U.S. Physical Therapy Reports Second Quarter and First Six Months 2015 Results

Share Name	Share Symbol	Market	Type
US Physical Therapy Inc	NYSE:USPH	NYSE	Common Stock

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US Physical Therapy (NYSE:USPH)
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Company Declares $0.15 Per Share Quarterly Dividend

Issues Updated Earnings Guidance for 2015

U.S. Physical Therapy, Inc. (NYSE: USPH), a national operator of outpatient physical therapy clinics, today reported results for the quarter and six months ended June 30, 2015.

U.S. Physical Therapy’s net income attributable to common shareholders prior to revaluation of redeemable non-controlling interests, net of tax (“operating results”) was $6.3 million for the second quarter of 2015 as compared to $6.4 million in the second quarter of 2014. Diluted earnings per share from operating results were $0.51 in the recent quarter as compared to $0.53 in the comparable 2014 period.

U.S. Physical Therapy’s operating results for the first six months of 2015 were $10.5 million as compared to $10.7 million in the first six months of 2014. Diluted earnings per share from operating results were $0.85 in the first half of 2015 as compared to $0.87 in the comparable 2014 period.

Second Quarter 2015 Compared to Second Quarter 2014

Net revenues increased 6.5% from $78.2 million in the second quarter of 2014 to $83.3 million in the second quarter of 2015, due to an increase in total patient visits of 8.1% from 718,800 to 776,900 offset by a decrease in the average net revenue per visit to $104.85 for the 2015 second quarter from $106.39 for the 2014 second quarter. Net revenues for new clinics opened or acquired in the past 12 months was $4.4 million.
Total clinic operating costs were $62.1 million, or 74.6% of net revenues, in the second quarter of 2015, as compared to $56.4 million, or 72.1% of net revenues, in the 2014 period. The increase was primarily attributable to $3.9 million in operating costs of new clinics opened or acquired in the past 12 months. Total clinic salaries and related costs, including those from new clinics, were 53.3% of net revenues in the recent quarter versus 51.3% in the 2014 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 20.0% for the recent quarter versus 19.4% in the 2014 period. The provision for doubtful accounts as a percentage of net revenues was 1.3% for both periods.
The gross margin for the second quarter of 2015 was $21.1 million or 25.4%, as compared to $21.8 million or 27.9% for the 2014 period.
Corporate office costs were $7.6 million in the second quarter of 2015 and 2014. Corporate office costs were 9.1% of net revenues for the 2015 second quarter compared to 9.7% of net revenues for the 2014 period.
Operating income for the recent quarter was $13.5 million compared to $14.2 million in the 2014 second quarter.
Interest expense was $0.2 million in the second quarter of 2015 and $0.3 million in the second quarter of 2014.
The provision for income taxes for the 2015 period was $4.2 million and for the 2014 period $4.5 million. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest was 40.0% in the 2015 second quarter and 41.0% in the 2014 second quarter.
Net income attributable to non-controlling interests was $2.8 million in the recent quarter as compared to $3.0 million in the year earlier period.
Net income attributable to common shareholders prior to revaluation of redeemable non-controlling interests, net of tax for the three months ended June 30, 2015 was $6.3 million and $6.4 million for the 2014 period. Diluted earnings per share from operating results were $0.51 for the 2015 period and $0.53 for the 2014 period.
Same store visits increased 2.9% for de novo and acquired clinics open for one year or more and same store revenue increased 1.3% as the average net rate per visit decreased by $1.60.

