Market Overview

U.S. Physical Therapy Reports Record Quarterly and Six Months Operating Results

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Company Raises Annual Earnings Guidance and Declares Quarterly
Dividend

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, 2018.

For the quarter ended June 30, 2018, USPH's Operating Results increased
24.4% to $9.2 million, or $0.73 per diluted share, as compared to $7.4
million, or $0.59 per diluted share, in the second quarter of 2017. For
the six months ended June 30, 2018, USPH's Operating Results increased
17.3% to $16.4 million, or $1.29 per diluted share, as compared to $14.0
million, or $1.11 per diluted share, in the first six months of 2017.
Operating Results, a non-generally accepted accounting principles
("non-GAAP") measure, for the 2018 second quarter and first six months
results equal net income attributable to USPH shareholders. For the 2017
second quarter and first six months, Operating Results is defined as net
income attributable to USPH shareholders prior to charge for interest
expense – mandatorily redeemable non-controlling interests – change in
redemption value and charge for cost related to restatement of
financials – legal and accounting, both charges net of tax.

For the quarter ended June 30, 2018, USPH's net income attributable to
its shareholders, in accordance with generally accepted accounting
principles ("GAAP"), was $9.2 million as compared to $4.9 million for
the second quarter of 2017. Earnings per diluted share of $0.48 in the
second quarter of 2018 compares to $0.39 per diluted share for the 2017
second quarter. For the six months ended June 30, 2018, USPH's net
income attributable to its shareholders, in accordance with generally
accepted accounting principles ("GAAP"), was $16.4 million as compared
to $9.8 million for the comparable period of 2017. Earnings per diluted
share of $0.74 in the 2018 first six months compares to $0.78 per
diluted share for the 2017 first six months. For both periods 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 rather charged directly to retained earnings, but is included
in the earnings per basic and diluted share calculation. See the
schedule on page 13 for a computation of diluted earnings per share and
a reconciliation of net income attributable to USPH shareholders to
Operating Results.

Second Quarter 2018 Compared to Second Quarter
2017

  • Net revenues increased $10.8 million, or 10.4%, from $104.3 million in
    the 2017 second quarter to $115.1 million in the 2018 second quarter,
    primarily due to an increase in net patient revenues from physical
    therapy operations from both internal growth and acquisitions, an
    increase in revenue from management contracts primarily due to
    acquired contracts and an increase in the revenue from the industrial
    injury prevention business from a combination of internal growth plus
    a recent acquisition. Our first company in the initial industrial
    injury prevention business was acquired in March 2017 and, on April
    30, 2018, the Company made a second acquisition with the two
    businesses then combined.
  • Net patient revenues from physical therapy operations increased
    approximately $8.3 million, or 8.5%, to $106.0 million in the 2018
    second quarter from $97.7 million in the 2017 second quarter due to an
    increase in total patient visits of 8.1% from 924,000 to 999,000 and
    an increase in the average net patient revenue per visit to $106.16
    from $105.73. Of the $8.3 million increase in net patient revenues,
    $4.6 million related to an increase in business of clinics opened or
    acquired on or prior to June 30, 2017 ("Mature Clinics") and $3.7
    million related to clinics opened or acquired after June 30, 2017
    ("New Clinics"). Revenue from physical therapy management contracts
    increased 33.6% to $2.2 million in the 2018 second quarter as compared
