Full Press Release Details
U.S. Physical Therapy, Inc.
Larry McAfee, Chief Financial Officer
Chris Reading, Chief Executive Officer
U.S. Physical Therapy Reports
Second Quarter and Six Months Earnings for 2020
Houston, TX, August 6, 2020U.S.
Physical Therapy, Inc. ("USPH" or the "Company") (NYSE: USPH), a national operator of outpatient physical therapy clinics and provider of industrial injury prevention services, today reported results for the second quarter and six months ended June
For the second quarter ended June 30, 2020, USPH's Operating Results (as defined below), was $10.9 million, or $0.85 per diluted share, inclusive of relief funds received from the Public Health and Social Services Emergency Fund as part of the CARES
Act ("Relief Funds"), as compared to $10.3 million, or $0.81 per diluted share in 2019. For the second quarter ended June 30, 2020, USPH's Operating Results, was $5.0 million, or $0.39 per diluted share, without the Relief Funds. 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 less gain on sale of partnership interest and clinics and excludes the ongoing CFO search, all
net of tax. The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest. For the second quarter ended June 30, 2020, USPH's net income attributable to its shareholders, in
accordance with GAAP, was $10.3 million as compared to $14.6 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 Second Quarter, the amount is $12.7 million, or $0.99 per share, as compared to $10.8 million, or $0.85 per share in the second quarter last year. 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 calculations.
For the six months ended June 30, 2020, USPH's Operating Results, was $14.8 million, or $1.15 per diluted share, including Relief Funds as compared to $18.8 million, or $1.47 per diluted share in 2019. For the six months ended June 30, 2020, USPH's
Operating Results, was $8.9 million, or $0.70 per diluted share, without Relief Funds. For the six months ended June 30, 2020, USPH's net income attributable to its shareholders, in accordance with GAAP, was $11.2 million as compared to $23.1 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 six months ended June 30, 2020,
the amount is $15.3 million, or $1.19 per share, as compared to $15.8 million, or $1.24 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 10 for the computation of diluted earnings per share.
As previously disclosed in a series of filings with the SEC and further described in detail in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 21, 2020, the Company's results have been negatively
impacted by the effects of the COVID-19 pandemic. Management has taken a number of steps to reduce costs, stem operating losses incurred in March and April and increase profits subsequently. The Company continues to experience lower physical therapy
patient volumes and revenues however it is improving. The Company's physical therapy daily patient volumes in April declined to as low as 45% of normal. For the month of April average visits per day per clinic were 16.4, in May that increased to 18.6
and in June rose to an average of 21.8 visits per day per clinic. The Company's industrial injury prevention business has been less effected by the pandemic and is currently running at approximately 90% of its normal volume of activity.
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Second Quarter 2020 Compared to Second Quarter 2019
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First Six Months 2020 Compared to First Six Months 2019
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Medicare Accelerated and Advance Payment Program ("MAAPP Funds")
to the COVID-19 pandemic, the federal government approved the CARES Act. The CARES Act allowed for qualified healthcare providers to receive advanced payments under the existing MAAPP Funds during the COVID-19 pandemic. Under this program,
healthcare providers could choose to receive advanced payments for future Medicare services provided. The Company applied for and received approval from Centers for Medicare & Medicaid Services ("CMS") in April 2020. The Company recorded these payments as a liability until all performance obligations have been met as the payments were made on
behalf of patients before services were provided. Currently, MAAPP funds received will be applied to future Medicare billings commencing in August 2020, with all such remaining amounts required to be repaid by November 2020. Beginning November
2020, any unpaid balance will begin accruing interest. Included in cash and cash equivalents and accrued liabilities
at June 30, 2020 is $12.9 million of MAAPP Funds.
Other Financial Measures
For the 2020 Second Quarter, the Company's Adjusted EBITDA was $19.0 million and was $24.9 million in the 2019 Second
Quarter. For the 2020 Second Quarter, the Company's Adjusted EBITDA, excluding Relief Funds, was $11.1 million.
