UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____TO _____ COMMISSION FILE NUMBER 1-11151 U.S. PHYSICAL THERAPY, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (STATE OR OTHER JURISDICTION OF ...

Financial Data and Key Metrics Changes - The company reported operating results per share of $0.96 for Q2 2021, a record high, which is $0.57 higher than $0.39 in Q2 2020 without relief funds and $0.15 or 18.5% higher than $0.81 in Q2 2019 [13][7][12] - Adjusted EBITDA reached $21.8 million, a record high, which is $2.8 million or 14.5% higher than $19 million in Q2 2020 and $10.7 million or 97.1% higher than Q2 2020 excluding relief funds [15][16] - Revenues for Q2 2021 were $126.9 million, a record high, which is $43.1 million higher than Q2 2020 and $0.6 million or 0.4% higher than Q2 2019 [16][17] Business Line Data and Key Metrics Changes - Physical therapy revenues were $113.2 million in Q2 2021, an increase of 56.7% from $72.3 million in Q2 2020, and only slightly less than $113.4 million in Q2 2019 despite having 21 fewer clinics open on average [18][19] - Revenues for the industrial injury prevention business were $10 million in Q2 2021, a 3.9% increase over Q2 2020 revenues of $9.7 million [19] Market Data and Key Metrics Changes - The net rate for physical therapy operations was $104.46 in Q2 2021, consistent with $104.72 in Q1 2021, showing resilience despite a 3.5% Medicare rate adjustment [18] - Medicare accounted for 31% of the payer mix, while workers' compensation was about 10.5% [78] Company Strategy and Development Direction - The company announced an acquisition of an 8-clinic practice, indicating a focus on growth and expansion in sports medicine-related services [8] - The management expressed confidence in the ability to continue strong performance and raised the full-year 2021 guidance range for the second time this year [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the physical therapy sector is gaining increased attention, emphasizing the importance of personal patient care [9] - The company is focused on overcoming challenges such as reimbursement and staffing while maintaining a commitment to quality care [10] Other Important Information - The company increased its quarterly dividend from $0.35 to $0.38 per share, reflecting confidence in financial performance [8] - The balance sheet remains strong with $38 million drawn on a $125 million revolving credit facility and $20.4 million in cash as of June 30, 2021 [25] Q&A Session Summary Question: Can you share insights on the strong rebound in patient volumes? - Management indicated that while there is no significant pent-up demand, the return of sports and recreational activities is expected to help maintain strong volumes [32] Question: How are you managing costs and efficiency post-COVID? - Management acknowledged improved efficiency and indicated that while there may be salary pressures, they expect to maintain margin improvements [38] Question: What is the outlook for 2022 reimbursement rates? - Management noted a proposed 3.5% reduction in reimbursement rates and emphasized the importance of advocating for the value of physical therapy [53] Question: Have patient volumes been affected by the Delta variant? - Management confirmed that there has been no degradation in patient volumes in Texas despite the Delta variant [56] Question: What is the current status of the industrial injury prevention business? - Management reported ongoing discussions and a focus on rebuilding the sales pipeline, with expectations for growth in the future [61]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____TO _____ COMMISSION FILE NUMBER 1-11151 U.S. PHYSICAL THERAPY, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEVADA 76-0364866 (STATE OR OT ...

Financial Data and Key Metrics Changes - The company reported Q1 2021 operating results per share of $0.64, an increase of $0.34 from $0.30 per share in Q1 2020 [21] - Total revenue for Q1 2021 was $112.4 million, slightly down from the previous year, despite having one less business day and 24 fewer clinics open on average [24] - Adjusted EBITDA for Q1 2021 was $15.6 million, up from $8 million in Q1 2020 [23] - Gross profit margin increased to 23.1% in Q1 2021, up 590 basis points from 17.2% in Q1 2020 [30] Business Line Data and Key Metrics Changes - Physical therapy revenues were $102.4 million in Q1 2021, a decline of only 0.5% compared to Q1 2020 [28] - Revenues from the industrial injury prevention business increased by 1.3% to $10 million in Q1 2021 [29] - Average visits per clinic per day were 27.1 in Q1 2021, higher than 26.2 in Q1 2020 and 26.9 in Q1 2019 [25] Market Data and Key Metrics Changes - Patient volumes per clinic per day were 26.1 in January, 25.6 in February, and increased to 29.3 in March 2021, marking a record high [26][22] - The net rate for physical therapy operations was $104.72 in Q1 2021, up 1.6% from $103.11 in Q1 2020 [27] Company Strategy and Development Direction - The company is raising its guidance for the year from a range of $2.40 to $2.52 to a new range of $2.68 to $2.78 per share, driven by better-than-expected performance and strong patient volumes [12] - The company has successfully renegotiated lease contracts and secured positive pricing adjustments with payers, which are expected to benefit future performance [11] - The company continues to pursue acquisitions and partnerships, indicating a strong appetite for growth [16][95] Management's Comments on Operating Environment and Future Outlook - Management noted that while volumes are recovering, COVID-19 still impacts operations, particularly in certain regions [48] - The company expects to see a restoration of normal activities, which will provide a tailwind for growth [49] - Management expressed confidence in the resilience of operations and the potential for increased shareholder value going forward [36] Other Important Information - The company paid back $14.1 million in Medicare advance payments during Q1 2021 and funded an acquisition of $11.7 million [35] - The company has a clean balance sheet with strong cash generation, ending the quarter with approximately $18 million in cash [34] Q&A Session Summary Question: Status of visits per day and COVID impact - Management indicated that visits per day are nearly back to pre-COVID levels, but some population segments are still affected by COVID [45][48] Question: Sustainability of efficiency improvements - Management acknowledged that while some costs will return, many efficiencies gained during the pandemic will be maintained [51][55] Question: Position of the injury prevention business - Management believes there is significant room for growth in the injury prevention business, despite some setbacks during the pandemic [57] Question: Activity level in M&A pipeline - The company reported brisk activity in the M&A pipeline, focusing on partnerships that align with their growth strategy [75][95] Question: Labor costs and filling positions - Management noted mixed experiences in filling positions, with some challenges in front office roles but overall good performance in maintaining staffing levels [96] Question: Renegotiated leases - Management confirmed that approximately $350,000 in overall adjustments have been made through lease renegotiations [132]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO U.S. PHYSICAL THERAPY, INC. (I.R.S. EMPLOYER IDENTIFICATION NO.) 1300 WEST SAM HOUSTON PARKWAY SOUTH, SUITE 300, HOUSTON, TEXAS 77042 (ADDRESS OF PRINCIPAL EXEC ...

