | $ | 0.92 | $ | 0.80 |
| U.S. Physical Therapy Press Release | Page 7 |
| March 7, 2019 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
| December 31, 2018 | December 31, 2017 | |||||||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 23,368 | $ | 21,933 | ||||
| Patient accounts receivable, less allowance for doubtful accounts of $2,672 and $2,273, respectively | 44,751 | 44,707 | ||||||
| Accounts receivable - other | 6,742 | 5,655 | ||||||
| Other current assets | 4,353 | 4,786 | ||||||
| Total current assets | 79,214 | 77,081 | ||||||
| Fixed assets: | ||||||||
| Furniture and equipment | 52,611 | 51,100 | ||||||
| Leasehold improvements | 31,712 | 29,760 | ||||||
| Fixed assets, gross | 84,323 | 80,860 | ||||||
| Less accumulated depreciation and amortization | 64,154 | 60,475 | ||||||
| Fixed assets, net | 20,169 | 20,385 | ||||||
| Goodwill | 293,525 | 271,338 | ||||||
| Other identifiable intangible assets, net | 48,828 | 48,954 | ||||||
| Other assets | 1,430 | 1,224 | ||||||
| Total assets | $ | 443,166 | $ | 418,982 | ||||
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS' EQUITY AND NON-CONTROLLING INTERESTS | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - trade | $ | 2,019 | $ | 2,165 | ||||
| Accrued expenses | 38,493 | 33,342 | ||||||
| Current portion of notes payable | 1,434 | 4,044 | ||||||
| Total current liabilities | 41,946 | 39,551 | ||||||
| Notes payable, net of current portion | 402 | 2,728 | ||||||
| Revolving line of credit | 38,000 | 54,000 | ||||||
| Mandatorily redeemable non-controlling interests | - | 327 | ||||||
| Deferred taxes | 9,012 | 10,875 | ||||||
| Deferred rent | 2,159 | 2,116 | ||||||
| Other long-term liabilities | 829 | 743 | ||||||
| Total liabilities | 92,348 | 110,340 | ||||||
| Redeemable non-controlling interests | 133,943 | 102,572 | ||||||
| Commitments and contingencies | ||||||||
| U.S. Physical Therapy, Inc. ("USPH") shareholders' equity: | ||||||||
| Preferred stock, $.01 par value, 500,000 shares authorized, no shares issued and outstanding | - | - | ||||||
| Common stock, $.01 par value, 20,000,000 shares authorized, 14,899,233 and 14,809,299 shares issued, respectively | 149 | 148 | ||||||
| Additional paid-in capital | 80,028 | 73,940 | ||||||
| Retained earnings | 167,396 | 162,406 | ||||||
| Treasury stock at cost, 2,214,737 shares | (31,628 | ) | (31,628 | ) | ||||
| Total USPH shareholders' equity | 215,945 | 204,866 | ||||||
| Non-controlling interests | 930 | 1,204 | ||||||
| Total USPH shareholders' equity and non-controlling interests | 216,875 | 206,070 | ||||||
| Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests | $ | 443,166 | $ | 418,982 |
| U.S. Physical Therapy Press Release | Page 8 |
| March 7, 2019 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Year Ended | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income including non-controlling interests | $ | 48,842 | $ | 27,724 | ||||
| Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 9,755 | 9,710 | ||||||
| Provision for doubtful accounts | 4,603 | 3,672 | ||||||
| Equity-based awards compensation expense | 5,939 | 5,032 | ||||||
| Deferred income taxes | 4,813 | (4,864 | ) | |||||
| Other | 167 | 621 | ||||||
| Gain on derecognition of debt | (1,846 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in patient accounts receivable | (3,434 | ) | (3,447 | ) | ||||
| Increase in accounts receivable - other | (1,087 | ) | (3,022 | ) | ||||
| Decrease in other assets | 345 | 2,086 | ||||||
| Increase in accounts payable and accrued expenses | 4,876 | 6,979 | ||||||
| Increase in mandatorily redeemable non-controlling interests | - | 11,579 | ||||||
| Increase in other liabilities | 32 | 456 | ||||||
| Net cash provided by operating activities | 73,005 | 56,526 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | (7,193 | ) | (7,095 | ) | ||||
| Purchase of businesses, net of cash acquired | (16,367 | ) | (36,682 | ) | ||||
| (Purchase) sale of non-controlling interest | (350 | ) | 121 | |||||
| Proceeds on sale of fixed assets | 1 | 81 | ||||||
| Net cash used in investing activities | (23,909 | ) | (43,575 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Distributions to non-controlling interests, permanent and temporary equity | (15,646 | ) | (5,572 | ) | ||||
| Cash dividends paid to shareholders - funded | (11,664 | ) | (10,066 | ) | ||||
| Proceeds from revolving line of credit | 103,000 | 93,000 | ||||||
| Payments on revolving line of credit | (119,000 | ) | (85,000 | ) | ||||
| Payments to settle mandatorily redeemable non-controlling interests | (265 | ) | (2,361 | ) | ||||
| Principal payments on notes payable | (4,044 | ) | (1,227 | ) | ||||
| Other | (42 | ) | 161 | |||||
| Net (cash used in) provided by financing activities | (47,661 | ) | (11,065 | ) | ||||
| Net increase in cash and cash equivalents | 1,435 | 1,886 | ||||||
| Cash and cash equivalents - beginning of period | 21,933 | 20,047 | ||||||
| Cash and cash equivalents - end of period | $ | 23,368 | $ | 21,933 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | 9,183 | $ | 8,543 | ||||
| Interest | $ | 2,357 | $ | 2,113 | ||||
| Non-cash investing and financing transactions during the period: | ||||||||
| Purchase of business - seller financing portion | $ | 950 | $ | 2,150 |
| U.S. Physical Therapy Press Release | Page 9 |
| March 7, 2019 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
OPERATING RESULTS AND ADJUSTED EBITDA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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 and Adjusted EBITDA. Management believes providing Operating Results and Adjusted EBITDA 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, for the 2018 fourth quarter and
for the 2018 year, equals net income attributable to USPH shareholders less gain on derecognition of debt, net of taxes. For the 2017 fourth quarter and 2017 year, Operating Results is defined as net income attributable to USPH shareholders prior to
the benefit due to the revaluation of deferred tax assets and liabilities due to the TCJA which was passed by Congress on December 20, 2017 and signed into law by the President on December 22, 2017 and prior to charges for interest expense -
mandatorily redeemable non-controlling interests - change in redemption value and charges for costs related to restatement of financials - legal and accounting, both charges net of tax.
Operating Results for the two periods are comparable, however, the calculations differ. Management uses Operating Results, which eliminates
this current non-cash item 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.
Adjusted EBITDA is defined as earnings before gain on derecognition of debt, interest income, interest expense - mandatorily redeemable
non-controlling interests - change in redemption value, interest expense - debt and other, taxes, depreciation, amortization and equity-based awards compensation expense. Management believes reporting Adjusted EBITDA is useful information for