For the 2020 Six Months, the Company's Adjusted EBITDA was $27.0 million compared to $40.5 million in 2019 Six Months. For
the 2020 Six Months, the Company's Adjusted EBITDA, excluding Relief Funds, was $19.1 million.
See definition, explanation and calculation of Adjusted EBITDA in the schedule on pages 9 and 10.
Management's Comments
Chris Reading, Chief Executive Officer, said, "I recognize that these past five months have been unprecedented and
extremely difficult for our nation, our communities, our schools and our businesses. As a Company and a team, we have endeavored to be responsive to the extraordinary demands that have resulted from this COVID-19 pandemic. Many sacrifices have
been made to position our Company in the best possible way to continue forward successfully. I am supremely grateful for the tenacity, courage and the resilience of our partners, employees and leadership as we have tried to make the best decisions
to serve our patients while maintaining a safe and healthy environment for all. These difficult decisions along with the tireless work of so many have resulted in positioning us well to continue our mission to serve our patients, customers,
employees and partners as we continue to navigate the challenges posed by the ongoing pandemic."
Larry McAfee, Chief Financial Officer, said, "Net cash flow has been better than expected and as of the end of the second
quarter borrowings under our $125,000,000 bank credit line were paid down to $33,000,000."
Second 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 August
6, 2020 to discuss results for the Company's second quarter and six months ended June 30, 2020, 2020. Interested parties may participate in the call by dialing 1-888-335-5539 or 973-582-2857 and entering reservation number 9978188 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 6, 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 disclosed in our Quarterly Report on Form 10-Q for the period ended March 31, 2020 filed with the SEC on February 28, 2020 and May 21, 2020, respectively.
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 554 outpatient physical therapy clinics (of which 8 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 29 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 INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||
| Net patient revenues | $ | 72,279 | $ | 113,363 | $ | 172,405 | $ | 220,013 | ||||||||
| Other revenues | 11,578 | 13,010 | 24,169 | 22,591 | ||||||||||||
| Net revenues | 83,857 | 126,373 | 196,574 | 242,604 | ||||||||||||
| Operating costs: | ||||||||||||||||
| Salaries and related costs | 43,429 | 70,669 | 112,433 | 136,936 | ||||||||||||
| Rent, supplies, contract labor and other | 20,311 | 23,026 | 43,220 | 45,070 | ||||||||||||
| Provision for doubtful accounts | 739 | 1,240 | 2,100 | 2,446 | ||||||||||||
| Closure costs - lease and other | 94 | 13 | 1,987 | 9 | ||||||||||||
| Closure costs - write-off of goodwill | - | - | 1,859 | - | ||||||||||||
| Total operating costs | 64,573 | 94,948 | 161,599 | 184,461 | ||||||||||||
| Gross profit | 19,284 | 31,425 | 34,975 | 58,143 | ||||||||||||
| Corporate office costs | 9,022 | 11,527 | 20,699 | 22,820 | ||||||||||||
| Operating income | 10,262 | 19,898 | 14,276 | 35,323 | ||||||||||||
| Other income and expense | ||||||||||||||||
| Relief Funds | 7,959 | - | 7,959 | - | ||||||||||||
| Gain on sale of partnership interest and clinics | 1,073 | 5,823 | 1,073 | 5,823 | ||||||||||||
| Interest and other income, net | 4 | 4 | 47 | 20 | ||||||||||||
| Interest expense - debt and other | (653 | ) | (607 | ) | (1,080 | ) | (965 | ) | ||||||||
| Total other income and expense | 8,383 | 5,220 | 7,999 | 4,878 | ||||||||||||
| Income before taxes | 18,645 | 25,118 | 22,275 | 40,201 | ||||||||||||
| Provision for income taxes | 3,882 | 5,318 | 4,174 | 8,026 | ||||||||||||
| Net income | 14,763 | 19,800 | 18,101 | 32,175 | ||||||||||||