    to $1.6 million in the 2017 second quarter.
  • The revenue from the industrial injury prevention business increased
    43.2% to $6.3 million in the 2018 second quarter compared to $4.4
    million in the 2017 second quarter due to internal growth and the
    acquisition on April 30, 2018. Other revenue was $0.6 million in both
    the 2018 and 2017 second quarters.
  • Total operating costs were $87.9 million, or 76.4% of net revenues, in
    the 2018 second quarter as compared to $79.7 million, or 76.5% of net
    revenues, in the 2017 second quarter. The $8.2 million increase was
    attributable to $3.6 million in operating costs related to New
    Clinics, an increase of $3.3 million related to Mature Clinics, an
    increase of $1.0 million in the industrial injury prevention business
    primarily due to the most recent acquisition and an increase of $0.3
    million related to management contracts. Total salaries and related
    costs, including those from New Clinics and the industrial injury
    prevention business, were 56.1% of net revenue in the recent quarter
    versus 56.4% in the 2017 second quarter. Rent, supplies, contract
    labor and other costs as a percentage of net revenue were 19.3% in the
    recent quarter versus 19.2% in the 2017 second quarter. The provision
    for doubtful accounts as a percentage of net revenue was 1.0% in the
    2018 second quarter as compared to 0.9% in the 2017 second quarter.
  • The gross profit for the 2018 second quarter grew by 10.7% or $2.6
    million to $27.1 million, as compared to $24.5 million in the second
    quarter of 2017. The gross profit percentage was 23.6% of net revenue
    in the recent period as compared to 23.5% in the 2017 second quarter.
    The gross profit percentage for the Company's physical therapy clinics
    was 23.7% in the recent quarter as compared to 24.2% in the 2017
    second quarter. The gross profit percentage on management contracts
    was 16.3% in the 2018 second quarter as compared to 7.4% in the 2017
    second quarter. The gross profit percentage for the industrial injury
    prevention business was 24.4% in the recent quarter as compared to
    15.0% in the 2017 period.
  • Corporate office costs were $10.1 million in the 2018 second quarter
    compared to $8.8 million in the 2017 second quarter. Corporate office
    costs were 8.8% of net revenues for the 2018 quarter compared to 8.5%
    for the 2017 quarter.
  • Operating income for the recent quarter increased 8.6% to $17.0
    million as compared to $15.7 million in the 2017 second quarter.
  • The Company no longer has mandatorily redeemable non-controlling
    interests. See discussion following – Redeemable Non-Controlling
    Interests.
  • Interest expense – debt and other was $0.5 million both the 2018 and
    2017 second quarters.
  • The provision for income tax for the 2018 second quarter was $3.3
    million and for the 2017 second quarter was $3.1 million, both of
    which are inclusive of the reduction of $0.2 million and $0.1 million,
    respectively, for the excess tax benefit, which is a component of the
    provision for income taxes, related to equity compensation. The
    provision for income tax as a percentage of income before taxes less
    net income attributable to non-controlling interest was 26.1% and
    38.4%, respectively, for the 2018 and 2017 second quarters.
  • Net income attributable to non-controlling interests (permanent
    equity) was $1.4 million in both the 2018 and 2017 second quarters.
    Net income attributable to redeemable non-controlling interests
    (temporary equity) was $2.6 million in the 2018 second quarter.
  • Same store revenues for de novo and acquired clinics open for one year
    or more increased 3.7%. Visits increased 2.8% for de novo and acquired
    clinics open for one year or more and the same store net rate
    increased by approximately 0.8%.

