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 2019
Management Provides 2020 Earnings Guidance and Raises Dividend
Houston, TX, February 27, 2020 - 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, 2019.
For the year ended December 31, 2019, USPH's Operating Results (as defined below) increased
7.3% to $36.0 million, or $2.82 per diluted share, as compared to $33.5 million, or $2.65 per diluted share in 2018. For the fourth quarter ended December 31, 2019, USPH's Operating Results were $8.2 million, or $0.64 per diluted share as compared
to $9.0 million, or $0.71 per diluted share, in the fourth quarter of 2018. As discussed further in this release, in the recent quarter the Company incurred more than $1.0 million in higher employee healthcare costs than planned. Operating Results,
a non-Generally Accepted Accounting Principle ("GAAP") measure, equals net income attributable to USPH shareholders per the consolidated statements of net income less the gain on the sale of a partnership interest in 2019 and the gain on the
derecognition of debt in 2018 as described below. The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest. 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 net pre-tax gain of $5.5 million in 2019 which is not included in Operating Results.
For the year ended December 31, 2019, USPH's net income attributable to its shareholders, in accordance with GAAP, was $40.0 million as compared to $34.9
million for the comparable period of 2018. For the fourth quarter ended December 31, 2019, USPH's net income attributable to its shareholders was $7.9 million, as compared to $10.4 million in the fourth 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 GAAP, in the recent year, the amount is $31.3 million, or $2.45 per share, as compared to $16.6 million, or $1.31 per share, for
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 quarter, the amount is $7.1 million, or $0.55 per share, as compared to $5.5
million, or $0.43 per share, for the fourth 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; however, the charge or credit for this change is included in the earnings per basic and diluted share calculation. See the schedule on page 9 for the computation of diluted earnings per share.
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Year 2019 Compared to Year 2018
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Fourth Quarter 2019 Compared to Fourth Quarter 2018
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Other Financial Measures
For 2019, the Company's Adjusted EBITDA increased by 8.5% to $67.3 million from $62.0 million in 2018 and, as a percentage of net revenue increased by 30 basis
points from 13.7% to 14.0%. For the fourth quarter of 2019, the Company's Adjusted EBITDA increased by 1.3% to $15.6 million from $15.4 million in the comparable 2018 quarter and as a percentage of net revenue decreased by 40 basis points from
13.2% to 12.8%. See definition and explanation of Adjusted EBITDA in the schedule on page 9.
Management's Comments
Chris Reading, Chief Executive Officer, said, "Our team produced a great many highlights in 2019 including an 11.8%
increase in our operating income as well as significant margin improvement. We delivered record 6.3% same store revenue growth in physical therapy and finished the year in strong fashion in all operating categories. When you dig into the details
our businesses performed quite well overall. We experienced some cost issues in the fourth quarter, including higher employee healthcare expenses, which are being addressed. Further, today we announced what will be another terrific
partner-centric acquisition with robust activity on the development front overall."
2020 Earnings Guidance
Management currently expects the Company's Operating Results for 2020 to be in the range of
$38.1 million to $39.8 million or $2.98 to $3.10 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, including the acquisition announced today, and excludes future acquisitions. The 2020 earnings guidance range excludes expenses associated with the scheduled retirement and replacement of the Company's CFO. The annual guidance figures
will not be updated unless there is a material development that causes management to believe that Operating Results will be significantly outside the given range.
U.S. Physical Therapy Quarterly Dividend
The first quarterly dividend for 2020 of $0.32 per share will be paid on April 17, 2020 to shareholders of record as
of March 13, 2020. At that quarterly rate the total dividend expected to be paid in 2020 would be 12.2% higher than what was paid in 2019. U.S. Physical Therapy began paying quarterly dividends in 2011 and has increased the dividend amount at
least annually every year since.
Employee Healthcare Plan Changes
Effective January 1, 2020, in order to reduce costs while continuing to provide excellent healthcare benefits for
employees, the Company made a number of changes to it prescription drug program. These included a change in the management company of the program, guaranteed price reductions and rebates, preauthorization being required for certain medications,
plan design changes to incentivize employees to utilize generic prescriptions or over-the-counter alternatives rather than significantly more expensive brand name drugs, and a number of other changes. This is expected to reduce the costs of the
Company's prescription medication plan by more than $1.0 million annually.
In addition, the Company's various employee healthcare insurance programs renew annually on May 1. The Company will
be making design changes to those plans which are anticipated to save a substantial amount.
The Company maintains a self-insured health plan and uses one of the largest insurance companies in the U.S. to
administer the plan and provide stop loss insurance and terminal run out-coverage. There are several layers of insurance within the plan to protect the Company, namely individual stop loss, aggregate stop loss and terminal liability coverages.
The individual stop loss protects the plan from any one single large claimant whereas the aggregate insurance protects the entire plan, similar to umbrella coverage, to provide a known maximum exposure. Lastly, the Company purchases terminal
liability coverage that provides a defined run-out cost in the event the plan is moved, replaced or terminated.