U.S. Physical Therapy, Inc. (NYSE:USPH) Q4 2020 Earnings Conference Call February 25, 2021 10:30 AM ET Company Participants Christopher Reading - President, CEO, Director Carey Hendrickson - CFO Graham Reeve - COO Glenn McDowell - COO Jon Bates - VP & Controller Rick Binstein - GC Conference Call Participants Brian Tanquilut - Jefferies Larry Solow - CGS Securities Mitra Ramgopal - Sidoti Mark Juvenile - Copeland Mike Petusky - Barrington Research Operator Ladies and gentlemen, thank you for standing by. We ...

Financial Data and Key Metrics Changes - For Q3 2020, earnings per share from operating results excluding relief funds were $0.85, marking the most profitable quarter in the company's history, exceeding analyst expectations by 67% [10] - Revenue for the third quarter was $108.9 million, surpassing analyst consensus estimates by $5.4 million [10] - Operating income increased by 18.5% year-over-year to $19.9 million, with operating income as a percentage of revenue rising by 400 basis points to 18.3% [11] - Adjusted EBITDA was $19.9 million compared to $17 million a year ago, with a significant reduction in debt obligations by 41% from $51.1 million at year-end 2019 to $30.3 million at September 30, 2020 [11] Business Line Data and Key Metrics Changes - Gross profit grew by 11% in Q3 2020, with a gross profit margin of 27.9%, an improvement of 460 basis points compared to Q3 2019 [8] - Physical Therapy gross margin improved to 28%, a 410 basis point increase year-over-year, while the injury prevention business saw margins improve by 870 basis points to 28.6% [8] Market Data and Key Metrics Changes - Average visits per clinic per day increased from 21.8 in June to 27.1 in September, nearing pre-pandemic levels [6][7] - In September 2020, the average visits per day per clinic were 27.2, down from 28.2 in September 2019, indicating a recovery trend but still slightly below pre-COVID levels [22] Company Strategy and Development Direction - The company is focused on maintaining cost control while aiming for growth, with a development engine that is beginning to bear fruit, including new deals announced during the quarter [8] - The balance sheet is in a strong position, with over $100 million in unused availability under the credit line, positioning the company favorably for potential M&A opportunities [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate ongoing challenges, emphasizing the resilience and adaptability of the team [8] - There is optimism regarding the potential for M&A activity, with management noting that the current environment may present more opportunities due to competitors facing difficulties [48] Other Important Information - The company has permanently closed 40 clinics and reopened 30, with ongoing evaluations of clinic performance and potential closures based on market conditions [32][35] - Telehealth services have been integrated into the business model, providing flexibility for patients unable to visit clinics [42] Q&A Session Summary Question: Can you provide insights on the sustainability of the recent margin performance? - Management acknowledged that while margins have improved significantly, they are still assessing the sustainability of these changes as the business stabilizes post-pandemic [15] Question: What are the same-store sales trends? - Management did not generate same-store sales data for the second and third quarters, focusing instead on overall trends which have been improving [17] Question: How is the company positioned for M&A opportunities? - The company is in a strong financial position to pursue M&A, with management indicating that they are well-prepared to capitalize on potential acquisitions [25] Question: What is the impact of potential Medicare cuts on revenue? - Management indicated that while they are preparing budgets with and without the cuts, it is too early to speculate on the exact impact on revenues and earnings [68] Question: How are commercial insurance policies affected by Medicare reimbursement rates? - Most commercial insurance policies are negotiated separately and are not directly tied to Medicare rates, providing some insulation from potential cuts [67]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____TO _____ COMMISSION FILE NUMBER 1-11151 U.S. PHYSICAL THERAPY, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (STATE OR OTHER JURISDICTI ...

