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 Quarterly Earnings
Houston, TX, November 5, 2020
- U.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 record results for the third quarter ended
For the third quarter ended September 30, 2020, USPH's Operating Results (as defined below), was $11.1 million, or $0.86 per diluted share, as
compared to $9.0 million, or $0.71 per diluted share in the third quarter of 2019. Included in the recent quarter was $0.2 million net of allocation to non-controlling interests and after-tax of Relief Funds, or $.01 per share. For the third quarter
ended September 30, 2020, USPH's Operating Results, without the Relief Funds, was $10.9 million, or $0.85 per diluted share. 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, less allocated non-controlling interests, and excludes expenses associated with the CFO recruitment, 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 third quarter ended September 30, 2020, USPH's net income attributable to its shareholders, in accordance with GAAP, was $10.9 million
as compared to $9.0 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 Third
Quarter, the amount is $7.8 million, or $0.61 per share, as compared to $8.4 million, or $0.66 per share in the third 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 nine months ended September 30, 2020, USPH's Operating Results, including Relief Funds, was $24.6 million, or $1.92 per diluted
share, as compared to $27.8 million, or $2.18 per diluted share in 2019. For the nine months ended September 30, 2020, USPH's Operating Results, without Relief Funds, was $19.7 million, or $1.54 per diluted share. For the nine months ended
September 30, 2020, USPH's net income attributable to its shareholders, in accordance with GAAP, was $22.2 million as compared to $32.1 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 nine months ended September 30, 2020, the amount is $23.0 million, or $1.80 per share, as compared to $24.2 million, or
$1.90 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 12 for the computation of diluted earnings per share and discussion of Relief Funds below.
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 first and second quarters, 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, make up for operating losses incurred in March and April, and increase profits subsequently. The Company continues to experience somewhat lower physical therapy patient volumes;
however revenues improved significantly in the 2020 third quarter compared to the 2020 second quarter. The Company's average physical therapy patient volumes per day per clinic were 26.2, 18.9, and 25.8, respectively, in the first three quarters of
2020. The Company's industrial injury prevention business has been less affected by the pandemic and is currently running at slightly less than its pre-COVID-19 revenue levels.
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Third Quarter 2020 Compared to Third Quarter 2019
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First Nine Months 2020 Compared to First Nine Months 2019
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Medicare Accelerated and Advance Payment Program ("MAAPP Funds")
to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act ("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 are
required to be applied to future Medicare billings commencing in August 2021, with all such remaining amounts required to be repaid by January 2024. Beginning January 2024, any unpaid balance will begin accruing interest. The Company currently
intends to repay funds prior to August 2021. Included in cash and cash equivalents and accrued liabilities at September 30, 2020 is $12.9 million of MAAPP Funds.
On March 27, 2020, the CARES Act was enacted. The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in appropriations for the
Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care providers for lost revenues and health
care related expenses that are attributable to COVID-19.
Through September 30, 2020, the Company's consolidated subsidiaries received approximately $8.3 million of payments under the CARES Act ("Relief Funds"). Under the Company's accounting policy, these payments have been recorded as Other income -
Relief Funds. For the three and nine months ended September 30, 2020, the Company has recognized approximately $0.4 million and $8.3 million, respectively, as Other income - Relief Funds on the accompany consolidated statement of operations. These
funds are not required to be repaid upon attestation and compliance with certain terms and conditions, which could change materially based on evolving grant compliance provisions and guidance provided by the U.S. Department of Health and Human
Services. Currently, the Company can attest and comply with the terms and conditions. The Company will continue to monitor the evolving guidelines and may record adjustments as additional information is released.
Other Financial Measures
For the 2020 Third Quarter, the Company's Adjusted EBITDA was $19.9 million and was $17.0 million in the 2019 Third Quarter.
For the 2020 Third Quarter, the Company's Adjusted EBITDA, excluding Relief Funds, was $19.5 million.
For the 2020 Nine Months, the Company's Adjusted EBITDA was $47.0 million compared to $ 57.5 million in 2019 Nine Months.
For the 2020 Nine Months, the Company's Adjusted EBITDA, excluding Relief Funds, was $38.7 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, "When conditions are truly challenging, as they have been for much of
this year, it makes all the difference to have a selfless, dedicated and driven team of partners and therapists, along with local and national support teams who are working hard every day to provide our patients with the excellent care they need
conducted in a safe and healthy environment. Our team has delivered what I feel like is an exceptional result this quarter and an outstanding effort throughout this Covid-19 pandemic. As much as any time in my 17 years with our Company, I am
truly proud to be able to work alongside such a tremendous group of people. While we have more work to do, I remain confident in our ability to navigate through the coming period and to execute on our plan to further grow, serve and expand our
partner-centric Company."
Larry McAfee, Chief Financial Officer, said, "Earnings per share from Operating Result of $.85 per share (excluding Relief
Funds) was the most profitable quarter in the Company's history. The previous high was $0.81 per share recorded in the second quarter of 2019."
