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 Second Quarter
And Six Months Results
Management Again Raises Earnings Guidance
Houston, TX, August 8, 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 second quarter and six months ended June 30, 2019.
For the second quarter ended June 30, 2019, USPH's Operating Results (as defined below) increased 11.7% to $10.3 million, or $0.81 per diluted share, as
compared to $9.2 million, or $0.73 per diluted share, in the second quarter of 2018. For the six months ended June 30, 2019, USPH's Operating Results increased 14.7% to $18.8 million, or $1.47 per diluted share, as compared to $16.4 million, or $1.29
per diluted share, in the first six months of 2018. Operating Results per share, a non-GAAP measure, equals net income attributable to USPH shareholders per the consolidated statements of net income, and excludes the impact of the gain on the sale of
a partnership interest and the revaluation of redeemable non-controlling interest, net of tax, to calculate earnings per share. On June 30, 2019, the Company sold its 50% interest in one physical therapy partnership to the group's founders for $11.6
million and recognized a pre-tax gain of $5.8 million on the sale.
For the second quarter ended June 30, 2019, USPH's net income attributable to its shareholders was $14.6 million, inclusive of the gain on the sale of the partnership interest, as
compared to $9.2 million in the second quarter of 2018. Inclusive of the charge for revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with Generally Accepted Accounting Principles ("GAAP"),
in the recent quarter, the amount is $10.8 million, or $0.85 per share, as compared to $6.0 million, or $0.48 per share for the second quarter of 2018. For the six months ended June 30, 2019, USPH's net income attributable to its shareholders, in
accordance with GAAP, was $23.1 million as compared to $16.4 million for the comparable period of 2018. Inclusive of the charge for revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with
GAAP, in the recent six months, the amount is $15.8 million, or $1.24 per share, as compared to $9.4 million, or $0.74 per share for the second quarter 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 charged directly to retained earnings and is included in the earnings per basic and diluted share calculation. See the schedule on page 8 for the computation of diluted earnings
Second Quarter 2019 Compared to Second Quarter 2018
| U.S. Physical Therapy Press Release | Page 2 |
| August 8, 2019 |
First Six Months 2019
Compared to First Six Months 2018
| U.S. Physical Therapy Press Release | Page 3 |
| August 8, 2019 |
Other Financial Measures
For the second quarter of 2019, the Company's Adjusted EBITDA increased by 12.2% to $19.1 million from $17.0 million in the comparable 2018 quarter and as
a percentage of net revenue increased by 30 basis points from 14.8% to 15.1%. For the first six months of 2019, the Company's Adjusted EBITDA increased by 12.1% to $34.7 million from $31.0 million in the comparable 2018 period and as a percentage of
net revenue increased by 40 basis points from 13.9% to 14.3%. See definition and explanation of Adjusted EBITDA in the schedule on page 8.
Management Raises 2019 Earnings Guidance
U.S. Physical Therapy's management is raising 2019 earnings guidance from Operating Results, a
non-GAAP measure, to the range of $36.6 million to $37.9 million or $2.87 to $2.97 per share. On March 7th, the Company issued initial 2019 earnings guidance in the range of $35.1 million to $36.4 million or $2.76 to $2.85 per share. On April 11th,
in conjunction with an acquisition, the Company raised guidance to the range of $35.9 million to $37.3 million or $2.82 to $2.92 per share. All three earnings ranges are based on an assumed annual corporate tax rate of approximately 26.5%. Please
note that the Company's 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, "I want to thank our entire team for the work they have put in this year resulting in our highest earnings quarter in our Company's
history. We continue to make improvements in all aspects of our business. Notably same store revenue growth has been excellent this year and we have achieved meaningful improvement in our physical therapy and industrial injury prevention margins. As
a group, our top partnerships have continued their excellent performance which is built upon a foundation of great care, service and communication. I remain highly grateful to work with so many gifted people who strive every day to make a difference
in the lives of those we serve."
Larry McAfee, Chief Financial Officer, noted, "Revenue from the industrial injury business plus physical therapy revenue
for workers comp patients increased by approximately 28% to $27.4 million in the second quarter of 2019 as compared to $21.5 million in the same quarter in 2018."
U.S. Physical Therapy Declares Quarterly Dividend
The third quarterly dividend for 2019 of $0.30 per share will be paid on September 13, 2019 to
shareholders of record as of August 15, 2019. On July 1, 2019 the Company announced that it planned to increase the quarterly dividend for the remainder of 2019 from $0.27 in the first and second quarters to $0.30 in the third and fourth quarters.
The $.30 third quarter dividend represents a 30% increase from $.23 per share paid in the third quarter of 2018. U.S. Physical Therapy began paying quarterly dividends in 2011 and has increased the dividend amount every year since.
Operating Leases - Right-to-Use Assets and Lease Liability
The Company implemented the new lease accounting standard beginning January 1, 2019. On June
30, 2019, the adoption resulted in $74.9 million of right-to-use assets and $79.3 million of operating lease liabilities, of which $24.1 million was classified as a current liability, in the consolidated balance sheet. For a detailed discussion of
the new lease accounting standard refer to the Company's Annual Report on Form 10-K filed with the SEC on March 18, 2019.