Financial Data and Key Metrics Changes - For Q2 2020, the company's net earnings from operating results were $10.9 million or $0.85 per share, including CARES Relief Funds, compared to $10.3 million or $0.81 a year ago [19] - Revenue for the second quarter was $83.9 million, down from $126.4 million a year ago, with physical therapy operations revenue at approximately $72.3 million versus $113.4 million in Q2 2019 [20] - Total operating costs, excluding closure costs, were $64.5 million, a 32% reduction compared to the second quarter last year [21] - Adjusted EBITDA was $19 million compared to $24.9 million in the second quarter last year [23] Business Line Data and Key Metrics Changes - The gross profit for physical therapy management contracts increased to 26.9% in Q2 2020 from 15.4% a year ago [22] - The industrial injury prevention business revenue was $9.7 million, down slightly from $10.3 million in Q2 2019, but gross margins improved significantly [20][14] Market Data and Key Metrics Changes - By the end of July, patient visits improved from the 70s into the mid-80s percentage of pre-COVID volumes [11] - The company experienced a peak drop to approximately 45% of pre-COVID volume in early April, but volumes have since stabilized and improved [9][11] Company Strategy and Development Direction - The company has focused on cost control and operational efficiency during the pandemic, reducing people-related costs by an estimated 38% [8] - Telehealth services were implemented rapidly and are expected to remain a part of the care offering [10] - The company aims to maintain a close alignment between volume and cost as it gradually brings back staff [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenges and emphasized the importance of partnerships during the pandemic [27] - The company anticipates that some costs will return as volumes grow, but expects improved margins compared to pre-COVID levels [28] - Management acknowledged the uncertainty regarding the full recovery of patient volumes but remains optimistic about ongoing improvements [32] Other Important Information - The company has $44 million in cash on its balance sheet, which is $20 million higher than six months ago [23] - The company has temporarily closed 30 clinics, most of which have since reopened [48] Q&A Session Summary Question: What have you learned from the cost rollback efforts? - Management learned they can mobilize quickly and efficiently, and that they were operating with some unnecessary costs [27] Question: What drove the decrease in revenue per patient? - The decrease was attributed to a lower percentage of Medicare and Medicaid patients and an increase in units per visit [30] Question: How do you view the potential for recovery in patient visits? - Management expects to return to pre-COVID levels but acknowledges that some patients may not return until a vaccine is available [32] Question: How has the competitive landscape changed during the pandemic? - The company has benefited from competitors struggling to cope with the pandemic, allowing for quicker recovery [45] Question: What impact will the proposed 9% cut to physical therapy rates have? - Management is preparing for the potential cut but believes they can manage through it as they have in the past [50]

[PART I—FINANCIAL INFORMATION - UNAUDITED](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION%20-%20UNAUDITED) [Item 1. Financial Statements.](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited consolidated financial statements and accompanying notes for the period [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202020%20and%20December%2031%2C%202019) The balance sheets show an increase in total assets to $585.0 million, driven by cash and goodwill | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $43,555 | $23,548 | | Total current assets | $92,139 | $85,386 | | Total assets | $585,018 | $560,845 | | Total current liabilities | $87,353 | $60,563 | | Total liabilities | $191,602 | $181,394 | | Total USPH shareholders' equity | $255,254 | $240,257 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202020%20and%202019) Income statements reflect a significant decline in net revenues and net income due to the COVID-19 pandemic | Metric (in thousands) | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net revenues | $83,857 | $126,373 | $196,574 | $242,604 | | Operating income | $10,262 | $19,898 | $14,276 | $35,323 | | Net income | $14,763 | $19,800 | $18,101 | $32,175 | | Net income attributable to USPH shareholders | $10,232 | $14,620 | $11,248 | $23,063 | | Basic and diluted EPS | $0.99 | $0.85 | $1.19 | $1.24 | | Dividends declared per common share | $- | $0.27 | $0.32 | $0.54 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202020%20and%202019) Operating cash flow increased significantly to $48.4 million, while financing activities used cash | Metric (in thousands) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $48,356 | $28,621 | | Net cash used in investing activities | $(18,079) | $(25,241) | | Net cash provided by (used in) financing activities | $(10,270) | $8,111 | | Net increase in cash and cash equivalents | $20,007 | $11,491 | | Cash and cash equivalents - end of period | $43,555 | $34,859 | [Consolidated Statements of Changes in Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity%20for%20the%20three%20months%20and%20six%20months%20ended%20June%2030%2C%202020%20and%202019) Total USPH shareholders' equity increased to $255.3 million, driven by net income | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Total USPH Shareholders' Equity (Beginning Balance) | $240,257 | $215,945 | | Net income attributable to USPH shareholders | $11,248 | $23,063 | | Revaluation of redeemable non-controlling interest, net of tax | $4,036 | $(7,250) | | Compensation expense - equity-based awards | $3,389 | $3,558 | | Dividends paid to USPH shareholders | $(4,110) | $(6,891) | | Total USPH Shareholders' Equity (Ending Balance) | $255,254 | $240,257 | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, acquisitions, revenue, and the impact of the COVID-19 pandemic [1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the company's two business segments, operational structure, and accounting policies - The Company operates two reportable business segments: physical therapy operations and industrial injury prevention services[22](index=22&type=chunk) - As of June 30, 2020, the Company operated **554 physical therapy clinics** in 39 states and managed 29 third-party physical therapy facilities[28](index=28&type=chunk) - The COVID-19 pandemic has adversely impacted operations, leading to **significant reductions and cancellations of patient visits** in physical therapy[40](index=40&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - The Company received **$12.8 million in Medicare Accelerated and Advance Payment Funds** (MAAPP) and **$7.9 million from the Public Health and Social Services Emergency Fund** (Relief Fund) under the CARES Act[51](index=51&type=chunk) [2. ACQUISITIONS OF BUSINESSES](index=19&type=section&id=2.%20ACQUISITIONS%20OF%20BUSINESSES) The company completed several acquisitions in 2019 and 2020 to expand its services - On February 27, 2020, the Company acquired interests in a four-clinic physical therapy practice for **$11.9 million**, resulting in an overall 65.0% ownership[80](index=80&type=chunk) - In 2019, the Company acquired a **67% interest in an eleven-clinic physical therapy practice for $12.4 million** and a third industrial injury prevention services company for **$22.9 million**[83](index=83&type=chunk)[84](index=84&type=chunk) 2020 Physical Therapy Acquisition Allocation (in thousands) | Item | Amount | | :---------------------------------------------------------- | :----- | | Cash paid, net of cash acquired | $11,633 | | Seller note | $300 | | Total consideration | $11,933 | | Net tangible assets acquired | $709 | | Referral relationships | $1,600 | | Non-compete | $750 | | Tradename | $1,500 | | Goodwill | $13,845 | | Fair value of non-controlling interest (redeemable) | $(6,471) | [3. REVENUE RECOGNITION](index=22&type=section&id=3.%20REVENUE%20RECOGNITION) Revenue is recognized when services are rendered, with details on payor mix and reimbursement - Medicare reimbursement for physical/occupational therapy services could face an **estimated 9% decrease in payment** effective January 1, 2021[98](index=98&type=chunk) - CMS provided a temporary waiver for physical and occupational therapists to perform and be reimbursed for telehealth visits, effective March 1, 2020[99](index=99&type=chunk) - Net patient revenue from Medicare was approximately **$44.4 million** for the six months ended June 30, 2020, a decrease from $59.4 million in the prior year[106](index=106&type=chunk) Revenue Categories (in thousands) | Category | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net patient revenues | $72,279 | $113,363 | $172,405 | $220,013 | | Management contract revenues | $1,592 | $2,215 | $3,740 | $4,360 | | Other revenues | $328 | $507 | $895 | $1,043 | | Industrial injury prevention services revenues | $9,658 | $10,288 | $19,534 | $17,188 | | Total Net Revenues | $83,857 | $126,373 | $196,574 | $242,604 | [4. OTHER INCOME](index=25&type=section&id=4.%20OTHER%20INCOME) Other income included a gain from the sale of clinics and significant relief funds under the CARES Act - The Company recognized a **gain of $1.1 million** in Q2 2020 from the sale of 11 previously closed clinics[111](index=111&type=chunk) - The Company received **$7.9 million in non-repayable Relief Funds** from the Public Health and Social Services Emergency Fund (CARES Act) in Q2 2020[112](index=112&type=chunk) [5. EARNINGS PER SHARE](index=25&type=section&id=5.%20EARNINGS%20PER%20SHARE) The earnings per share calculation includes the revaluation of redeemable non-controlling interest Earnings Per Share Computation (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :---------------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to USPH shareholders | $10,232 | $14,620 | $11,248 | $23,063 | | Credit (charges) to retained earnings: Revaluation of redeemable non-controlling interest | $3,344 | $(5,169) | $5,473 | $(9,830) | | Tax effect at statutory rate (federal and state) of 26.25% | $(878) | $1,356 | $(1,437) | $2,580 | | Total for EPS computation | $12,698 | $10,807 | $15,284 | $15,813 | | Earnings per share (basic and diluted) | $0.99 | $0.85 | $1.19 | $1.24 | | Shares used in computation - basic and diluted | 12,843 | 12,767 | 12,820 | 12,738 | [6. REDEEMABLE NON-CONTROLLING INTEREST](index=26&type=section&id=6.%20REDEEMABLE%20NON-CONTROLLING%20INTEREST) This section details the accounting for redeemable non-controlling interests from clinic partnerships - Redeemable non-controlling interests are recorded at fair value and adjusted each period, with adjustments charged directly to retained earnings[60](index=60&type=chunk) - The redemption price is based on a **specified multiple of the partnership's trailing twelve months of earnings**[119](index=119&type=chunk) Changes in Redeemable Non-Controlling Interests (in thousands) | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :---------------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Beginning balance | $140,498 | $137,196 | $137,750 | $133,943 | | Operating results allocated to redeemable non-controlling interest partners | $2,996 | $3,378 | $4,792 | $5,773 | | Changes in the fair value of redeemable non-controlling interest | $(3,344) | $5,169 | $(5,473) | $9,830 | | Purchases of redeemable non-controlling interest | $(1,372) | $(2,604) | $(3,224) | $(4,885) | | Ending balance | $136,728 | $133,366 | $136,728 | $133,366 | [7. GOODWILL](index=28&type=section&id=7.