First Six Months 2018 Compared to First Six
Months 2017

  • Net revenues increased $21.7 million, or 10.7%, from $201.8 million in
    the first six months of 2017 to $223.4 million in the first six months
    of 2018, primarily due to an increase in net patient revenues from
    physical therapy operations from both internal growth and
    acquisitions, an increase in revenue from management contracts due to
    acquired contracts and an increase in the revenue from the industrial
    injury prevention business from a combination of internal growth plus
    a recent acquisition and due to a full six months of activity in 2018
    for the business acquired in March 2017. Our first company in the
    industrial injury prevention business was acquired in March 2017 and,
    on April 30, 2018, the Company made a second acquisition with the two
    businesses then combined.
  • Net patient revenues from physical therapy operations increased
    approximately $15.2 million, or 8.0%, to $206.5 million in the 2018
    period from $191.3 million in the 2017 period due to an increase in
    total patient visits of 7.7% from 1,815,000 to 1,955,000 and an
    increase in the average net patient revenue per visit to $105.67 from
    $105.39. Of the $15.2 million increase, $8.6 million related to Mature
    Clinics and $6.6 million related to New Clinics. Revenue from physical
    therapy management contracts increased 26.6% to $4.4 million in the
    2018 first six months as compared to $3.5 million for the 2017 first
    six months.
  • Revenue from the industrial injury prevention business increased 89.0%
    to $11.1 million for the first six months of 2018 compared to $5.9
    million in the first half of 2017 due to internal growth and the
    recent acquisition. Other revenue was $1.4 million in the 2018 period
    and $1.1 million in the 2017 period.
  • Total operating costs were $173.1 million, or 77.5% of net revenues,
    in the first six months of 2018 as compared to $156.5 million, or
    77.6% of net revenues, in the 2017 first six months. The $16.5 million
    increase was attributable to $6.6 million in operating costs related
    to New Clinics, an increase of $5.4 million related to Mature Clinics,
    an increase of $3.8 million related to the industrial injury
    prevention business primarily due to the most recent acquisition and a
    full six months of activity in 2018 for the business acquired in March
    2017 versus four months in 2017, and an increase of $0.7 million
    related to management contracts. Total salaries and related costs,
    including those from New Clinics and the industrial prevention
    business, were 56.8% of net revenue for the first six months of 2018
    and 2017. Rent, supplies, contract labor and other costs as a
    percentage of net revenue were 19.7% for 2018 period and 19.9% for the
    2017 period. The provision for doubtful accounts as a percentage of
    net revenue was 1.0% for the 2018 period as compared to 0.9% for the
    2017 period.
  • The gross profit for the first six months of 2018 grew by 11.2% or
    $5.1 million to $50.4 million, as compared to $45.3 million in the
    2017 first six months. The gross profit percentage was 22.5% of net
    revenue in the recent period as compared to 22.4% for the 2017 first
    six months. The gross profit percentage for the Company's physical
    therapy clinics was 22.8% in the recent quarter as compared to 22.9%
    in the first six months of 2017. The gross profit percentage on
    management contracts was 15.1% in the first half of 2018 as compared
    to 11.3% in the 2017 first six months. The gross profit percentage for
    the industrial injury prevention business was 20.6% for the first six
    months of 2018 as compared to 14.8% for the four months of operation
    in the 2017 period.
  • Corporate office costs were $20.3 million in the first six months of
    2018 compared to $17.4 million in the 2017 first six months. Corporate
    office costs were 9.1% of net revenues for the 2018 first six months
    compared to 8.6% for the 2017 first six months.
  • Operating income for the 2018 first six months increased 7.9% to $30.1
    million as compared to $27.9 million in the 2017 first six months.
  • The Company no longer has mandatorily redeemable non-controlling
    interests. See discussion following – Redeemable Non-Controlling
    Interests.
  • Interest expense – debt and other was $1.1 million in the first six
    months of 2018 and $0.9 million in the 2017 first six months.
  • The provision for income tax for the 2018 first six months was $5.7
    million and for the 2017 first six months was $4.9 million both of
    which are inclusive of the reduction of $0.5 million and $0.9 million,
    respectively, for the excess tax benefit, which is a component of the
    provision for income taxes, related to equity compensation. The
    provision for income tax as a percentage of income before taxes less
    net income attributable to non-controlling interest was 26.0% and
    33.4%, respectively, for the 2018 and 2017 first six months.
  • Net income attributable to non-controlling interests (permanent
    equity) was $2.6 million in the 2018 first six months as compared to
    $2.7 million in the 2017 first six months. Net income attributable to
    redeemable non-controlling interests (temporary equity) was $4.3
    million in the 2018 first six months.
  • Same store revenues for de novo and acquired clinics open for one year
    or more increased 3.0%. Visits increased 2.3% for de novo and acquired
    clinics open for one year or more and the same store net rate
    increased by approximately 0.6%.

Other Financial Measures

For the second quarter of 2018 the Company's Adjusted EBITDA increased
by 6.6% to $17.0 million from $15.9 million in the comparable 2017
quarter. For the first six months of 2018 the Company's Adjusted EBITDA
increased by 5.8% to $31.0 million from $29.3 million in the comparable
2017 period. See definition and explanation of Adjusted EBITDA in the
schedule on pages 12 and 13.

Raising 2018 Earnings Guidance

The Company is raising earnings guidance for the year 2018. Management
currently expects the Company's Operating Results for the year 2018 to
be in the range of $31.1 million to $32.3 million or $2.45 to $2.55 per
share. Previous 2018 earning guidance had been for Operating Results of
$29.5 million to $30.9 million or $2.34 to $2.44 per share. Please note
that the 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, "Last year we embarked on
making a number of changes in order to create the kind of results we are
producing in 2018. I am proud of our partners and their staffs, our
regional operations teams and our Houston-based support groups for
working together to move market share, get a handle on cost, and to
continue our daily focus to make a difference in the lives of our
patients. While we have more work to do and continued opportunity to
improve, I am encouraged by our performance to date. Additionally and
importantly, our industrial injury prevention business has grown
significantly over the past year, both organically and through the
recent acquisition."

Larry McAfee, Chief Financial Officer, noted, "The gross margin for the
Company's industrial injury prevention business more than doubled
growing from $.7 million in the second quarter of 2017 to $1.5 million
in the comparable 2018 period. The gross margin percentage grew from
15.0% to 24.4%."