Second Quarter 2019 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 August 8, 2019 to discuss
the Company's Quarter and Six Months Ended June 30, 2019 results. Interested parties may participate in the call by dialing 1-888-335-5539 or 973-582-2857 and entering reservation number 6297501 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
November 8, 2019 at U.S. Physical Therapy's website.
| U.S. Physical Therapy Press Release | Page 4 |
| August 8, 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.
Physical Therapy, Inc.
Founded in 1990, U.S. Physical Therapy, Inc. operates 564 outpatient physical therapy
clinics in 41 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 26 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 and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations, and ergonomic assessments.
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 press release.
| U.S. Physical Therapy Press Release | Page 5 |
| August 8, 2019 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2019 | June 30, 2018 | June 30, 2019 | June 30, 2018 | |||||||||||||
| Net patient revenues | $ | 113,363 | $ | 105,989 | $ | 220,013 | $ | 206,541 | ||||||||
| Other revenues | 13,010 | 9,109 | 22,591 | 16,899 | ||||||||||||
| Net revenues | 126,373 | 115,098 | 242,604 | 223,440 | ||||||||||||
| Operating costs: | ||||||||||||||||
| Salaries and related costs | 70,669 | 64,607 | 136,936 | 126,886 | ||||||||||||
| Rent, supplies, contract labor and other | 23,026 | 22,168 | 45,070 | 43,944 | ||||||||||||
| Provision for doubtful accounts | 1,240 | 1,151 | 2,446 | 2,212 | ||||||||||||
| Closure costs | 13 | 18 | 9 | 30 | ||||||||||||
| Total operating costs | 94,948 | 87,944 | 184,461 | 173,072 | ||||||||||||
| Gross profit | 31,425 | 27,154 | 58,143 | 50,368 | ||||||||||||
| Corporate office costs | 11,527 | 10,128 | 22,820 | 20,291 | ||||||||||||
| Operating income | 19,898 | 17,026 | 35,323 | 30,077 | ||||||||||||
| Other income and expense | ||||||||||||||||
| Gain on sale of partnership interest | 5,823 | - | 5,823 | - | ||||||||||||
| Interest and other income, net | 4 | 22 | 20 | 54 | ||||||||||||
| Interest expense - debt and other | (607 | ) | (545 | ) | (965 | ) | (1,098 | ) | ||||||||
| Income before taxes | 25,118 | 16,503 | 40,201 | 29,033 | ||||||||||||
| Provision for income taxes | 5,318 | 3,267 | 8,026 | 5,743 | ||||||||||||
| Net income | 19,800 | 13,236 | 32,175 | 23,290 | ||||||||||||
| Less: net income attributable to non-controlling interests: | ||||||||||||||||
| Non-controlling interests - permanent equity | (1,802 | ) | (1,380 | ) | (3,339 | ) | (2,581 | ) | ||||||||
| Redeemable non-controlling interests - temporary equity | (3,378 | ) | (2,610 | ) | (5,773 | ) | (4,346 | ) | ||||||||
| (5,180 | ) | (3,990 | ) | (9,112 | ) | (6,927 | ) | |||||||||
| Net income attributable to USPH shareholders | $ | 14,620 | $ | 9,246 | $ | 23,063 | $ | 16,363 | ||||||||
| Basic and diluted earnings per share attributable to USPH shareholders | $ | 0.85 | $ | 0.48 | $ | 1.24 | $ | 0.74 | ||||||||
| Shares used in computation - basic and diluted | 12,767 | 12,677 | 12,738 | 12,647 | ||||||||||||
| Dividends declared per common share | $ | 0.27 | $ | 0.23 | $ | 0.54 | $ | 0.46 |
| U.S. Physical Therapy Press Release | Page 6 |
| August 8, 2019 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| June 30, 2019 | December 31, 2018 | |||||||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 34,859 | $ | 23,368 | ||||
| Patient accounts receivable, less allowance for doubtful accounts of $2,666 and $2,672, respectively | 44,923 | 44,751 | ||||||
| Accounts receivable - other | 10,724 | 6,742 | ||||||
| Receivable, net - sale and purchase of partnership interests | 9,401 | - | ||||||
| Other current assets | 7,102 | 4,353 | ||||||
| Total current assets | 107,009 | 79,214 | ||||||
| Fixed assets: | ||||||||
| Furniture and equipment | 52,831 | 52,611 | ||||||
| Leasehold improvements | 31,020 | 31,712 | ||||||
| Fixed assets, gross | 83,851 | 84,323 | ||||||
| Less accumulated depreciation and amortization | 63,829 | 64,154 | ||||||
| Fixed assets, net | 20,022 | 20,169 | ||||||
| Operating lease right-of-use assets | 74,930 | - | ||||||
| Goodwill | 303,549 | 293,525 | ||||||
| Other identifiable intangible assets, net | 50,055 | 48,828 | ||||||
| Other assets | 1,445 | 1,430 | ||||||
| Total assets | $ | 557,010 | $ | 443,166 | ||||
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS' EQUITY AND NON-CONTROLLING INTERESTS | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - trade | $ | 2,426 | $ | 2,019 | ||||