%20GOODWILL) Goodwill increased due to acquisitions but was partially offset by a write-off related to closed clinics - The Company derecognized **$1.9 million in goodwill** for the six months ended June 30, 2020, related to permanently closed clinics due to COVID-19[121](index=121&type=chunk) - Despite the pandemic's impact, the Company determined that **goodwill and tradenames were not impaired** as of June 30, 2020[55](index=55&type=chunk) Changes in Goodwill (in thousands) | Metric | 6 Months Ended June 30, 2020 | Year Ended December 31, 2019 | | :---------------------------------------------------------- | :--------------------------- | :--------------------------- | | Beginning balance | $317,676 | $293,525 | | Goodwill acquired | $13,845 | $31,330 | | Goodwill write-off related to closed clinics | $(1,859) | $- | | Ending balance | $330,894 | $317,676 | [8. INTANGIBLE ASSETS, NET](index=28&type=section&id=8.%20INTANGIBLE%20ASSETS%2C%20NET) Net intangible assets increased to $54.9 million, comprising tradenames, referral relationships, and non-compete agreements Intangible Assets, Net (in thousands) | Asset Category | June 30, 2020 | December 31, 2019 | | :---------------------------------------------------------- | :------------ | :---------------- | | Tradenames | $31,490 | $32,049 | | Referral relationships, net | $21,517 | $18,367 | | Non-compete agreements, net | $1,888 | $2,172 | | Total | $54,895 | $52,588 | Amortization Expense for Intangible Assets (in thousands) | Asset Category | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Referral relationships | $836 | $581 | $1,449 | $1,114 | | Non-compete agreements | $87 | $169 | $264 | $338 | | Total | $923 | $750 | $1,713 | $1,452 | [9. ACCRUED EXPENSES](index=30&type=section&id=9.%20ACCRUED%20EXPENSES) Accrued expenses increased significantly due to MAAPP funds payable and deferred payroll taxes - The Company recorded **$12.8 million in Medicare Accelerated and Advance Payment Program (MAAPP) funds** as a liability[125](index=125&type=chunk) - The Company deferred depositing **$2.2 million of employer's share of Social Security taxes** under the CARES Act[51](index=51&type=chunk)[125](index=125&type=chunk) Accrued Expenses (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Salaries and related costs | $16,809 | $19,340 | | Credit balances due to patients and payors | $6,871 | $4,303 | | MAAPP funds payable | $12,861 | $- | | Deferred employer payroll taxes - CARES ACT | $2,155 | $- | | Total | $51,325 | $30,855 | [10. NOTES PAYABLE AND AMENDED CREDIT AGREEMENT](index=31&type=section&id=10.%20NOTES%20PAYABLE%20AND%20AMENDED%20CREDIT%20AGREEMENT) Total notes payable decreased to $38.3 million, with $92.0 million available on the revolving credit facility - As of June 30, 2020, **$33.0 million was outstanding** on the $125.0 million revolving credit facility, leaving **$92.0 million of availability**[129](index=129&type=chunk) - The Amended Credit Agreement's maturity date is November 30, 2021, and it allows for acquisitions, stock repurchases, and dividend payments[128](index=128&type=chunk)[216](index=216&type=chunk) Notes Payable and Amended Credit Agreement (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :---------------------------------------------------------- | :------------ | :---------------- | | Credit Agreement outstanding | $33,000 | $46,000 | | Various notes payable | $5,320 | $5,089 | | Total | $38,320 | $51,089 | | Less current portion | $(4,635) | $(728) | | Long term portion | $33,685 | $50,361 | [11. LEASES](index=32&type=section&id=11.%20LEASES) Operating lease liabilities totaled $90.8 million, with total lease costs of $19.2 million for H1 2020 - The weighted-average remaining lease term for operating leases was **4.21 years**, and the weighted-average discount rate was **3.2%** as of June 30, 2020[139](index=139&type=chunk) Components of Lease Expense (in thousands) | Lease Type | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease cost | $7,815 | $7,708 | $15,627 | $15,295 | | Short-term lease cost | $215 | $297 | $509 | $668 | | Variable lease cost | $1,514 | $1,547 | $3,046 | $3,128 | | Total lease cost | $9,544 | $9,552 | $19,182 | $19,091 | Aggregate Future Lease Payments for Operating Leases (in thousands) | Fiscal Year | Amount | | :------------------------------------------ | :----- | | 2020 (excluding six months ended June 30, 2020) | $15,568 | | 2021 | $26,363 | | 2022 | $20,565 | | 2023 | $14,968 | | 2024 | $9,439 | | 2025 and thereafter | $10,288 | | Total lease payments | $97,191 | | Less: imputed interest | $6,359 | | Total operating lease liabilities | $90,832 | [12. SEGMENT INFORMATION](index=34&type=section&id=12.%20SEGMENT%20INFORMATION) Financial performance is reported across two segments, with physical therapy operations significantly impacted by COVID-19 Net Operating Revenues by Segment (in thousands) | Segment | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Physical therapy operations | $74,199 | $116,085 | $177,040 | $225,416 | | Industrial injury prevention services | $9,658 | $10,288 | $19,534 | $17,188 | | Total Company | $83,857 | $126,373 | $196,574 | $242,604 | Gross Profit by Segment (in thousands) | Segment | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Physical therapy operations (excluding closure costs) | $16,199 | $28,433 | $33,978 | $53,610 | | Industrial injury prevention services | $3,179 | $3,005 | $4,843 | $4,542 | | Total Gross Profit | $19,284 | $31,425 | $34,975 | $58,143 | [13. COMMON STOCK](index=35&type=section&id=13.