Third 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 November 5, 2020 to discuss results for the Company's third quarter and nine months ended September 30, 2020, 2020. Interested parties may participate in the call by dialing 1-888-335-5539 or 973-582-2857 and entering reservation
number 5149266 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 February 5, 2021 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 550 outpatient physical therapy clinics 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 38 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 Nine Months Ended | |||||||||||||||
| September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||
| Net patient revenues | $ | 96,398 | $ | 104,392 | $ | 268,803 | $ | 324,405 | ||||||||
| Other revenues | 12,531 | 12,859 | 36,700 | 35,450 | ||||||||||||
| Net revenues | 108,929 | 117,251 | 305,503 | 359,855 | ||||||||||||
| Operating costs: | ||||||||||||||||
| Salaries and related costs | 57,519 | 66,748 | 169,952 | 203,684 | ||||||||||||
| Rent, supplies, contract labor and other | 19,695 | 22,166 | 62,915 | 67,236 | ||||||||||||
| Provision for doubtful accounts | 1,279 | 962 | 3,379 | 3,408 | ||||||||||||
| Closure costs - lease and other | 79 | 3 | 2,066 | 12 | ||||||||||||
| Closure costs - derecognition of goodwill | - | - | 1,859 | - | ||||||||||||
| Total operating costs | 78,572 | 89,879 | 240,171 | 274,340 | ||||||||||||
| Gross profit | 30,357 | 27,372 | 65,332 | 85,515 | ||||||||||||
| Corporate office costs | 10,422 | 10,556 | 31,121 | 33,376 | ||||||||||||
| Operating income | 19,935 | 16,816 | 34,211 | 52,139 | ||||||||||||
| Other income and expense | ||||||||||||||||
| Relief Funds | 390 | - | 8,349 | - | ||||||||||||
| Gain on sale of partnership interest and clinics | 18 | - | 1,091 | 5,823 | ||||||||||||
| Interest and other income, net | 50 | 7 | 97 | 27 | ||||||||||||
| Interest expense - debt and other | (351 | ) | (557 | ) | (1,431 | ) | (1,522 | ) | ||||||||
| Total other income and expense | 107 | (550 | ) | 8,106 | 4,328 | |||||||||||
| Income before taxes | 20,042 | 16,266 | 42,317 | 56,467 | ||||||||||||
| Provision for income taxes | 4,279 | 3,197 | 8,453 | 11,223 | ||||||||||||
| Net income | 15,763 | 13,069 | 33,864 | 45,244 | ||||||||||||
| Less: net income attributable to non-controlling interests: | ||||||||||||||||
| Non-controlling interests - permanent equity | (1,828 | ) | (1,643 | ) | (3,889 | ) | (4,982 | ) | ||||||||
| Redeemable non-controlling interests - temporary equity | (3,019 | ) | (2,379 | ) | (7,811 | ) | (8,152 | ) | ||||||||
| (4,847 | ) | (4,022 | ) | (11,700 | ) | (13,134 | ) | |||||||||
| Net income attributable to USPH shareholders | $ | 10,916 | $ | 9,047 | $ | 22,164 | $ | 32,110 | ||||||||
| Basic and diluted earnings per share attributable to USPH shareholders | $ | 0.61 | $ | 0.66 | $ | 1.80 | $ | 1.90 | ||||||||
| Shares used in computation - basic and diluted | 12,847 | 12,774 | 12,829 | 12,750 | ||||||||||||
| Dividends declared per common share | $ | - | $ | 0.30 | $ | 0.32 | $ | 0.84 |
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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
| September 30, 2020 | December 31, 2019 | |||||||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 30,129 | $ | 23,548 | ||||
| Patient accounts receivable, less allowance for doubtful accounts of $2,154 and $2,698, respectively | 39,439 | 46,228 | ||||||
| Accounts receivable - other | 9,878 | 9,823 | ||||||
| Other current assets | 3,198 | 5,787 | ||||||
| Total current assets | 82,644 | 85,386 | ||||||
| Fixed assets: | ||||||||
| Furniture and equipment | 55,411 | 54,942 | ||||||
| Leasehold improvements | 34,111 | 33,247 | ||||||
| Fixed assets, gross | 89,522 | 88,189 | ||||||
| Less accumulated depreciation and amortization | 68,048 | 66,099 | ||||||
| Fixed assets, net | 21,474 | 22,090 | ||||||
| Operating lease right-of-use assets | 78,784 | 81,586 | ||||||
| Goodwill | 336,946 | 317,676 | ||||||
| Other identifiable intangible assets, net | 54,060 | 52,588 | ||||||
| Other assets | 1,530 | 1,519 | ||||||
| Total assets | $ | 575,438 | $ | 560,845 | ||||
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS' EQUITY AND NON-CONTROLLING INTERESTS | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - trade | $ | 1,060 | $ | 2,494 | ||||
| Accrued expenses | 60,236 | 30,855 | ||||||
| Current portion of operating lease liabilities | 26,905 | 26,486 | ||||||
| Current portion of notes payable | 4,999 | 728 | ||||||
