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Share Name | Share Symbol | Market | Type |
---|---|---|---|
US Physical Therapy Inc | NYSE:USPH | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 94.48 | 0 | 09:09:52 |
Management Provides 2020 Earnings Guidance and Raises 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 fourth quarter and year ended December 31, 2019.
For the year ended December 31, 2019, USPH’s Operating Results (as defined below) increased 7.3% to $36.0 million, or $2.82 per diluted share, as compared to $33.5 million, or $2.65 per diluted share in 2018. For the fourth quarter ended December 31, 2019, USPH’s Operating Results were $8.2 million, or $0.64 per diluted share as compared to $9.0 million, or $0.71 per diluted share, in the fourth quarter of 2018. As discussed further in this release, in the recent quarter the Company incurred more than $1.0 million in higher employee healthcare costs than planned. Operating Results, a non-Generally Accepted Accounting Principle (“GAAP”) measure, equals net income attributable to USPH shareholders per the consolidated statements of net income less the gain on the sale of a partnership interest in 2019 and the gain on the derecognition of debt in 2018 as described below. The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest. On June 30, 2019, the Company sold its 50% interest in one physical therapy partnership to the group’s founders for $11.6 million and recognized a net pre-tax gain of $5.5 million in 2019 which is not included in Operating Results.
For the year ended December 31, 2019, USPH’s net income attributable to its shareholders, in accordance with GAAP, was $40.0 million as compared to $34.9 million for the comparable period of 2018. For the fourth quarter ended December 31, 2019, USPH’s net income attributable to its shareholders was $7.9 million, as compared to $10.4 million in the fourth quarter of 2018. Inclusive of the charge for revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with GAAP, in the recent year, the amount is $31.3 million, or $2.45 per share, as compared to $16.6 million, or $1.31 per share, for 2018. Inclusive of the charge for revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share in accordance with GAAP, in the recent quarter, the amount is $7.1 million, or $0.55 per share, as compared to $5.5 million, or $0.43 per share, for the fourth quarter 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 charged 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 14 for the computation of diluted earnings per share.
Year 2019 Compared to Year 2018
Fourth Quarter 2019 Compared to Fourth Quarter 2018
Other Financial Measures
For 2019, the Company's Adjusted EBITDA increased by 8.5% to $67.3 million from $62.0 million in 2018 and, as a percentage of net revenue increased by 30 basis points from 13.7% to 14.0%. For the fourth quarter of 2019, the Company's Adjusted EBITDA increased by 1.3% to $15.6 million from $15.4 million in the comparable 2018 quarter and as a percentage of net revenue decreased by 40 basis points from 13.2% to 12.8%. See definition and explanation of Adjusted EBITDA in the schedule on pages 13 and 14.
Management’s Comments
Chris Reading, Chief Executive Officer, said, “Our team produced a great many highlights in 2019 including an 11.8% increase in our operating income as well as significant margin improvement. We delivered record 6.3% same store revenue growth in physical therapy and finished the year in strong fashion in all operating categories. When you dig into the details our businesses performed quite well overall. We experienced some cost issues in the fourth quarter, including higher employee healthcare expenses, which are being addressed. Further, today we announced what will be another terrific partner-centric acquisition with robust activity on the development front overall.”
2020 Earnings Guidance
Management currently expects the Company’s Operating Results for 2020 to be in the range of $38.1 million to $39.8 million or $2.98 to $3.10 per share. This earnings range is based on an assumed annual corporate tax rate of approximately 26.5%. Please note that the earnings guidance represents projected Operating Results from existing operations, including the acquisition announced today, and excludes future acquisitions. The 2020 earnings guidance range excludes expenses associated with the scheduled retirement and replacement of the Company’s CFO. The annual guidance figures will not be updated unless there is a material development that causes management to believe that Operating Results will be significantly outside the given range.
U.S. Physical Therapy Quarterly Dividend
The first quarterly dividend for 2020 of $0.32 per share will be paid on April 17, 2020 to shareholders of record as of March 13, 2020. At that quarterly rate the total dividend expected to be paid in 2020 would be 12.2% higher than what was paid in 2019. U.S. Physical Therapy began paying quarterly dividends in 2011 and has increased the dividend amount at least annually every year since.