| Accrued expenses | 31,346 | 38,493 | ||||||
| Current portion of operating lease liabilities | 22,558 | - | ||||||
| Current portion of notes payable | 690 | 1,434 | ||||||
| Total current liabilities | 57,020 | 41,946 | ||||||
| Notes payable, net of current portion | 4,316 | 402 | ||||||
| Revolving line of credit | 62,000 | 38,000 | ||||||
| Deferred taxes | 12,284 | 9,012 | ||||||
| Deferred rent | - | 2,159 | ||||||
| Operating lease liabilities, net of current portion | 56,711 | - | ||||||
| Other long-term liabilities | 566 | 829 | ||||||
| Total liabilities | 192,897 | 92,348 | ||||||
| Redeemable non-controlling interests | 133,366 | 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, 14,989,350 and 14,899,233 shares issued, respectively | 149 | 149 | ||||||
| Additional paid-in capital | 84,125 | 80,028 | ||||||
| Retained earnings | 176,610 | 167,396 | ||||||
| Treasury stock at cost, 2,214,737 shares | (31,628 | ) | (31,628 | ) | ||||
| Total USPH shareholders' equity | 229,256 | 215,945 | ||||||
| Non-controlling interests | 1,491 | 930 | ||||||
| Total USPH shareholders' equity and non-controlling interests | 230,747 | 216,875 | ||||||
| Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests | $ | 557,010 | $ | 443,166 |
| U.S. Physical Therapy Press Release | Page 7 |
| August 8, 2019 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Six Months Ended | ||||||||
| June 30, 2019 | June 30, 2018 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income including non-controlling interests | $ | 32,175 | $ | 23,290 | ||||
| Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 4,958 | 4,866 | ||||||
| Provision for doubtful accounts | 2,446 | 2,212 | ||||||
| Equity-based awards compensation expense | 3,558 | 2,937 | ||||||
| Deferred income taxes | 5,421 | (1,736 | ) | |||||
| Gain on sale of partnership interest, net of tax | (4,294 | ) | - | |||||
| Other | 21 | 94 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in patient accounts receivable | (4,956 | ) | (2,141 | ) | ||||
| Increase in accounts receivable - other | (2,468 | ) | (2,934 | ) | ||||
| Increase in other assets | (2,759 | ) | (140 | ) | ||||
| (Decrease) increase in accounts payable and accrued expenses | (4,780 | ) | 4,845 | |||||
| Decrease in other liabilities | (701 | ) | (672 | ) | ||||
| Net cash provided by operating activities | 28,621 | 30,621 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | (4,876 | ) | (3,270 | ) | ||||
| Purchase of business | (18,239 | ) | (9,118 | ) | ||||
| Purchase of redeemable non-controlling interest, temporary equity | (2,053 | ) | - | |||||
| Purchase of non-controlling interest, permanent equity | (138 | ) | (245 | ) | ||||
| Proceeds on sale of fixed assets | 65 | 1 | ||||||
| Net cash used in investing activities | (25,241 | ) | (12,632 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Distributions to non-controlling interests, permanent and temporary equity | (7,934 | ) | (6,735 | ) | ||||
| Cash dividends paid to shareholders | (6,891 | ) | (5,828 | ) | ||||
| Proceeds from revolving line of credit | 80,000 | 55,000 | ||||||
| Payments on revolving line of credit | (56,000 | ) | (53,000 | ) | ||||
| Payments to settle mandatorily redeemable non-controlling interests | - | (265 | ) | |||||
| Principal payments on notes payable | (1,057 | ) | (1,898 | ) | ||||
| Other | (7 | ) | (48 | ) | ||||
| Net cash provided by (used in) financing activities | 8,111 | (12,774 | ) | |||||
| Net increase in cash and cash equivalents | 11,491 | 5,215 | ||||||
| Cash and cash equivalents - beginning of period | 23,368 | 21,933 | ||||||
| Cash and cash equivalents - end of period | $ | 34,859 | $ | 27,148 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | 4,339 | $ | 7,483 | ||||
| Interest | $ | 902 | $ | 1,106 | ||||
| Non-cash investing and financing transactions during the period: | ||||||||
| Purchase of business - seller financing portion | $ | 4,000 | $ | 550 | ||||
| Purchase of business - payable to common shareholders of acquired business | $ | 502 | $ | - | ||||
| Receivable related to sale of partnership interest | $ | 11,601 | $ | - | ||||
| Payable related to purchase of partnership interest - settlement of redeemable non-controlling interest | $ | 2,200 | $ | - | ||||
| Notes receivable related to sale of partnership interest - redeemable non-controlling interest | $ | 2,780 | $ | - |
| U.S. Physical Therapy Press Release | Page 8 |
| August 8, 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, 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.
Adjusted EBITDA is defined as net income attributable to USPH shareholders before