Full Press Release Details
U.S. Physical Therapy, Inc.
Larry McAfee, Chief Financial Officer
Chris Reading, Chief Executive Officer
U.S. Physical Therapy Reports
First Quarter Earnings for 2020
Houston, TX, May 21, 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 first quarter ended March 31, 2020.
USPH's results for the first quarter of 2020 were negatively impacted by the effects of the
COVID-19 pandemic. Management estimates that the Company suffered more than $8 million in lost revenue and related contribution margin because of the pandemic. The Company continues to experience significantly lower physical therapy revenue than
normal and in the near term expects to incur losses. The Company's physical therapy patient volumes in April declined to as low as 45% of normal. In a number of our markets, patient volume is increasing albeit at a slow pace. We are currently at a
little over 60% of normal patient volume but that varies significantly by region. As of May 20, 2020, the Company has 69 clinics that are closed as a result of this pandemic; 34 of these clinics are anticipated to be closed only temporarily. At
least 35 clinics likely will not reopen, of which 22 of those were closed in late March. The Company's industrial injury prevention business has also experienced a reduction in business, although not as significant as experienced by our physical
therapy operations. Management has taken a number of steps to mitigate operating losses primarily through furloughs and salary cuts and to a lesser extent through terminations. To date, the Company has furloughed or terminated more than 2,150
employees (1,400 furloughs and 750 terminations), comprising approximately 40% of the employees across the Company. In the corporate office, across-the-board employee salary reductions have been implemented from 20% to 25%, as well as 35% to 40%
salary reductions for executives, and a 50% reduction in fees paid to our Board of Directors. A number of the Company's clinic partnerships have made salary reductions as well. Management estimates that these workforce and pay reductions would
equate to annualized savings of approximately $87 million. The Company continues to (i) deploy a telehealth and e-visit solutions to perform services remotely, (ii) renegotiate leases, (iii) slow development of new clinics, (iv) delay potential
acquisitions and (v) reduce other expenses.
Beginning in mid-March, hospitals and other medical facilities began to halt elective and non-essential surgeries. Additionally, state governments in areas with
significant growth of COVID-19 infections implemented mandatory closures of non-essential and non-life sustaining businesses, executed stay-at-home orders, imposed restrictions on travel and closed schools. These actions continued to develop and
towards the end of March, most states had significant restrictions on businesses and individuals. The suspension of elective surgeries, decrease in physician office visits and recommendations of social distancing along with the aforementioned
limitations had an adverse impact on our volume of patient visits. Due to these impacts and measures, we have experienced significant and unpredictable reductions in and cancellations of patient visits.
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| May 21, 2020 |
Below are certain performance benchmarks and measures for use in order to understand the adverse impact of COVID-19 on the Company's Operating Results (as defined
below). For the first quarter ended March 31, 2020, the Company has defined the pre-COVID-19 period as the two months ended February 29, 2020 and the post-COVID-19 period as the month ended March 31, 2020. The following performance measures and
operating data excludes the effects of the clinics in the partnership sold in June 2019 and should be evaluated in conjunction with the Operating Results for the entire quarters ended March 31, 2020 and 2019. The performance measures and operating
data presented for the two months ended February, 29, 2020 and one month ended March 31, 2020 are, when combined, equal to the performance measures and operating data presented for the full quarter ended March 31, 2020.