Employee Healthcare Plan Changes
Effective January 1, 2020, in order to reduce costs while continuing to provide excellent healthcare benefits for employees, the Company made a number of changes to it prescription drug program. These included a change in the management company of the program, guaranteed price reductions and rebates, preauthorization being required for certain medications, plan design changes to incentivize employees to utilize generic prescriptions or over-the-counter alternatives rather than significantly more expensive brand name drugs, and a number of other changes. This is expected to reduce the costs of the Company’s prescription medication plan by more than $1.0 million annually.
In addition, the Company’s various employee healthcare insurance programs renew annually on May 1. The Company will be making design changes to those plans which are anticipated to save a substantial amount.
The Company maintains a self-insured health plan and uses one of the largest insurance companies in the U.S. to administer the plan and provide stop loss insurance and terminal run out-coverage. There are several layers of insurance within the plan to protect the Company, namely individual stop loss, aggregate stop loss and terminal liability coverages. The individual stop loss protects the plan from any one single large claimant whereas the aggregate insurance protects the entire plan, similar to umbrella coverage, to provide a known maximum exposure. Lastly, the Company purchases terminal liability coverage that provides a defined run-out cost in the event the plan is moved, replaced or terminated.
Operating Leases – Right-to-Use Assets and Lease Liability
The Company implemented the new lease accounting standard beginning January 1, 2019. As of December 31, 2019, the adoption has resulted in $81.6 million of right-to-use assets and $86.7 million of operating lease liabilities, of which $26.5 million was classified as a current liability, in the consolidated balance sheet. For a detailed discussion of the new lease accounting standard refer to the Company’s Annual Report on Form 10-K filed with the SEC on March 18, 2019.
Fourth Quarter 2019 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 February 27, 2020 to discuss the Company's Fourth Quarter and Year Ended December 31, 2019 results. Interested parties may participate in the call by dialing 1-888-335-5539 or 973-582-2857 and entering reservation number 4759865 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 May 27, 2020 at U.S. Physical Therapy’s website.
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:
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 587 outpatient physical therapy clinics in 40 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 26 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.
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
Three Months Ended
For the Year Ended
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Net patient revenues
$
108,940
$
107,808
$
433,345
$
417,703
Other revenues
13,174
9,541
48,624
36,208
Net revenues
122,114
117,349
481,969
453,911
Operating costs:
Salaries and related costs
70,549
67,818
274,233
259,228
Rent, supplies, contract labor and other
23,143
22,828
90,379
88,426
Provision for doubtful accounts
1,450
1,501
4,858
4,603
Closure costs
13
(17
)
25
(9
)
Total operating costs
95,155
92,130
369,495
352,248
Gross profit
26,959
25,219
112,474
101,663
Corporate office costs
11,673
10,415
45,049
41,349
Operating income
15,286
14,804
67,425
60,314
Other income and expense
Gain (adjustment) on sale of partnership interest
(309
)
-
5,514
-
Gain on derecognition of debt
-
1,846
-
1,846
Interest and other income, net
19
23
46
93
Interest expense - debt and other
(557
)
(365
)
(2,079
)
(2,042
)
Income before taxes
14,439
16,308
70,906
60,211
Provision for income taxes
2,424
2,635
13,647
11,369
Net income
12,015
13,673
57,259
48,842
Less: net income attributable to non-controlling interests:
Non-controlling interests - permanent equity
(1,579
)
(1,600
)
(6,561
)
(5,536
)
Redeemable non-controlling interests - temporary equity
(2,507
)
(1,665
)
(10,659
)
(8,433
)
(4,086
)
(3,265
)
(17,220
)
(13,969
)
Net income attributable to USPH shareholders
$
7,929
$
10,408
$
40,039
$
34,873
Basic and diluted earnings per share attributable to USPH shareholders
$
0.55
$
0.43
$
2.45
$
1.31
Shares used in computation - basic and diluted
12,774
12,685
12,756
12,666
Dividends declared per common share
$
0.30
$
0.23
$
1.14
$
0.92
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
December 31, 2019
December 31, 2018
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
23,548
$
23,368
Patient accounts receivable, less allowance for doubtful accounts of $2,698 and $2,672, respectively
46,228
44,751
Accounts receivable - other
9,823
6,742
Other current assets
5,787