Operating Leases - Right-to-Use Assets and Lease Liability
The Company implemented the new lease accounting standard beginning January 1, 2019. As of
December 31, 2019, the adoption has resulted in $81.6 million of right-to-use assets and $86.7 million of operating lease liabilities, of which $26.5 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.
Fourth 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 February 27, 2020 to discuss the Company's Fourth Quarter and Year Ended December 31, 2019 results. Interested parties may participate in the call by dialing
1-888-335-5539 or 973-582-2857 and entering reservation number 4759865 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 May 27, 2020 at U.S. Physical Therapy's website.
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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 587 outpatient physical therapy clinics in 40 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.
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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Three Months Ended | For the Year Ended | |||||||||||||||
| December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||
| Net patient revenues | $ | 108,940 | $ | 107,808 | $ | 433,345 | $ | 417,703 | ||||||||
| Other revenues | 13,174 | 9,541 | 48,624 | 36,208 | ||||||||||||
| Net revenues | 122,114 | 117,349 | 481,969 | 453,911 | ||||||||||||
| Operating costs: | ||||||||||||||||
| Salaries and related costs | 70,549 | 67,818 | 274,233 | 259,228 | ||||||||||||
| Rent, supplies, contract labor and other | 23,143 | 22,828 | 90,379 | 88,426 | ||||||||||||
| Provision for doubtful accounts | 1,450 | 1,501 | 4,858 | 4,603 | ||||||||||||
| Closure costs | 13 | (17 | ) | 25 | (9 | ) | ||||||||||
| Total operating costs | 95,155 | 92,130 | 369,495 | 352,248 | ||||||||||||
| Gross profit | 26,959 | 25,219 | 112,474 | 101,663 | ||||||||||||
| Corporate office costs | 11,673 | 10,415 | 45,049 | 41,349 | ||||||||||||
| Operating income | 15,286 | 14,804 | 67,425 | 60,314 | ||||||||||||
| Other income and expense | ||||||||||||||||
| Gain (adjustment) on sale of partnership interest | (309 | ) | - | 5,514 | - | |||||||||||
| Gain on derecognition of debt | - | 1,846 | - | 1,846 | ||||||||||||
| Interest and other income, net | 19 | 23 | 46 | 93 | ||||||||||||
| Interest expense - debt and other | (557 | ) | (365 | ) | (2,079 | ) | (2,042 | ) | ||||||||
| Income before taxes | 14,439 | 16,308 | 70,906 | 60,211 | ||||||||||||
| Provision for income taxes | 2,424 | 2,635 | 13,647 | 11,369 | ||||||||||||
| Net income | 12,015 | 13,673 | 57,259 | 48,842 | ||||||||||||
| Less: net income attributable to non-controlling interests: | ||||||||||||||||
| Non-controlling interests - permanent equity | (1,579 | ) | (1,600 | ) | (6,561 | ) | (5,536 | ) | ||||||||
| Redeemable non-controlling interests - temporary equity | (2,507 | ) | (1,665 | ) | (10,659 | ) | (8,433 | ) | ||||||||
| (4,086 | ) | (3,265 | ) | (17,220 | ) | (13,969 | ) | |||||||||
| Net income attributable to USPH shareholders | $ | 7,929 | $ | 10,408 | $ | 40,039 | $ | 34,873 | ||||||||
| Basic and diluted earnings per share attributable to USPH shareholders | $ | 0.55 | $ | 0.43 | $ | 2.45 | $ | 1.31 | ||||||||
| Shares used in computation - basic and diluted | 12,774 | 12,685 | 12,756 | 12,666 | ||||||||||||
| Dividends declared per common share | $ | 0.30 | $ | 0.23 | $ | 1.14 | $ | 0.92 |
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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| December 31, 2019 | December 31, 2018 | |||||||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 23,548 | $ | 23,368 | ||||
| Patient accounts receivable, less allowance for doubtful accounts of $2,698 and $2,672, respectively | 46,228 | 44,751 | ||||||
| Accounts receivable - other | 9,823 | 6,742 | ||||||
| Other current assets | 5,787 | 4,353 | ||||||
| Total current assets | 85,386 | 79,214 | ||||||
| Fixed assets: | ||||||||
| Furniture and equipment | 54,942 | 52,611 | ||||||
| Leasehold improvements | 33,247 | 31,712 | ||||||
| Fixed assets, gross | 88,189 | 84,323 | ||||||
| Less accumulated depreciation and amortization | 66,099 | 64,154 | ||||||
| Fixed assets, net | 22,090 | 20,169 | ||||||
| Operating lease right-of-use assets | 81,586 | - | ||||||
| Goodwill | 317,676 | 293,525 | ||||||
| Other identifiable intangible assets, net | 52,588 | 48,828 | ||||||
| Other assets | 1,519 | 1,430 | ||||||
| Total assets | $ | 560,845 | $ | 443,166 | ||||
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS' EQUITY AND NON-CONTROLLING INTERESTS | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - trade | $ | 2,494 | $ | 2,019 | ||||
| Accrued expenses | 30,855 | 38,493 | ||||||
| Current portion of operating lease liabilities | 26,486 | - | ||||||
| Current portion of notes payable | 728 | 1,434 | ||||||