| Total current liabilities | 93,200 | 60,563 | ||||||
| Notes payable, net of current portion | 509 | 4,361 | ||||||
| Revolving line of credit | 7,000 | 46,000 | ||||||
| Deferred taxes | 8,570 | 10,071 | ||||||
| Operating lease liabilities, net of current portion | 60,137 | 60,258 | ||||||
| Other long-term liabilities | 349 | 141 | ||||||
| Total liabilities | 169,765 | 181,394 | ||||||
| Redeemable non-controlling interests - temporary equity | 139,801 | 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, 15,065,087 and 14,989,337 shares issued, respectively | 151 | 150 | ||||||
| Additional paid-in capital | 93,195 | 87,383 | ||||||
| Retained earnings | 203,201 | 184,352 | ||||||
| Treasury stock at cost, 2,214,737 shares | (31,628 | ) | (31,628 | ) | ||||
| Total USPH shareholders' equity | 264,919 | 240,257 | ||||||
| Non-controlling interests - permanent equity | 953 | 1,444 | ||||||
| Total USPH shareholders' equity and non-controlling interests | 265,872 | 241,701 | ||||||
| Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests | $ | 575,438 | $ | 560,845 |
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U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Nine Months Ended | ||||||||
| September 30, 2020 | September 30, 2019 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income including non-controlling interests | $ | 33,864 | $ | 45,244 | ||||
| Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 8,066 | 7,377 | ||||||
| Provision for doubtful accounts | 3,379 | 3,408 | ||||||
| Equity-based awards compensation expense | 5,325 | 5,262 | ||||||
| Deferred income taxes | (834 | ) | 3,680 | |||||
| Loss on sale of fixed assets | 346 | - | ||||||
| Gain on sale of partnership interest | (1,091 | ) | (5,823 | ) | ||||
| Write-off of goodwill - closed clinics | 1,859 | - | ||||||
| Other | - | 120 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease (increase) in patient accounts receivable | 4,117 | (8,171 | ) | |||||
| Decrease(increase) in accounts receivable - other | 730 | (1,006 | ) | |||||
| Decrease (increase) in other assets | 5,404 | (2,744 | ) | |||||
| Increase (decrease) in accounts payable and accrued expenses | 13,495 | (440 | ) | |||||
| Decrease in other long-term liabilities | (58 | ) | (443 | ) | ||||
| Net cash provided by operating activities | 74,602 | 46,464 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | (5,494 | ) | (7,428 | ) | ||||
| Purchase of majority interest in businesses, net of cash acquired | (15,322 | ) | (30,365 | ) | ||||
| Purchase of redeemable non-controlling interest, temporary equity | (3,087 | ) | (5,699 | ) | ||||
| Purchase of non-controlling interest, permanent equity | (184 | ) | (138 | ) | ||||
| Proceeds on sale of redeemable non-controlling interest, temporary equity | 54 | 11,601 | ||||||
| Proceeds on sales of partnership interest and clinics | 674 | - | ||||||
| Proceeds on sale of fixed assets | 444 | 64 | ||||||
| Net cash used in investing activities | (22,915 | ) | (31,965 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Distributions to non-controlling interests, permanent and temporary equity | (14,223 | ) | (10,862 | ) | ||||
| Cash dividends paid to shareholders | (4,110 | ) | (10,723 | ) | ||||
| Proceeds from revolving line of credit | 134,000 | 110,000 | ||||||
| Payments on revolving line of credit | (173,000 | ) | (97,000 | ) | ||||
| Principal payments on notes payable | (700 | ) | (1,409 | ) | ||||
| Medicare Accelerated and Advance Payment Funds | 12,924 | - | ||||||
| Other | 3 | (17 | ) | |||||
| Net cash used in financing activities | (45,106 | ) | (10,011 | ) | ||||
| Net increase in cash and cash equivalents | 6,581 | 4,488 | ||||||
| Cash and cash equivalents - beginning of period | 23,548 | 23,368 | ||||||
| Cash and cash equivalents - end of period | $ | 30,129 | $ | 27,856 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Income taxes | $ | 4,421 | $ | 9,458 | ||||
| Interest | $ | 1,202 | $ | 1,412 | ||||
| Non-cash investing and financing transactions during the period: | ||||||||
| Purchase of businesses - seller financing portion | $ | 796 | $ | 4,300 | ||||
| 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 | $ | 283 | ||||
| Receivables related to sale of partnership interest | $ | 386 | $ | - | ||||
| Notes receivables related to sale of partnership interest | $ | 670 | $ | 2,780 |
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| November 5, 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