%20COMMON%20STOCK) The company has an authorized share repurchase program with approximately 185,139 shares remaining - As of June 30, 2020, approximately **185,139 shares remain available for repurchase** under the March 2009 Authorization[144](index=144&type=chunk) - The Company **did not purchase any shares** of its common stock during the six months ended June 30, 2020[144](index=144&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, highlighting the impact of COVID-19 [EXECUTIVE SUMMARY](index=36&type=section&id=EXECUTIVE%20SUMMARY) The summary details the adverse impact of COVID-19 on patient volumes and provides an update on recovery trends - The Company operates **554 outpatient physical therapy clinics** and an industrial injury prevention services business[148](index=148&type=chunk)[150](index=150&type=chunk) - COVID-19 led to the furlough/termination of **~40% of the 5,500 workforce** in March, with over 750 employees returning by early May[149](index=149&type=chunk) - Physical therapy daily patient volumes declined to **45% of normal in April** but recovered to an estimated **80-85% of pre-COVID-19 levels in July 2020**[149](index=149&type=chunk) - The industrial injury prevention business was less affected, operating at approximately **90% of normal**[149](index=149&type=chunk) [RESULTS OF OPERATIONS](index=37&type=section&id=RESULTS%20OF%20OPERATIONS) This section compares financial results, showing declines in revenue and income due to COVID-19 [Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019](index=37&type=section&id=Three%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202019) Q2 2020 net revenues decreased significantly, leading to a decline in GAAP net income [Revenues](index=40&type=section&id=Revenues) Net revenues for Q2 2020 decreased by $42.5 million (33.6%) YoY to $83.9 million due to COVID-19 - Total patient visits **decreased from 1,058,000 in Q2 2019 to 675,700 in Q2 2020**[165](index=165&type=chunk) - Average net patient revenue per visit remained stable at **$106.97 in Q2 2020** compared to $107.16 in Q2 2019[165](index=165&type=chunk) Net Revenues (in thousands) | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Reported net revenues | $83,857 | $126,373 | | Adjusted net revenues (excluding sold clinics) | $83,745 | $118,782 | | Net patient revenues (physical therapy) | $72,279 | $113,363 | | Industrial injury prevention services revenues | $9,658 | $10,288 | [Operating Costs](index=41&type=section&id=Operating%20Costs) Total operating costs decreased by $30.4 million but increased as a percentage of net revenues - Total operating costs (excluding closure costs) were **$64.5 million (76.9% of net revenues)** in Q2 2020, down from $94.9 million (75.1% of net revenues) in Q2 2019[167](index=167&type=chunk) [Operating Costs—Salaries and Related Costs](index=41&type=section&id=Operating%20Costs%E2%80%94Salaries%20and%20Related%20Costs) Salaries and related costs decreased due to staffing reductions in response to the COVID-19 pandemic - Salaries and related costs were **51.8% of net revenues** in Q2 2020, down from 55.9% in Q2 2019, due to staffing and salary reductions[169](index=169&type=chunk) [Operating Costs—Rent, Supplies, Contract Labor and Other](index=42&type=section&id=Operating%20Costs%E2%80%94Rent%2C%20Supplies%2C%20Contract%20Labor%20and%20Other) These costs decreased in absolute terms but increased as a percentage of net revenues - Rent, supplies, contract labor and other costs were **24.2% of net revenues** in Q2 2020, up from 18.2% in Q2 2019[172](index=172&type=chunk) [Operating Costs—Provision for Doubtful Accounts](index=42&type=section&id=Operating%20Costs%E2%80%94Provision%20for%20Doubtful%20Accounts) The provision for doubtful accounts remained stable, but days' sales outstanding increased - Provision for doubtful accounts was **0.9% of net revenue** in Q2 2020, compared to 1.0% in Q2 2019[174](index=174&type=chunk) - Days' sales outstanding increased to **36 days** at June 30, 2020, from 33 days at December 31, 2019[174](index=174&type=chunk) [Gross Profit](index=42&type=section&id=Gross%20Profit) Gross profit decreased significantly in Q2 2020, both in absolute terms and as a percentage of net revenue - Gross profit was **$19.4 million (23.1% of net revenue)** in Q2 2020, down from $31.4 million (24.9% of net revenues) in Q2 2019[175](index=175&type=chunk) - Gross profit for industrial injury prevention services **increased to $3.2 million (32.9%)** in Q2 2020 from $3.0 million (29.2%) in Q2 2019[176](index=176&type=chunk) [Corporate Office Costs](index=42&type=section&id=Corporate%20Office%20Costs) Corporate office costs decreased due to cost reduction measures but increased as a percentage of net revenues - Corporate office costs **decreased to $9.0 million** in Q2 2020 from $11.5 million in Q2 2019[177](index=177&type=chunk) - As a percentage of net revenues, corporate office costs **increased to 10.8%** in Q2 2020 from 9.1% in Q2 2019[177](index=177&type=chunk) [Operating Income](index=42&type=section&id=Operating%20Income) Operating income declined significantly in Q2 2020 compared to the prior year - Operating income for Q2 2020 was **$10.3 million**, down from $19.9 million in Q2 2019[178](index=178&type=chunk) - Operating income as a percentage of net revenue **decreased from 15.7% in Q2 2019 to 12.2% in Q2 2020**[178](index=178&type=chunk) [Relief Funds](index=43&type=section&id=Relief%20Funds) The company recognized $7.9 million in non-repayable relief funds from the CARES Act - Included in other income in Q2 2020 was **$7.9 million of non-repayable Relief Funds** from the CARES Act[179](index=179&type=chunk) [Gain on Sale of Partnership Interest and Clinics](index=43&type=section&id=Gain%20on%20Sale%20of%20Partnership%20Interest%20and%20Clinics) The company recognized a gain from the sale of clinics, though less than the prior year's gain - A **gain of $1.1 million** was recognized in Q2 2020 from the sale of 11 previously closed clinics[180](index=180&type=chunk) [Interest Expense](index=43&type=section&id=Interest%20Expense) Interest expense slightly increased due to higher average borrowings - Interest expense was **$653,000 in Q2 2020**, up from $607,000 in Q2 2019[181](index=181&type=chunk) [Provision for Income Taxes](index=43&type=section&id=Provision%20for%20Income%20Taxes) The provision for income taxes decreased, with the effective tax rate slightly increasing - Provision for income tax was **$3.9 million** in Q2 2020, down from $5.3 million in Q2 2019[182](index=182&type=chunk) - The effective tax rate was **27.5% in Q2 2020**, compared to 26.7% in Q2 2019[182](index=182&type=chunk)[183](index=183&type=chunk) [Net Income