First Six Months 2015 Compared to First Six Months 2014

Net revenues increased 8.5% from $148.0 million in the first six months of 2014 to $160.5 million in the first six month of 2015, due to an increase in total patient visits of 9.3% from 1,362,600 to 1,489,700 offset by a decrease in the average net revenue per visit to $105.56 for the first half of 2015 from $106.31 for the 2014 period. Net revenues from new clinics opened or acquired in the past 12 months was $7.1 million.
Total clinic operating costs were $122.5 million, or 76.3% of net revenues, in the first six months of 2015, as compared to $109.5 million, or 74.0% of net revenues, in the 2014 period. The increase includes $6.4 million in operating costs of new clinics opened or acquired in the past 12 months. Total clinic salaries and related costs, including those from new clinics, were 54.5% of net revenues in the first six months versus 52.7% in the 2014 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 20.6% for the recent period versus 19.9% in the 2014 period. The provision for doubtful accounts as a percentage of net revenues was 1.3% for the 2015 period and 1.4% in the 2014 period.
The gross margin for the first six months of 2015 was $38.0 million or 23.7%, as compared to $38.5 million or 26.0% for the 2014 period.
Corporate office costs were $15.3 million in the first six months of 2015 compared to $14.7 million in the 2014 period. Corporate office costs were 9.5% of net revenues for the 2015 first six months as compared to 10.0% of net revenues for the 2014 period.
Operating income for the first six months of 2015 was $22.7 million compared to $23.7 million in the 2014 first six months.
Interest expense was $0.5 million in the first six months of 2015 versus $0.6 million in the first six months of 2014.
The provision for income taxes for the 2015 period was $7.0 million and for the 2014 period $7.4 million. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest was 40.0% in the 2015 first six months and 41.0% in the 2014 first six months.
Net income attributable to non-controlling interests was $4.8 million for the six months of 2015 as compared to $5.1 million in the year earlier period.
Net income attributable to common shareholders prior to revaluation of redeemable non-controlling interests, net of tax for the six months ended June 30, 2015 was $10.5 million compared to $10.7 million for the six months ended June 30, 2014. Diluted earnings per share from operating results were $0.85 for the 2015 period and $0.87 for the 2014 period.
Same store visits increased 3.1% for de novo and acquired clinics open for one year or more and same store revenue increased 2.5%. The average net rate per visit decreased by $0.65.

Chris Reading, Chief Executive Officer, said, “During May and June we experienced an unexpected net rate decline in an otherwise busy patient visits quarter. Management, working together with the affected partnerships, has recently taken a number of operational steps to improve the net rate and appropriately adjust costs. Our updated earnings guidance reflects these actions and the rate change. We continue our emphasis on increasing the workers comp portion of our payor mix. Internal de novo clinic development and particularly prospective acquisition activity is strong.”

Larry McAfee, Chief Financial Officer, noted, “During the quarter, the Company produced excellent net cash flow based on record receivables collections with the average A/R days outstanding at 38 days as of June 30th.”

U.S. Physical Therapy Declares Quarterly Dividend

The third quarterly dividend of 2015 for $0.15 per share will be paid on September 4 to shareholders of record as of August 18.

2015 Earnings Guidance Update

Management currently expects the Company’s earnings from continuing operations for the year 2015 to be in the range of $21.7 million to $22.7 million in net income and $1.75 to $1.83 in diluted earnings per share. Guidance issued previously was for 2015 net income in the range of $22.3 million to $22.9 million and $1.80 to $1.86 in diluted earnings per share.

Please note that management’s guidance range represents projected earnings from existing operations only and excludes future acquisitions. The annual guidance figures will not be updated unless there is a material development that causes management to believe that earnings will be significantly outside the given range.

Second Quarter 2015 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 Thursday, August 6, 2015 to discuss the Company’s Quarter Ended June 30, 2015 results. Interested parties may participate in the call by dialing 1-888-335-5539 or 973-582-2857 and entering reservation number 80627966 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 October 6, 2015.

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 guidelines and reimbursement or failure of our clinics to maintain their Medicare certification status;
business and regulatory conditions including federal and state regulations;
governmental and other third party payor 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;
transition to ICD-10 coding system;
revenue and earnings expectations;
general economic conditions;
availability and cost of qualified physical and occupational therapists;
personnel productivity;
competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain operations 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 adequate internal controls;
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 applicable.

About U.S. Physical Therapy, Inc.

Founded in 1990, U.S. Physical Therapy, Inc. operates 501 outpatient physical and occupational 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 19 physical therapy facilities for third parties, including hospitals and physician groups.