| Two months ended February 29, | One month ended March 31, | Three months ended March 31, | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | % Change | 2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||||||||||||
| Selected Financial Data: | ||||||||||||||||||||||||||||||||||||
| Net revenues (in thousands) - reported | $ | 78,193 | $ | 75,901 | 3.0 | % | $ | 34,524 | $ | 40,330 | -14.4 | % | $ | 112,717 | $ | 116,231 | -3.0 | % | ||||||||||||||||||
| Net revenues (in thousands) - without sold clinics | $ | 78,193 | $ | 72,232 | 8.3 | % | $ | 34,524 | $ | 38,314 | -9.9 | % | $ | 112,717 | $ | 110,546 | 2.0 | % | ||||||||||||||||||
| Operating Statistics (without sold clinics): | ||||||||||||||||||||||||||||||||||||
| Number of clinics, at the end of period | 587 | 561 | 567 | 559 | 567 | 559 | ||||||||||||||||||||||||||||||
| Working Days | 42 | 42 | 22 | 21 | 64 | 63 | ||||||||||||||||||||||||||||||
| Average visits per day per clinic | 27.7 | 26.5 | 22.7 | 27.9 | 26.2 | 27.0 | ||||||||||||||||||||||||||||||
| Total patient visits | 676,328 | 623,943 | 294,695 | 328,288 | 971,023 | 952,231 | ||||||||||||||||||||||||||||||
| Net patient revenue per visit | $ | 103.06 | $ | 105.89 | $ | 103.22 | $ | 106.29 | $ | 103.11 | $ | 106.02 |
For the first quarter ended March 31, 2020, USPH's Operating Results (as defined below) was $3.9 million, or $0.30 per
diluted share, as compared to $8.4 million, or $0.66 per diluted share in 2019. Operating Results, a non-GAAP measure, equals net income attributable to USPH shareholders per the consolidated statement of net income plus charges incurred for closure
costs and CFO search, net of tax. The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest. For the first quarter March 31, 2020, USPH's net income attributable to its
shareholders, in accordance with GAAP, was $1.0 million as compared to $8.4 million for the comparable period of 2019. Inclusive of the credit or charge for the revaluation of non-controlling interest, net of tax, used to compute diluted earnings
per share, in accordance with GAAP, in the 2020 First Quarter, the amount is $2.6 million, or $0.20 per share, as compared to $5.0 million, or $0.39 per share. In accordance with current accounting guidance, the revaluation of redeemable
non-controlling interest, net of tax, is not included in net income but charged or credited 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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First Quarter 2020 Compared to First Quarter 2019
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Other Financial Measures
For the 2020 First Quarter, the Company's Adjusted EBITDA was $8.0 million and was $15.6 million in the 2019 First Quarter. See definition, explanation
and calculation of Adjusted EBITDA in the schedule on page 9.
Management's Comments
Chris Reading, Chief Executive Officer, said, "This has obviously been a very challenging time for everyone. We
were able to make changes early on which has helped our cash position while maintaining a high level of needed service in a safe environment for our patients as well as our staff. We are seeing communities begin to re-open and our volumes of new
patient referrals as well as patient visits have begun to increase. In our industrial injury prevention business, the impact has been considerably less than in our core physical therapy business. Our teams in Houston and around the country in
our individual partnerships are doing everything possible to conserve resources while working to carefully and safely ramp up the business. We have a strong partner-centric Company with an excellent balance sheet and these will continue to be
our strengths as we work our way through this pandemic."
As of the date of this announcement, the Company has approximately $110.0 million in cash. In addition to collections from our patient receivables, we have drawn all
funds available on our credit line of $125.0 million, received funds from (a) the Medicare Accelerated and Advance Payment Program ("MAAPP") ($12.4 million to date) and (b) the Public Health and Social Services Emergency Fund ("Relief Fund") ($5.7
million to date) as part of the Coronavirus Aid, Relief, and Economics Securities Act ("CARES Act"). MAAPP funds received will be applied to future Medicare billings commencing in August 2020, with all such remaining amounts required to be repaid
by us by November 2020. Beginning November 2020, any unpaid balance will begin accruing interest. The Relief Fund monies do not have to be repaid, are used to fund operations and will be positively incremental to operating results in the second
quarter of 2020. In addition, we are taking advantage of the allowed deferral of the employer payroll taxes under the CARES Act.
As of March 31, 2020, the Company was in compliance with all of the covenants contained in its credit agreement. Management cannot be certain whether the Company will be in compliance with covenants at the end of the second quarter of 2020.
Management is in discussions with our lender regarding an amendment to the facility so as to maintain compliance with all covenants. Management anticipates an amendment will be in place by the end of the second quarter of 2020.
Additional Closure Costs
During April 2020 and May 2020, the Company closed 11
clinics and 2 clinics, respectively. The Company will record closure costs in the second quarter of at least $0.9 million.