Redeemable Non-Controlling Interests

Effective December 31, 2017, the Company entered into amendments to its
acquired limited partnership agreements replacing the mandatory
redemption feature. No monetary consideration was paid to the partners
to amend the agreements. The amended Partnership Agreements provide
that, upon certain events, the Company has a call right (the "Call
Right") and the selling entity has a put right (the "Put Right") for the
purchase and sale of the limited partnership interest held by the
partner. Once the terms are triggered, the Put Right and the Call Right
do not expire, even upon an individual partner's death, and contain no
mandatory redemption feature. The purchase price of the partner's
limited partnership interest upon the exercise of either the Put Right
or the Call Right is calculated per the original terms of the respective
agreements. The Company accounted for the amendment of its Partnership
Agreements as an extinguishment of the outstanding Seller Entity
Interests classified as liabilities through the issuance of new Seller
Entity Interests classified in temporary equity. Pursuant to ASC
470-50-40-2, the Company removed the outstanding liability-classified
Seller Entity Interests at their carrying amounts and recognized the new
temporary-equity-classified Seller Entity Interests at their fair value.
In summary, the redemption values of the mandatorily redeemable
non-controlling interest (previously classified as liabilities) were
reclassified as redeemable non-controlling interest (temporary equity)
on the December 31, 2017 consolidated balance sheet. For 2018, in
accordance with current accounting guidance, the revaluation of
redeemable non-controlling interest, net of tax, will be charged
directly to retained earnings and will be included in the earnings per
basic and diluted share calculation.

U.S. Physical Therapy Declares Quarterly
Dividend

The third quarterly dividend for 2018 of $0.23 per share will be paid on
September 7, 2018 to shareholders of record as of August 14, 2018. U.S.
Physical Therapy began paying quarterly dividends in 2011 and has
increased the dividend amount every year since.

Second Quarter 2018 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 2, 2018 to discuss
the Company's Quarter and Six Months Ended June 30, 2018 results.
Interested parties may participate in the call by dialing 1-888-335-5539
or 973-582-2857 and entering reservation number 1791027 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 2, 2018.

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:

  • changes as the result of government enacted national healthcare reform;
  • changes in Medicare rules and guidelines and reimbursement or failure
    of our clinics to maintain their Medicare certification status;
  • revenue we receive from Medicare and Medicaid being subject to
    potential retroactive reduction;
  • business and regulatory conditions including federal and state
    regulations;
  • governmental and other third party payor inspections, reviews,
    investigations and audits;
  • compliance with federal and state laws and regulations relating to the
    privacy of individually identifiable patient information, and
    associated fines and penalties for failure to comply;
  • changes in reimbursement rates or payment methods from third party
    payors including government agencies and deductibles and co-pays owed
    by patients;
  • revenue and earnings expectations;
  • cost, risks and uncertainties associated with the Company's
    restatement of its prior financial statements due to the correction of
    its accounting methodology for redeemable non-controlling partnership
    interests, and including any pending and future claims or proceedings
    relating to such matters;
  • legal actions, which could subject us to increased operating costs and
    uninsured liabilities;
  • general economic conditions;
  • availability and cost of qualified physical therapists;
  • personnel productivity and retaining key personnel;
  • competitive, economic or reimbursement conditions in our markets which
    may require us to reorganize or close certain clinics and thereby
    incur losses and/or closure costs including the possible write-down or
    write-off of goodwill and other intangible assets;
  • acquisitions, purchase of non-controlling interests (minority
    interests) and the successful integration of the operations of the
    acquired businesses;
  • maintaining our information technology systems with adequate
    safeguards to protect against cyber-attacks;
  • maintaining adequate internal controls;
  • maintaining necessary insurance coverage;
  • availability, terms, and use of capital; and
  • weather and other seasonal factors.

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 581 outpatient
physical therapy clinics in 42 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 28
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, rehabilitation, ergonomic
assessments and performance optimization.

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, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF NET INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)

 

Three Months Ended

Six Months Ended

June 30, 2018

 

June 30, 2017

June 30, 2018

 

June 30, 2017

 
Net patient revenues $ 105,989 $ 97,657 $ 206,541 $ 191,311
Other revenues   9,109   6,594   16,899   10,505
Net revenues 115,098 104,251 223,440 201,816
Operating costs:
Salaries and related costs 64,607 58,779 126,886 114,606
Rent, supplies, contract labor and other 22,168 20,033 43,944 40,120
Provision for doubtful accounts 1,151 888 2,212 1,786
Closure costs   18   17   30   23
Total operating costs   87,944   79,717   173,072   156,535
 
Gross profit 27,154 24,534 50,368 45,281
 
Corporate office costs   10,128   8,856   20,291   17,403
Operating income 17,026 15,678 30,077 27,878
 