| Total current liabilities | 60,563 | 41,946 | ||||||
| Notes payable, net of current portion | 4,361 | 402 | ||||||
| Revolving line of credit | 46,000 | 38,000 | ||||||
| Deferred taxes | 10,071 | 9,012 | ||||||
| Deferred rent | - | 2,159 | ||||||
| Operating lease liabilities, net of current portion | 60,258 | - | ||||||
| Other long-term liabilities | 141 | 829 | ||||||
| Total liabilities | 181,394 | 92,348 | ||||||
| Redeemable non-controlling interests | 137,750 | 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, 14,989,337 and 14,899,233 shares issued, respectively | 150 | 149 | ||||||
| Additional paid-in capital | 87,383 | 80,028 | ||||||
| Retained earnings | 184,352 | 167,396 | ||||||
| Treasury stock at cost, 2,214,737 shares | (31,628 | ) | (31,628 | ) | ||||
| Total USPH shareholders' equity | 240,257 | 215,945 | ||||||
| Non-controlling interests | 1,444 | 930 | ||||||
| Total USPH shareholders' equity and non-controlling interests | 241,701 | 216,875 | ||||||
| Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests | $ | 560,845 | $ | 443,166 |
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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Year Ended | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income including non-controlling interests | $ | 57,259 | $ | 48,842 | ||||
| Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 10,095 | 9,755 | ||||||
| Provision for doubtful accounts | 4,858 | 4,603 | ||||||
| Equity-based awards compensation expense | 6,985 | 5,939 | ||||||
| Deferred income taxes | 4,651 | 4,813 | ||||||
| Gain on sale of partnership interest | (5,514 | ) | - | |||||
| Gain on derecognition of Debt | - | (1,846 | ) | |||||
| Other | 96 | 167 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in patient accounts receivable | (6,376 | ) | (3,434 | ) | ||||
| Increase in accounts receivable - other | (2,499 | ) | (1,087 | ) | ||||
| (Increase) decrease in other assets | (1,878 | ) | 345 | |||||
| (Decrease) increase in accounts payable and accrued expenses | (4,209 | ) | 4,876 | |||||
| (Decrease) increase in other liabilities | (1,020 | ) | 32 | |||||
| Net cash provided by operating activities | 62,448 | 73,005 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | (10,189 | ) | (7,193 | ) | ||||
| Purchase of majority interest in businesses | (30,597 | ) | (16,367 | ) | ||||
| Purchase of redeemable non-controlling interest, temporary equity | (8,651 | ) | - | |||||
| Purchase of non-controlling interest, permanent equity | (428 | ) | (350 | ) | ||||
| Sales of non controlling interest-permanent | 207 | - | ||||||
| Proceeds on sale of partnership interest, net | 11,601 | - | ||||||
| Proceeds on sale of fixed assets | 64 | 1 | ||||||
| Net cash used in investing activities | (37,993 | ) | (23,909 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Distributions to non-controlling interests, permanent and temporary equity | (16,235 | ) | (15,646 | ) | ||||
| Cash dividends paid to shareholders | (14,555 | ) | (11,664 | ) | ||||
| Proceeds from revolving line of credit | 145,000 | 103,000 | ||||||
| Payments on revolving line of credit | (137,000 | ) | (119,000 | ) | ||||
| Payments to settle mandatorily redeemable non-controlling interests | - | (265 | ) | |||||
| Principal payments on notes payable | (1,433 | ) | (4,044 | ) | ||||
| Other | (52 | ) | (42 | ) | ||||
| Net cash used in financing activities | (24,275 | ) | (47,661 | ) | ||||
| Net increase in cash and cash equivalents | 180 | 1,435 | ||||||
| Cash and cash equivalents - beginning of period | 23,368 | 21,933 | ||||||
| Cash and cash equivalents - end of period | $ | 23,548 | $ | 23,368 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | 9,856 | $ | 9,183 | ||||
| Interest | $ | 1,890 | $ | 2,357 | ||||
| Non-cash investing and financing transactions during the period: | ||||||||
| Purchase of businesses - seller financing portion | $ | 4,300 | $ | 950 | ||||
| Purchase of business - payable to common shareholders of acquired business | $ | 502 | $ | - | ||||
| Notes payable related to purchase of redeemable non-controlling interest, temporary equity | $ | 283 | $ | - | ||||
| Notes payable related to purchase of non-controlling interest, permanent equity | $ | 103 | $ | - | ||||
| Notes receivable related to sale of partnership interest - redeemable non-controlling interest | $ | 2,870 | $ | - |
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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
Operating Results per share, a non-GAAP measure, equals net income attributable to USPH shareholders per the consolidated statement of
net income, and excludes the impact of the gain on the sale of a partnership interest in 2019 and the gain on the derecognition of debt in 2018. In addition, the revaluation of redeemable non-controlling interest, net of tax, is not considered in