First Quarter 2020 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 May 21, 2020 to discuss results for the Company's
quarter ended March 31, 2020. Interested parties may participate in the call by dialing 1-888-335-5539 or 973-582-2857 and entering reservation number 1788749 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 September 04, 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:
See Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and the additional risk factor
noted on Form 8-K.filed on April 24, 2020.
Many factors are beyond our control. Given these uncertainties, you should not place undue reliance on our forward-looking statements. Please see the
other sections of this report and our other periodic reports filed with the Securities and Exchange Commission (the "SEC") for more information on these factors. Our forward-looking statements represent our estimates and assumptions only as of the
date of this report. Except as required by law, we are under no obligation to update any forward-looking statement, regardless of the reason the statement may no longer be accurate.
About U.S. Physical Therapy, Inc.
Founded in 1990, U.S. Physical Therapy, Inc. operates 555 outpatient physical therapy clinics (of which 34 are not currently
seeing patients) in 39 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 30 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 | ||||||||
| March 31, 2020 | March 31, 2019 | |||||||
| Net patient revenues | $ | 100,126 | $ | 106,650 | ||||
| Other revenues | 12,591 | 9,581 | ||||||
| Net revenues | 112,717 | 116,231 | ||||||
| Operating costs: | ||||||||
| Salaries and related costs | 69,004 | 66,267 | ||||||
| Rent, supplies, contract labor and other | 22,909 | 22,044 | ||||||
| Provision for doubtful accounts | 1,361 | 1,206 | ||||||
| Closure costs - lease and other | 1,893 | (4 | ) | |||||
| Closure costs - write-off of goodwill | 1,859 | - | ||||||
| Total operating costs | 97,026 | 89,513 | ||||||
| Gross profit | 15,691 | 26,718 | ||||||
| Corporate office costs | 11,677 | 11,293 | ||||||
| Operating income | 4,014 | 15,425 | ||||||
| Other income and expense | ||||||||
| Interest and other income, net | 43 | 16 | ||||||
| Interest expense - debt and other | (427 | ) | (358 | ) | ||||
| Income before taxes | 3,630 | 15,083 | ||||||
| Provision for income taxes | 292 | 2,708 | ||||||
| Net income | 3,338 | 12,375 | ||||||
| Less: net income attributable to non-controlling interests: | ||||||||
| Non-controlling interests - permanent equity | (526 | ) | (1,537 | ) | ||||
| Redeemable non-controlling interests - temporary equity | (1,796 | ) | (2,395 | ) | ||||
| (2,322 | ) | (3,932 | ) | |||||
| Net income attributable to USPH shareholders | $ | 1,016 | $ | 8,443 | ||||
| Basic and diluted earnings per share attributable to USPH shareholders | $ | 0.20 | $ | 0.39 | ||||
| Shares used in computation - basic and diluted | 12,796 | 12,707 | ||||||
| Dividends declared per common share | $ | 0.32 | $ | 0.27 |
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| May 21, 2020 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| March 31, 2020 | December 31, 2019 | |||||||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 89,551 | $ | 23,548 | ||||
| Patient accounts receivable, less allowance for doubtful accounts of $2,557 and $2,698, respectively | 42,649 | 46,228 | ||||||
| Accounts receivable - other | 11,650 | 9,823 | ||||||
| Other current assets | 4,822 | 5,787 | ||||||
| Total current assets | 148,672 | 85,386 | ||||||
| Fixed assets: | ||||||||
| Furniture and equipment | 56,873 | 54,942 | ||||||
| Leasehold improvements | 32,873 | 33,247 | ||||||
| Fixed assets, gross | 89,746 | 88,189 | ||||||
| Less accumulated depreciation and amortization | 66,764 | 66,099 | ||||||
| Fixed assets, net | 22,982 | 22,090 | ||||||
| Operating lease right-of-use assets | 83,619 | 81,586 | ||||||
| Goodwill | 330,769 | 317,676 | ||||||
| Other identifiable intangible assets, net | 55,648 | 52,588 | ||||||
| Other assets | 1,563 | 1,519 | ||||||
| Total assets | $ | 643,253 | $ | 560,845 | ||||