| Less: net income attributable to non-controlling interests: | ||||||||||||||||
| Non-controlling interests - permanent equity | (1,535 | ) | (1,802 | ) | (2,061 | ) | (3,339 | ) | ||||||||
| Redeemable non-controlling interests - temporary equity | (2,996 | ) | (3,378 | ) | (4,792 | ) | (5,773 | ) | ||||||||
| (4,531 | ) | (5,180 | ) | (6,853 | ) | (9,112 | ) | |||||||||
| Net income attributable to USPH shareholders | $ | 10,232 | $ | 14,620 | $ | 11,248 | $ | 23,063 | ||||||||
| Basic and diluted earnings per share attributable to USPH shareholders | $ | 0.99 | $ | 0.85 | $ | 1.19 | $ | 1.24 | ||||||||
| Shares used in computation - basic and diluted | 12,843 | 12,767 | 12,820 | 12,738 | ||||||||||||
| Dividends declared per common share | $ | - | $ | 0.27 | $ | 0.32 | $ | 0.54 |
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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
| June 30, 2020 | December 31, 2019 | |||||||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 43,555 | $ | 23,548 | ||||
| Patient accounts receivable, less allowance for doubtful accounts of $2,470 and $2,698, respectively | 36,029 | 46,228 | ||||||
| Accounts receivable - other | 9,983 | 9,823 | ||||||
| Other current assets | 2,572 | 5,787 | ||||||
| Total current assets | 92,139 | 85,386 | ||||||
| Fixed assets: | ||||||||
| Furniture and equipment | 55,914 | 54,942 | ||||||
| Leasehold improvements | 33,631 | 33,247 | ||||||
| Fixed assets, gross | 89,545 | 88,189 | ||||||
| Less accumulated depreciation and amortization | 67,011 | 66,099 | ||||||
| Fixed assets, net | 22,534 | 22,090 | ||||||
| Operating lease right-of-use assets | 82,965 | 81,586 | ||||||
| Goodwill | 330,894 | 317,676 | ||||||
| Other identifiable intangible assets, net | 54,895 | 52,588 | ||||||
| Other assets | 1,591 | 1,519 | ||||||
| Total assets | $ | 585,018 | $ | 560,845 | ||||
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS' EQUITY AND NON-CONTROLLING INTERESTS | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - trade | $ | 1,802 | $ | 2,494 | ||||
| Accrued expenses | 51,325 | 30,855 | ||||||
| Current portion of operating lease liabilities | 29,591 | 26,486 | ||||||
| Current portion of notes payable | 4,635 | 728 | ||||||
| Total current liabilities | 87,353 | 60,563 | ||||||
| Notes payable, net of current portion | 685 | 4,361 | ||||||
| Revolving line of credit | 33,000 | 46,000 | ||||||
| Deferred taxes | 8,930 | 10,071 | ||||||
| Operating lease liabilities, net of current portion | 61,242 | 60,258 | ||||||
| Other long-term liabilities | 392 | 141 | ||||||
| Total liabilities | 191,602 | 181,394 | ||||||
| Redeemable non-controlling interests - temporary equity | 136,728 | 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, 15,057,859 and 14,989,337 shares issued, respectively | 151 | 150 | ||||||
| Additional paid-in capital | 91,258 | 87,383 | ||||||
| Retained earnings | 195,473 | 184,352 | ||||||
| Treasury stock at cost, 2,214,737 shares | (31,628 | ) | (31,628 | ) | ||||
| Total USPH shareholders' equity | 255,254 | 240,257 | ||||||
| Non-controlling interests - permanent equity | 1,434 | 1,444 | ||||||
| Total USPH shareholders' equity and non-controlling interests | 256,688 | 241,701 | ||||||
| Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests | $ | 585,018 | $ | 560,845 |
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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Six Months Ended | ||||||||
| June 30, 2020 | June 30, 2019 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income including non-controlling interests | $ | 18,101 | $ | 32,175 | ||||
| Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 5,333 | 4,958 | ||||||
| Provision for doubtful accounts | 2,100 | 2,446 | ||||||
| Equity-based awards compensation expense | 3,389 | 3,558 | ||||||
| Deferred income taxes | (1,737 | ) | 5,421 | |||||