4,353
Total current assets
85,386
79,214
Fixed assets:
Furniture and equipment
54,942
52,611
Leasehold improvements
33,247
31,712
Fixed assets, gross
88,189
84,323
Less accumulated depreciation and amortization
66,099
64,154
Fixed assets, net
22,090
20,169
Operating lease right-of-use assets
81,586
-
Goodwill
317,676
293,525
Other identifiable intangible assets, net
52,588
48,828
Other assets
1,519
1,430
Total assets
$
560,845
$
443,166
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTERESTS
Current liabilities:
Accounts payable - trade
$
2,494
$
2,019
Accrued expenses
30,855
38,493
Current portion of operating lease liabilities
26,486
-
Current portion of notes payable
728
1,434
Total current liabilities
60,563
41,946
Notes payable, net of current portion
4,361
402
Revolving line of credit
46,000
38,000
Deferred taxes
10,071
9,012
Deferred rent
-
2,159
Operating lease liabilities, net of current portion
60,258
-
Other long-term liabilities
141
829
Total liabilities
181,394
92,348
Redeemable non-controlling interests
137,750
133,943
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, 14,989,337 and 14,899,233 shares issued, respectively
150
149
Additional paid-in capital
87,383
80,028
Retained earnings
184,352
167,396
Treasury stock at cost, 2,214,737 shares
(31,628
)
(31,628
)
Total USPH shareholders’ equity
240,257
215,945
Non-controlling interests
1,444
930
Total USPH shareholders' equity and non-controlling interests
241,701
216,875
Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests
$
560,845
$
443,166
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
Year Ended
December 31, 2019
December 31, 2018
OPERATING ACTIVITIES
Net income including non-controlling interests
$
57,259
$
48,842
Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities:
Depreciation and amortization
10,095
9,755
Provision for doubtful accounts
4,858
4,603
Equity-based awards compensation expense
6,985
5,939
Deferred income taxes
4,651
4,813
Gain on sale of partnership interest
(5,514
)
-
Gain on derecognition of Debt
-
(1,846
)
Other
96
167
Changes in operating assets and liabilities:
Increase in patient accounts receivable
(6,376
)
(3,434
)
Increase in accounts receivable - other
(2,499
)
(1,087
)
(Increase) decrease in other assets
(1,878
)
345
(Decrease) increase in accounts payable and accrued expenses
(4,209
)
4,876
(Decrease) increase in other liabilities
(1,020
)
32
Net cash provided by operating activities
62,448
73,005
INVESTING ACTIVITIES
Purchase of fixed assets
(10,189
)
(7,193
)
Purchase of majority interest in businesses
(30,597
)
(16,367
)
Purchase of redeemable non-controlling interest, temporary equity
(8,651
)
-
Purchase of non-controlling interest, permanent equity
(428
)
(350
)
Sales of non controlling interest-permanent
207
-
Proceeds on sale of partnership interest, net
11,601
-
Proceeds on sale of fixed assets
64
1
Net cash used in investing activities
(37,993
)
(23,909
)
FINANCING ACTIVITIES
Distributions to non-controlling interests, permanent and temporary equity
(16,235
)
(15,646
)
Cash dividends paid to shareholders
(14,555
)
(11,664
)
Proceeds from revolving line of credit
145,000
103,000
Payments on revolving line of credit
(137,000
)
(119,000
)
Payments to settle mandatorily redeemable non-controlling interests
-
(265
)
Principal payments on notes payable
(1,433
)
(4,044
)
Other
(52
)
(42
)
Net cash used in financing activities
(24,275
)
(47,661
)
Net increase in cash and cash equivalents
180
1,435
Cash and cash equivalents - beginning of period
23,368
21,933
Cash and cash equivalents - end of period
$
23,548
$
23,368
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes
$
9,856
$
9,183
Interest
$
1,890
$
2,357
Non-cash investing and financing transactions during the period:
Purchase of businesses - seller financing portion
$
4,300
$
950
Purchase of business - payable to common shareholders of acquired business
$
502
$
-
Notes payable related to purchase of redeemable non-controlling interest, temporary equity
$
283
$
-
Notes payable related to purchase of non-controlling interest, permanent equity
$
103
$
-
Notes receivable related to sale of partnership interest - redeemable non-controlling interest
$
2,870
$
-
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
OPERATING RESULTS AND ADJUSTED EBITDA (IN THOUSANDS, EXCEPT PER SHARE DATA) (unaudited)
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 per share, a non-GAAP measure, equals net income attributable to USPH shareholders per the consolidated statement of net income, and excludes the impact of the gain on the sale of a partnership interest in 2019 and the gain on the derecognition of debt in 2018. In addition, the revaluation of redeemable non-controlling interest, net of tax, is not considered in calculating Operating Results per share. 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.