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 June 30, Six Months Ended June 30, 2015 2014 2015 2014 Net patient revenues $ 81,451 $ 76,470 $ 157,258 $ 144,867 Other revenues 1,837 1,731 3,271 3,101 Net revenues 83,288 78,201 160,529 147,968 Clinic operating costs: Salaries and related costs 44,398 40,109 87,450 78,051 Rent, clinic supplies, contract labor and other 16,681 15,205 33,006 29,421 Provision for doubtful accounts 1,062 1,054 2,052 2,004 Closure costs 5 (2 ) 37 11 Total clinic operating costs 62,146 56,366 122,545 109,487 Gross margin 21,142 21,835 37,984 38,481 Corporate office costs 7,593 7,614 15,250 14,746 Operating income 13,549 14,221 22,734 23,735 Interest and other income, net 16 - 24 1 Interest expense (245 ) (332 ) (510 ) (585 ) Income before taxes 13,320 13,889 22,248 23,151 Provision for income taxes 4,203 4,469 6,980 7,408 Net income including non-controlling interests 9,117 9,420 15,268 15,743 Less: net income attributable to non-controlling interests (2,813 ) (2,988 ) (4,798 ) (5,083 ) Net income attributable to common shareholders $ 6,304 $ 6,432 $ 10,470 $ 10,660 Basic earnings per share attributable to common shareholders: From operations prior to revaluation of redeemable non-controlling interests, net of tax $ 0.51 $ 0.53 $ 0.85 $ 0.88 Charges to additional paid-in-capital - revaluation of redeemable non-controlling interests, net of tax (0.03 ) (0.01 ) (0.03 ) (0.09 ) Basic $ 0.48 $ 0.52 $ 0.82 $ 0.79 Diluted earnings per share attributable to common shareholders: From operations prior to revaluation of redeemable non-controlling interests, net of tax $ 0.51 $ 0.53 $ 0.85 $ 0.87 Charges to additional paid-in-capital - revaluation of redeemable non-controlling interests, net of tax (0.03 ) (0.01 ) (0.03 ) (0.09 ) Diluted $ 0.48 $ 0.52 $ 0.82 $ 0.78 Shares used in computation: Basic 12,409 12,224 12,362 12,177 Diluted 12,409 12,226 12,362 12,184 Dividends declared per common share $ 0.15 $ 0.12 $ 0.30 $ 0.24

U.S. PHYSICAL THERAPY, INC AND SUBSIDIARIES

CONSOLIDATED EARNINGS PER SHARE

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)

Three Months Ended Six Months Ended June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014 Earnings attributable to common shareholders: From operations prior to revaluation of redeemable non-controlling interests, net of tax $ 6,304 $ 6,432 $ 10,470 $ 10,660 Charges to additional paid-in-capital - revaluation of redeemable non-controlling interests, net of tax (376 ) (119 ) (376 ) (1,086 ) $ 5,928 $ 6,313 $ 10,094 $ 9,574 Basic earnings per share attributable to common shareholders: From operations prior to revaluation of redeemable non-controlling interests, net of tax $ 0.51 $ 0.53 $ 0.85 $ 0.88 Charges to additional paid-in-capital - revaluation of redeemable non-controlling interests, net of tax (0.03 ) (0.01 ) (0.03 ) (0.09 ) $ 0.48 $ 0.52 $ 0.82 $ 0.79 Diluted earnings per share attributable to common shareholders: From operations prior to revaluation of redeemable non-controlling interests, net of tax $ 0.51 $ 0.53 $ 0.85 $ 0.87 Charges to additional paid-in-capital - revaluation of redeemable non-controlling interests, net of tax (0.03 ) (0.01 ) (0.03 ) (0.09 ) $ 0.48 $ 0.52 $ 0.82 $ 0.78 Shares used in computation: Basic earnings per share - weighted-average shares 12,409 12,224 12,362 12,177 Effect of dilutive securities - stock options - 2 - 7 Denominator for diluted earnings per share - adjusted weighted-average shares 12,409 12,226 12,362 12,184