Attributable to Non-controlling Interests](index=43&type=section&id=Net%20Income%20Attributable%20to%20Non-controlling%20Interests) Net income attributable to non-controlling interests decreased in Q2 2020 - Net income attributable to non-controlling interests (permanent equity) was **$1.5 million** in Q2 2020, down from $1.8 million in Q2 2019[184](index=184&type=chunk) - Net income attributable to redeemable non-controlling interests (temporary equity) was **$3.0 million** in Q2 2020, down from $3.4 million in Q2 2019[184](index=184&type=chunk) Operating Results (Non-GAAP) (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | | :---------------------------------------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to USPH shareholders (GAAP) | $10,232 | $14,620 | | Operating Results (without Relief Fund) | $5,042 | $10,325 | | Operating Results (including Relief Fund) | $10,911 | $10,325 | | Basic and diluted Operating Results (without Relief Fund) per share | $0.39 | $0.81 | | Basic and diluted Operating Results (including Relief Fund) per share | $0.85 | $0.81 | [Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019](index=44&type=section&id=Six%20Months%20Ended%20June%2030%2C%202020%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202019) For H1 2020, the company experienced a substantial decline in GAAP net income [Revenues](index=46&type=section&id=Revenues) Net revenues for H1 2020 decreased by $46.0 million (19.0%) YoY to $196.6 million due to COVID-19 - Total patient visits **decreased from 2,059,000 in H1 2019 to 1,646,700 in H1 2020**[197](index=197&type=chunk) - Average net patient revenue per visit **decreased slightly to $104.70** in H1 2020 from $106.83 in H1 2019[197](index=197&type=chunk) Net Revenues (in thousands) | Metric | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Reported net revenues | $196,574 | $242,604 | | Adjusted net revenues (excluding sold clinics) | $195,625 | $228,370 | | Net patient revenues (physical therapy) | $172,405 | $220,013 | | Industrial injury prevention services revenues | $19,534 | $17,188 | [Operating Costs](index=47&type=section&id=Operating%20Costs) Total operating costs decreased in H1 2020 but increased as a percentage of net revenues - Total operating costs (excluding closure costs) were **$157.8 million (80.3% of net revenues)** in H1 2020, down from $184.5 million (76.0% of net revenues) in H1 2019[195](index=195&type=chunk) [Operating Costs—Salaries and Related Costs](index=47&type=section&id=Operating%20Costs%E2%80%94Salaries%20and%20Related%20Costs) Salaries and related costs decreased due to COVID-19 related reductions but slightly increased as a percentage of net revenues - Salaries and related costs were **57.2% of net revenues** in H1 2020, up from 56.4% in H1 2019[197](index=197&type=chunk) [Operating Costs—Rent, Supplies, Contract Labor and Other](index=48&type=section&id=Operating%20Costs%E2%80%94Rent%2C%20Supplies%2C%20Contract%20Labor%20and%20Other) These costs decreased in absolute terms but increased as a percentage of net revenues in H1 2020 - Rent, supplies, contract labor and other costs were **22.0% of net revenues** in H1 2020, up from 18.6% in H1 2019[199](index=199&type=chunk) [Operating Costs—Provision for Doubtful Accounts](index=48&type=section&id=Operating%20Costs%E2%80%94Provision%20for%20Doubtful%20Accounts) The provision for doubtful accounts remained stable, but days' sales outstanding increased - Provision for doubtful accounts was **1.1% of net revenue** in H1 2020, compared to 1.0% in H1 2019[201](index=201&type=chunk) - Days' sales outstanding increased to **36 days** at June 30, 2020, from 33 days at December 31, 2019[201](index=201&type=chunk) [Gross Profit](index=48&type=section&id=Gross%20Profit) Gross profit decreased significantly in H1 2020, both in absolute terms and as a percentage of net revenue - Gross profit was **$38.8 million (19.7% of net revenue)** in H1 2020, down from $58.2 million (24.0% of net revenues) in H1 2019[202](index=202&type=chunk) - Gross profit for industrial injury prevention services was **$4.8 million (24.8%)** in H1 2020, compared to $4.5 million (26.4%) in H1 2019[203](index=203&type=chunk) [Corporate Office Costs](index=48&type=section&id=Corporate%20Office%20Costs) Corporate office costs decreased due to cost reduction measures but increased as a percentage of net revenues - Corporate office costs **decreased to $20.7 million** in H1 2020 from $22.8 million in H1 2019[204](index=204&type=chunk) - As a percentage of net revenues, corporate office costs **increased to 10.5%** in H1 2020 from 9.4% in H1 2019[204](index=204&type=chunk) [Operating Income](index=48&type=section&id=Operating%20Income) Operating income declined substantially in H1 2020 compared to the prior year - Operating income for H1 2020 was **$14.3 million**, down from $35.3 million in H1 2019[205](index=205&type=chunk) - Operating income as a percentage of net revenue **decreased from 14.6% in H1 2019 to 7.3% in H1 2020**[205](index=205&type=chunk) [Relief Funds](index=49&type=section&id=Relief%20Funds) The company recognized $7.9 million in non-repayable relief funds from the CARES Act - Included in other income in H1 2020 was **$7.9 million of non-repayable Relief Funds** from the CARES Act[206](index=206&type=chunk) [Gain on Sale of Partnership Interest and Clinics](index=49&type=section&id=Gain%20on%20Sale%20of%20Partnership%20Interest%20and%20Clinics) The company recognized a gain from the sale of clinics, though less than the prior year's gain - A **gain of $1.1 million** was recognized in H1 2020 from the sale of 11 previously closed clinics[207](index=207&type=chunk) [Interest Expense](index=49&type=section&id=Interest%20Expense) Interest expense slightly increased in H1 2020 due to higher average borrowings - Interest expense was **$1.1 million in H1 2020**, up from $1.0 million in H1 2019[208](index=208&type=chunk) [Provision for Income Taxes](index=49&type=section&id=Provision%20for%20Income%20Taxes) The