| Loss on sale of fixed assets | 429 | - | ||||||
| Gain on sale of partnership interest, net of tax | (1,073 | ) | (5,514 | ) | ||||
| Write-off of goodwill - closed clinics | 1,859 | - | ||||||
| Other | - | 21 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in patient accounts receivable | 8,880 | (4,956 | ) | |||||
| Decrease (increase) in accounts receivable - other | 283 | (2,468 | ) | |||||
| Decrease (increase) in other assets | 5,969 | (2,759 | ) | |||||
| Increase (decrease) in accounts payable and accrued expenses | 4,478 | (3,560 | ) | |||||
| Increase (decrease) in other liabilities | 345 | (701 | ) | |||||
| Net cash provided by operating activities | 48,356 | 28,621 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | (4,628 | ) | (4,876 | ) | ||||
| Purchase of majority interest in businesses, net of cash acquired | (11,633 | ) | (18,239 | ) | ||||
| Purchase of redeemable non-controlling interest, temporary equity | (2,388 | ) | (2,053 | ) | ||||
| Purchase of non-controlling interest, permanent equity | (144 | ) | (138 | ) | ||||
| Proceeds on sale of redeemable non-controlling interest, temporary equity | 19 | - | ||||||
| Proceeds on sales of partnership interest and clinics | 674 | - | ||||||
| Proceeds on sale of fixed assets | 21 | 65 | ||||||
| Net cash used in investing activities | (18,079 | ) | (25,241 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Distributions to non-controlling interests, permanent and temporary equity | (5,707 | ) | (7,934 | ) | ||||
| Cash dividends paid to shareholders | (4,110 | ) | (6,891 | ) | ||||
| Proceeds from revolving line of credit | 99,000 | 80,000 | ||||||
| Payments on revolving line of credit | (112,000 | ) | (56,000 | ) | ||||
| Principal payments on notes payable | (314 | ) | (1,057 | ) | ||||
| Medicare Accelerated and Advance Payment Funds | 12,861 | - | ||||||
| Other | - | (7 | ) | |||||
| Net cash provided by (used in) financing activities | (10,270 | ) | 8,111 | |||||
| Net increase in cash and cash equivalents | 20,007 | 11,491 | ||||||
| Cash and cash equivalents - beginning of period | 23,548 | 23,368 | ||||||
| Cash and cash equivalents - end of period | $ | 43,555 | $ | 34,859 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | 57 | $ | 4,339 | ||||
| Interest | $ | 944 | $ | 902 | ||||
| Non-cash investing and financing transactions during the period: | ||||||||
| Purchase of businesses - seller financing portion | $ | 300 | $ | 4,000 | ||||
| Purchase of business - payable to common shareholders of acquired business | $ | - | $ | 502 | ||||
| Purchase of redeemable non-controlling interest - notes payable | $ | 137 | $ | - | ||||
| Payable due to purchase of redeemable non-controlling interest | $ | 699 | $ | - | ||||
| Receivables related to sale of partnership interest | $ | - | $ | 11,601 | ||||
| Note receivables related to sale of partnership interest | $ | 386 | $ | 2,780 | ||||
| Payable related to purchase of partnership interest - settlement of redeemable non-controlling interest | $ | - | $ | 2,200 |
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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 results.
Operating Results, a non-GAAP measure, equals net income attributable to USPH shareholders per the consolidated
statement of net income plus charges incurred for the closure costs and CFO search less gain on sale of partnership interest and clinics, all net of tax. The earnings per share from Operating Results also excludes the impact of the revaluation
of redeemable non-controlling interest. In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is included in the earnings per basic and diluted share calculation, although it is not
included in net income but charged directly to retained earnings.
Management uses Operating Results, which eliminates certain items described above 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.