Interest and other income, net 22 23 54 47
Interest expense:
Mandatorily redeemable non-controlling interests - change in
redemption value
- (3,923 ) - (6,592 )
Mandatorily redeemable non-controlling interests - earnings allocable - (1,787 ) - (3,081 )
Debt and other   (545 )   (516 )   (1,098 )   (931 )
Total interest expense (545 ) (6,226 ) (1,098 ) (10,604 )
 
Income before taxes 16,503 9,475 29,033 17,321
 
Provision for income taxes   3,267   3,085   5,743   4,897
 
Net income 13,236 6,390 23,290 12,424
 
Less: net income attributable to non-controlling interests   (3,990 )   (1,449 )   (6,927 )   (2,667 )
 
Net income attributable to USPH shareholders $ 9,246 $ 4,941 $ 16,363 $ 9,757
 
Basic and diluted earnings per share attributable to USPH
shareholders
$ 0.48 $ 0.39 $ 0.74 $ 0.78
 
Shares used in computation - basic and diluted   12,677   12,579   12,647   12,553
 
Dividends declared per common share $ 0.23 $ 0.20 $ 0.46 $ 0.40
         

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

 

June 30, 2018

December 31,
2017

ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 27,148 $ 21,933
Patient accounts receivable, less allowance for doubtful accounts of
$2,790 and $2,273, respectively
45,424 44,707
Accounts receivable - other 8,589 5,655
Other current assets   5,247   4,786
Total current assets 86,408 77,081
Fixed assets:
Furniture and equipment 51,923 51,100
Leasehold improvements   30,421   29,760
Fixed assets, gross 82,344 80,860
Less accumulated depreciation and amortization   62,652   60,475
Fixed assets, net 19,692 20,385
Goodwill 284,624 271,338
Other identifiable intangible assets, net 48,435 48,954
Other assets   1,384   1,224
Total assets $ 440,543 $ 418,982
 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH
SHAREHOLDERS' EQUITY AND NON-CONTROLLING INTERESTS
Current liabilities:
Accounts payable - trade $ 1,705 $ 2,165
Accrued expenses 35,367 33,342
Current portion of notes payable   4,817   4,044
Total current liabilities 41,889 39,551
Notes payable, net of current portion 607 2,728
Revolving line of credit 56,000 54,000
Mandatorily redeemable non-controlling interests - 327
Deferred taxes 9,584 10,875
Deferred rent 1,913 2,116
Other long-term liabilities   775   743
Total liabilities 110,768 110,340
 
Redeemable non-controlling interests 117,027 102,572
 
Commitments and contingencies
 
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,
14,900,575 and 14,809,299 shares issued, respectively
149 148
Additional paid-in capital 77,099 73,940
Retained earnings 165,991 162,406
Treasury stock at cost, 2,214,737 shares   (31,628 )   (31,628 )
Total USPH shareholders' equity 211,611 204,866
Non-controlling interests   1,137   1,204
Total USPH shareholders' equity and non-controlling interests   212,748   206,070
Total liabilities, redeemable non-controlling interests, USPH
shareholders' equity and non-controlling interests
$ 440,543 $ 418,982
     

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)

 
Six Months Ended
June 30, 2018     June 30, 2017
OPERATING ACTIVITIES
Net income including non-controlling interests $ 23,290 $ 12,424
Adjustments to reconcile net income including non-controlling
interests to net cash provided by operating activities:
Depreciation and amortization 4,866 4,789
Provision for doubtful accounts 2,212 1,786
Equity-based awards compensation expense 2,937 2,345
Loss on sale of fixed assets 94 65
Deferred income taxes (1,736 ) (985 )
Changes in operating assets and liabilities:
Increase in patient accounts receivable (2,141 ) (4,006 )
Increase in accounts receivable - other (2,934 ) (3,406 )
Increase in other assets (140 ) (2,342 )
Increase in accounts payable and accrued expenses 4,845 5,043
Increase in mandatorily redeemable non-controlling interests - 6,401
(Decrease) increase in other liabilities   (672 )   77
Net cash provided by operating activities 30,621 22,191
 
INVESTING ACTIVITIES
Purchase of fixed assets (3,270 ) (3,245 )
Purchase of businesses, net of cash acquired (9,118 ) (33,665 )
Purchase of non-controlling interest (245 ) -
Proceeds on sale of fixed assets   1   62
Net cash used in investing activities (12,632 ) (36,848 )
 
