AP NEWS

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

August 2, 2018

HOUSTON--(BUSINESS WIRE)--Aug 2, 2018--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.

This article has been truncated. You can see the rest of this article by visiting http://www.businesswire.com/news/home/20180802005069/en.

AP RADIO
Update hourly