provision for income taxes decreased, with the effective tax rate slightly increasing - Provision for income tax was **$4.2 million** in H1 2020, down from $8.0 million in H1 2019[209](index=209&type=chunk) - The effective tax rate was **27.1% in H1 2020**, compared to 25.8% in H1 2019[209](index=209&type=chunk)[210](index=210&type=chunk) [Net Income Attributable to Non-controlling Interests](index=49&type=section&id=Net%20Income%20Attributable%20to%20Non-controlling%20Interests) Net income attributable to non-controlling interests decreased in H1 2020 - Net income attributable to non-controlling interests (permanent equity) was **$2.0 million** in H1 2020, down from $3.3 million in H1 2019[211](index=211&type=chunk) - Net income attributable to redeemable non-controlling interests (temporary equity) was **$4.8 million** in H1 2020, down from $5.8 million in H1 2019[211](index=211&type=chunk) Operating Results (Non-GAAP) (in thousands, except per share data) | Metric | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :---------------------------------------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to USPH shareholders (GAAP) | $11,248 | $23,063 | | Operating Results (without Relief Fund) | $8,923 | $18,768 | | Operating Results (including Relief Fund) | $14,792 | $18,768 | | Basic and diluted Operating Results (without Relief Fund) per share | $0.70 | $1.47 | | Basic and diluted Operating Results (including Relief Fund) per share | $1.15 | $1.47 | [LIQUIDITY AND CAPITAL RESOURCES](index=49&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Cash and cash equivalents increased to $43.5 million, supported by operating activities and Medicare advances - Cash and cash equivalents **increased by $20.0 million** from December 31, 2019, to June 30, 2020, reaching **$43.5 million**[212](index=212&type=chunk)[214](index=214&type=chunk) - Operating activities provided **$48.4 million in cash**, and **$12.9 million was received from the Medicare Accelerated and Advance Payment Program** (MAAPP)[214](index=214&type=chunk) - Major uses of cash included a net reduction in the credit line ($33.0 million), business acquisitions ($11.6 million), and cash dividends paid ($4.1 million)[214](index=214&type=chunk) - The company has a **$125.0 million revolving credit facility**, with $33.0 million outstanding and **$92.0 million available** as of June 30, 2020[215](index=215&type=chunk)[216](index=216&type=chunk) [FACTORS AFFECTING FUTURE RESULTS](index=51&type=section&id=FACTORS%20AFFECTING%20FUTURE%20RESULTS) Future results are subject to risks from public health crises, healthcare regulations, and competition - Key risks include the financial magnitude of public health crises like COVID-19, changes in Medicare rules, and governmental audits[227](index=227&type=chunk) - Other factors include general economic conditions, availability of qualified therapists, and the competitive environment[233](index=233&type=chunk) [Forward-Looking Statements](index=52&type=section&id=Forward-Looking%20Statements) This section clarifies that the report contains forward-looking statements involving risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, including those related to new clinics and reimbursement[230](index=230&type=chunk) - The company is under **no obligation to update any forward-looking statement**[231](index=231&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company's primary market risk exposure is to changes in interest rates on its variable-rate credit facility - The company's primary market risk is from changes in interest rates on its variable-rate Amended Credit Agreement[232](index=232&type=chunk) - A **1% change in the interest rate** would result in an annual interest expense change of **$330,000**[232](index=232&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2020 - The principal executive and financial officers concluded that **disclosure controls and procedures were effective** as of June 30, 2020[234](index=234&type=chunk) - Internal controls were added or modified in Q2 2020 to address COVID-19 risks and changes in segment reporting[235](index=235&type=chunk) [PART II—OTHER INFORMATION](index=48&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal actions, including a qui tam lawsuit in Florida - The company is a party to various legal actions, including potential lawsuits under the federal False Claims Act[237](index=237&type=chunk)[238](index=238&type=chunk) - A qui tam lawsuit filed in August 2019 alleges **'upcoding' of Medicare billings** by a majority-owned subsidiary[239](index=239&type=chunk)[240](index=240&type=chunk) - The company believes the allegations in the Florida litigation **have no merit** and intends to vigorously defend the action[242](index=242&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, emphasizing the adverse impact of public health crises like COVID-19 - The company is subject to risks from public health crises such as COVID-19, which has caused disruption and economic uncertainty[245](index=245&type=chunk) - COVID-19 has led to **significant and unpredictable reductions and cancellations** of physical therapy patient appointments[246](index=246&type=chunk)[247](index=247&type=chunk) - The exercise of 'put' rights by partners to sell their redeemable non-controlling interests could adversely impact the company's capital structure[248](index=248&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data - Exhibits include **Rule 13a-14(a)/15d-14(a) Certifications** from the CEO, CFO, and Corporate Controller[250](index=250&type=chunk) - **XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents** are also filed as exhibits[250](index=250&type=chunk) [Signatures](index=57&type=section&id=Signatures) The report is duly signed by the Chief Financial Officer and Corporate Controller as of August 7, 2020 - The report was signed on **August 7, 2020**, by Lawrance W. McAfee, Chief Financial Officer, and Jon C. Bates, Vice President/Corporate Controller[254](index=254&type=chunk)