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) June 30, 2015 December 31, 2014 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 12,972 $ 14,271 Patient accounts receivable, less allowance for doubtful accounts of $1,618 and $1,669, respectively 34,830 32,891 Accounts receivable - other, less allowance for doubtful accounts of $198 and $198, respectively 1,338 1,503 Other current assets 6,509 6,186 Total current assets 55,649 54,851 Fixed assets: Furniture and equipment 43,495 42,003 Leasehold improvements 24,107 22,806 67,602 64,809 Less accumulated depreciation and amortization 51,098 49,045 16,504 15,764 Goodwill 170,914 147,914 Other intangible assets, net 24,167 24,907 Other assets 1,086 1,115 $ 268,320 $ 244,551 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable - trade $ 1,451 $ 1,782 Accrued expenses 19,446 22,839 Current portion of notes payable 800 883 Total current liabilities 21,697 25,504 Notes payable 1,059 234 Revolving line of credit 41,000 34,500 Deferred rent 1,040 991 Other long-term liabilities 10,925 8,732 Total liabilities 75,721 69,961 Commitments and contingencies Redeemable non-controlling interests 10,585 7,376 Shareholders' equity: U. S. Physical Therapy, Inc. 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, 14,635,674 and 14,487,346 shares issued, respectively

146 145 Additional paid-in capital 45,829 43,577 Retained earnings 140,933 134,186 Treasury stock at cost, 2,214,737 shares (31,628 ) (31,628 ) Total U. S. Physical Therapy, Inc. shareholders' equity 155,280 146,280 Non-controlling interests 26,734 20,934 Total equity 182,014 167,214 $ 268,320 $ 244,551

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS, EXCEPT PER SHARE DATA) (unaudited) Six Months Ended June 30, 2015 2014 OPERATING ACTIVITIES Net income including non-controlling interests $ 15,268 $ 15,743 Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: Depreciation and amortization 3,674 2,825 Provision for doubtful accounts 2,052 2,004 Equity-based awards compensation expense 2,206 1,593 Gain on sale or abandonment of assets, net (13 ) 34 Excess tax benefit from shared-based compensation (430 ) (215 ) Deferred income tax 2,130 2,422 Write-off of goodwill - closed clinic 111 - Changes in operating assets and liabilities: Increase in patient accounts receivable (2,880 ) (4,442 ) Decrease (increase) in accounts receivable - other 165 (80 ) (Increase) decrease in other assets (13 ) 1,540 Decrease in accounts payable and accrued expenses (3,958 ) (774 ) Increase in other Long term liabilities 927 404 Net cash provided by operating activities 19,239 21,054 INVESTING ACTIVITIES Purchase of fixed assets (2,873 ) (2,132 ) Purchase of businesses, net of cash acquired (14,467 ) (10,750 ) Acquisitions of non-controlling interests (968 ) (4,945 ) Proceeds on sale of business and fixed assets, net 72 38 Net cash used in investing activities (18,236 ) (17,789 ) FINANCING ACTIVITIES Distributions to non-controlling interests (including redeemable non-controlling interests) (4,906 ) (4,982 ) Cash Dividends to shareholders (3,723 ) (2,932 ) Proceeds from revolving line of credit 51,000 77,000 Payments on revolving line of credit (44,500 ) (72,000 ) Payment of notes payable (608 ) (575 ) Tax benefit from share-based compensation 430 215 Other 5 45 Net cash used in financing activities (2,302 ) (3,229 ) Net (decrease) increase in cash and cash equivalents (1,299 ) 36 Cash and cash equivalents - beginning of period 14,271 12,898 Cash - end of period $ 12,972 $ 12,934 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Income taxes $ 3,835 $ 3,235 Interest $ 460 $ 657 Non-cash investing and financing transactions during the period: Purchase of business - seller financing portion $ 1,350 $ 400 Revaluation of redeemable non-controlling interests $ 627 $ 1,841

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES RECAP OF CLINIC COUNT Number of Date Clinics March 31, 2014 472 June 30, 2014 486 September 30, 2014 489 December 31, 2014 489 March 31, 2015 494 June 30, 2015 501

View source version on businesswire.com: http://www.businesswire.com/news/home/20150806005264/en/

U.S. Physical Therapy, Inc.Larry McAfee, (713) 297-7000Chief Financial OfficerorChris Reading, (713) 297-7000Chief Executive OfficerorWestwicke PartnersBob East, (443) 213-0502

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