Adjusted EBITDA is defined as net income attributable to USPH shareholders before interest income, interest expense, taxes, depreciation, amortization, equity-based awards compensation expense and gain on sale of partnership interest. 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 Operating Results 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.
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
OPERATING RESULTS AND ADJUSTED EBITDA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(unaudited)
Three Months Ended December 31,
Year Ended December 31,
2019
2018
2019
2018
Computation of earnings per share - USPH shareholders:
Net income attributable to USPH shareholders
$
7,929
$
10,408
$
40,039
$
34,873
Charges to retained earnings:
Revaluation of redeemable non-controlling interest
(1,141
)
(6,665
)
(11,893
)
(24,770
)
Tax effect at statutory rate (federal and state) of 26.25%
299
1,749
3,121
6,502
$
7,087
$
5,492
$
31,267
$
16,605
Earnings per share (basic and diluted)
$
0.55
$
0.43
$
2.45
$
1.31
Adjustments:
Gain on derecognition of debt
-
(1,846
)
-
(1,846
)
Gain on sale of partnership interest
309
-
(5,514
)
-
Revaluation of redeemable non-controlling interest
1,141
6,665
11,893
24,770
Tax effect at statutory rate (federal and state) of 26.25%
(380
)
(1,265
)
(1,674
)
(6,018
)
Operating Results
$
8,157
$
9,046
$
35,972
$
33,511
Basic and diluted Operating Results per share
$
0.64
$
0.71
$
2.82
$
2.65
Shares used in computation - basic and diluted
12,774
12,685
12,756
12,666
Three Months Ended December 31,
Year Ended December 31,
2019
2018
2019
2018
Net income attributable to USPH shareholders
$
7,929
$
10,408
$
40,039
$
34,873
Adjustments:
Depreciation and amortization
2,718
2,420
10,095
9,755
Gain of derecognition of debt
-
(1,846
)
-
(1,846
)
Gain on sale of partnership interest
309
-
(5,514
)
-
Interest income
(19
)
(23
)
(46
)
(93
)
Interest expense - debt and other
557
365
2,079
2,042
Provision for income taxes
2,424
2,635
13,647
11,369
Equity-based awards compensation expense
1,723
1,486
6,985
5,939
Adjusted EBITDA
$
15,641
$
15,445
$
67,285
$
62,039
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
RECAP OF CLINIC COUNT
March 31, 2018
580
June 30, 2018
581
September 30, 2018
588
December 31, 2018
591
March 31, 2019
590
June 30, 2019
564
September 30, 2019
574
December 31, 2019
583
View source version on businesswire.com: https://www.businesswire.com/news/home/20200227005140/en/
U.S. Physical Therapy, Inc. Larry McAfee, Chief Financial Officer Chris Reading, Chief Executive Officer (713) 297-7000 Three Part Advisors Joe Noyons (817) 778-8424
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