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS' EQUITY AND NON-CONTROLLING INTERESTS | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - trade | $ | 2,950 | $ | 2,494 | ||||
| Accrued expenses | 40,645 | 30,855 | ||||||
| Current portion of operating lease liabilities | 26,826 | 26,486 | ||||||
| Current portion of notes payable | 728 | 728 | ||||||
| Total current liabilities | 71,149 | 60,563 | ||||||
| Notes payable, net of current portion | 4,602 | 4,361 | ||||||
| Revolving line of credit | 114,000 | 46,000 | ||||||
| Deferred taxes | 7,743 | 10,071 | ||||||
| Operating lease liabilities, net of current portion | 62,577 | 60,258 | ||||||
| Other long-term liabilities | 380 | 141 | ||||||
| Total liabilities | 260,451 | 181,394 | ||||||
| Redeemable non-controlling interests | 140,498 | 137,750 | ||||||
| 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, 15,058,804 and 14,989,337 shares issued, respectively | 151 | 150 | ||||||
| Additional paid-in capital | 89,756 | 87,383 | ||||||
| Retained earnings | 182,785 | 184,352 | ||||||
| Treasury stock at cost, 2,214,737 shares | (31,628 | ) | (31,628 | ) | ||||
| Total USPH shareholders' equity | 241,064 | 240,257 | ||||||
| Non-controlling interests | 1,240 | 1,444 | ||||||
| Total USPH shareholders' equity and non-controlling interests | 242,304 | 241,701 | ||||||
| Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests | $ | 643,253 | $ | 560,845 |
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| May 21, 2020 |
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Three Months Ended | ||||||||
| March 31, 2020 | March 31, 2019 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income including non-controlling interests | $ | 3,338 | $ | 12,375 | ||||
| Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 2,607 | 2,400 | ||||||
| Provision for doubtful accounts | 1,361 | 1,206 | ||||||
| Equity-based awards compensation expense | 1,886 | 1,728 | ||||||
| Deferred income taxes | (1,369 | ) | 2,118 | |||||
| Write-off of goodwill - closed clinics | 1,859 | - | ||||||
| Other | 129 | 12 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Decrease) Increase in patient accounts receivable | 3,209 | (4,898 | ) | |||||
| Increase in accounts receivable - other | (1,752 | ) | (495 | ) | ||||
| Increase (Decrease) in other assets | 2,846 | (894 | ) | |||||
| Increase in accounts payable and accrued expenses | 2,027 | 274 | ||||||
| Increase (Decrease) in other liabilities | 239 | (263 | ) | |||||
| Net cash provided by operating activities | 16,380 | 13,563 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | (2,754 | ) | (2,497 | ) | ||||
| Purchase of majority interest in businesses, net of cash acquired | (11,633 | ) | - | |||||
| Purchase of redeemable non-controlling interest, temporary equity | (1,852 | ) | (2,053 | ) | ||||
| Purchase of non-controlling interest, permanent equity | - | (139 | ) | |||||
| Proceeds on sale of fixed assets | 316 | 59 | ||||||
| Net cash used in investing activities | (15,923 | ) | (4,630 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Distributions to non-controlling interests, permanent and temporary equity | (2,341 | ) | (2,576 | ) | ||||
| Proceeds from revolving line of credit | 88,000 | 19,000 | ||||||
| Payments on revolving line of credit | (20,000 | ) | (28,000 | ) | ||||
| Principal payments on notes payable | (114 | ) | (482 | ) | ||||
| Other | 1 | (5 | ) | |||||
| Net cash provided by (used in) financing activities | 65,546 | (12,063 | ) | |||||
| Net increase in cash and cash equivalents | 66,003 | (3,130 | ) | |||||
| Cash and cash equivalents - beginning of period | 23,548 | 23,368 | ||||||
| Cash and cash equivalents - end of period | $ | 89,551 | $ | 20,238 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | 242 | $ | 313 | ||||
| Interest | $ | 349 | $ | 343 | ||||
| Non-cash investing and financing transactions during the period: | ||||||||
| Purchase of businesses - seller financing portion | $ | 300 | $ | - |
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| May 21, 2020 |
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