FINANCING ACTIVITIES
Distributions to non-controlling interests, permanent and temporary
equity
(6,735 ) (2,665 )
Cash dividends paid to shareholders (5,828 ) (2,516 )
Proceeds from revolving line of credit 55,000 49,000
Payments on revolving line of credit (53,000 ) (26,000 )
Payments to settle mandatorily redeemable non-controlling interests (265 ) (2,230 )
Principal payments on notes payable (1,898 ) (777 )
Other   (48 )   40
Net (cash used in) provided by financing activities (12,774 ) 14,852
 
Net increase in cash and cash equivalents 5,215 195
Cash and cash equivalents - beginning of period   21,933   20,047
Cash and cash equivalents - end of period $ 27,148 $ 20,242
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes $ 7,483 $ 7,516
Interest $ 1,106 $ 104
Non-cash investing and financing transactions during the period:
Purchase of business - seller financing portion $ 550 $ 1,650
 

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

 

OPERATING RESULTS AND ADJUSTED EBITDA

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)

The following tables provide a 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.

For 2018, Operating Results equal net income attributable to USPH
shareholders and, in accordance with current accounting guidance, the
revaluation of redeemable non-controlling interest, net of tax, charged
directly to retained earnings is included in the earnings per diluted
share calculation. For the 2017 first quarter, Operating Results, a
non-generally accepted accounting principles ("non-GAAP") measure, is
defined as net income attributable to common shareholders prior to
interest expense – mandatorily redeemable non-controlling interests –
change in redemption value and charge for cost related to restatement of
financials – legal and accounting, both charges net of tax.

Operating Results for the two periods are comparable, however, the
calculations differ. Management uses Operating Results, which eliminates
this current non-cash item 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 earnings before interest income, interest
expense – mandatorily redeemable non-controlling interests – change in
redemption value, interest expense – debt and other, taxes,
depreciation, amortization and equity-based awards compensation expense.
Management believes reporting Adjusted EBITDA is useful information for
investors in comparing the Company's period-to-period results as well as
comparing with similar businesses which report adjusted EBITDA as
defined by their company.

Operating Results and Adjusted EBITDA are not measures of financial
performance under GAAP. Adjusted EBITDA and Adjusted Net Income should
not be considered in isolation or as an alternative to, or substitute
for, net income attributable to USPH shareholders presented in the
consolidated financial statements.

         
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Computation of earnings per share - USPH shareholders
Net income attributable to USPH shareholders $ 9,246 $ 4,941 $ 16,363 $ 9,757
Charges to retained earnings:
Revaluation of redeemable non-controlling interest $ (4,344 ) $ - (9,425 ) -
Tax effect at statutory rate (federal and state) of 26.25%   1,140   -   2,474   -
$ 6,042 $ 4,941 $ 9,412 $ 9,757
 
Basic and diluted per share $ 0.48 $ 0.39 $ 0.74 $ 0.78
 
Adjustments:
Interest expense MRNCI * - change in redemption value - 3,923 - 6,592
Cost related to restatement of financials - legal and accounting - 177 - 312
Revaluation of redeemable non-controlling interest 4,344 - 9,425 -
Tax effect at statutory rate (federal and state) of 26.25% and
39.25%, respectively
  (1,140 )   (1,609 )   (2,474 )   (2,710 )
Operating results $ 9,246 $ 7,432 $ 16,363 $ 13,951
 
Basic and diluted operating results per share $ 0.73 $ 0.59 $ 1.29 $ 1.11
 
Shares used in computation:
Basic and diluted   12,677   12,579   12,647   12,553
 
 
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
 
Net income attributable to USPH shareholders $ 9,246 $ 4,941 $ 16,363 $ 9,757
 
Adjustments:
Depreciation and amortization 2,398 2,433 4,866 4,789
Interest income (22 ) (23 ) (54 ) (47 )
Interest expense MRNCI * - change in redemption value - 3,923 - 6,592
Interest expense - debt and other 545 516 1,098 931
Provision for income taxes 3,267 3,085 5,743 4,897
Equity-based awards compensation expense   1,556   1,065   2,937   2,345
 
Adjusted EBITDA $ 16,990 $ 15,940 $ 30,953 $ 29,264
 

* Mandatorily redeemable non-controlling interest

 

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

RECAP OF CLINIC COUNT

   
Date Number of Clinics
 
March 31, 2017 558
June 30, 2017 566
September 30, 2017 569
December 31, 2017 578
 
March 31, 2018 580
June 30, 2018 581

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