U.S. Physical Therapy, Inc. (NYSE:USPH) Q1 2020 Earnings Conference Call May 21, 2020 10:30 AM ET Company Participants Chris Reading - Chief Executive Officer Jon Bates - Vice President & Controller Larry McAfee - Executive Vice President & Chief Financial Officer Graham Reeve - Chief Operating Officer, East Conference Call Participants Larry Solow - CJS Securities Brian Tanquilut - Jefferies Matt Larew - William Blair Mike Petusky - Barrington Research Operator Ladies and gentlemen, thank you for standing ...

[EXPLANATORY NOTE](index=2&type=section&id=EXPLANATORY%20NOTE) The company delayed its **Form 10-Q** filing due to **COVID-19** disruptions, relying on **SEC Release No. 34-88465** - The filing of the **Form 10-Q** was delayed due to **COVID-19 pandemic disruptions**, including government restrictions and limited access to facilities and staff support[6](index=6&type=chunk) - The Company relied on **SEC Release No. 34-88465** to delay the filing of this Report[6](index=6&type=chunk) [PART I—FINANCIAL INFORMATION - UNAUDITED](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION%20-%20UNAUDITED) [Item 1. Financial Statements.](index=4&type=section&id=Item%201.%20Financial%20Statements.) **U.S. Physical Therapy, Inc.**'s unaudited consolidated financial statements and comprehensive explanatory notes are presented [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) **Cash and cash equivalents** significantly increased to **$89.6 million** by March 31, 2020, primarily due to increased borrowings, driving total assets Consolidated Balance Sheet Data | Metric | Dec 31, 2019 (in thousands) | Mar 31, 2020 (in thousands) | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Cash and cash equivalents | $23,548 | $89,551 | +$66,003 | | Patient accounts receivable, net | $46,228 | $42,649 | -$3,579 | | Total current assets | $85,386 | $148,672 | +$63,286 | | Total assets | $560,845 | $643,253 | +$82,408 | | Revolving line of credit | $46,000 | $114,000 | +$68,000 | | Total liabilities | $181,394 | $260,451 | +$79,057 | | Total USPH shareholders' equity | $240,257 | $241,064 | +$807 | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) **Net revenues** declined and **net income attributable to USPH shareholders** substantially decreased in Q1 2020 due to **COVID-19 impacts** and increased operating costs Consolidated Statements of Income Data | Metric (Three Months Ended March 31) | 2020 (in thousands) | 2019 (in thousands) | Change | | :----------------------------------- | :------------------ | :------------------ | :----- | | Net revenues | $112,717 | $116,231 | -$3,514 | | Total operating costs | $97,026 | $89,513 | +$7,513 | | Gross profit | $15,691 | $26,718 | -$11,027 | | Operating income | $4,014 | $15,425 | -$11,411 | | Net income attributable to USPH shareholders | $1,016 | $8,443 | -$7,427 | | Basic and diluted EPS attributable to USPH shareholders | $0.20 | $0.39 | -$0.19 | | Dividends declared per common share | $0.32 | $0.27 | +$0.05 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) **Cash and cash equivalents** significantly increased by **$66.0 million** in Q1 2020, driven by **financing activities** and increased borrowings Consolidated Statements of Cash Flows Data | Metric (Three Months Ended March 31) | 2020 (in thousands) | 2019 (in thousands) | Change | | :----------------------------------- | :------------------ | :------------------ | :----- | | Net cash provided by operating activities | $16,380 | $13,563 | +$2,817 | | Net cash used in investing activities | $(15,923) | $(4,630) | -$11,293 | | Net cash provided by (used in) financing activities | $65,546 | $(12,063) | +$77,609 | | Net increase in cash and cash equivalents | $66,003 | $(3,130) | +$69,133 | | Cash and cash equivalents - end of period | $89,551 | $20,238 | +$69,313 | [Consolidated Statements of Changes in Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total shareholders' equity increased slightly to **$241.1 million** by March 31, 2020, influenced by **net income** and **equity compensation** Consolidated Statements of Changes in Equity Data | Metric (Three Months Ended March 31, 2020) | Amount (in thousands) | | :----------------------------------------- | :-------------------- | | Balance December 31, 2019 | $240,257 | | Net income attributable to USPH shareholders | $1,016 | | Revaluation of redeemable non-controlling interest, net of tax | $1,570 | | Compensation expense - equity-based awards | $1,886 | | Dividends payable to USPT shareholders | $(4,110) | | Balance March 31, 2020 | $241,064 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the company's operations, recent acquisitions, and the significant impact of **COVID-19** on its financial policies and presentation - The Company operates **567 clinics** in 39 states and an **industrial injury prevention business** as of March 31, 2020, with **30 third-party facilities** under management[26](index=26&type=chunk) - On February 27, 2020, the Company acquired interests in a four-clinic **physical therapy practice** for **$11.9 million** (**$11.6 million cash**, **$0.3 million seller note**)[21](index=21&type=chunk)[81](index=81&type=chunk) - The **COVID-19 pandemic** has caused significant disruptions, leading to a decline in **patient visits** (as low as **45% of normal** in April, currently slightly over **60%**), closure of **69 clinics** (**35 permanently**), **furloughs/terminations of over 2,150 employees** (**40% of workforce**), and **salary reductions** for corporate staff and executives, resulting in estimated **annualized savings** of **$87 million**[75](index=75&type=chunk) - The Company received **$12.3 million** from the **Medicare Accelerated and Advance Payments Program (MAAPP)** and **$5.9 million** from the **Public Health and Social Services Emergency Fund (Relief Fund)** under the **CARES Act**, and is deferring employer payroll taxes[77](index=77&type=chunk)[78](index=78&type=chunk) - The Company derecognized **$1.9 million** in **goodwill** related to clinics permanently closed due to **COVID-19**[50](index=50&type=chunk)[126](index=126&type=chunk) - The Company adopted **ASU 2016-13 (CECL)** and **ASU 2017-04 (Goodwill Impairment)** on January 1, 2020, with no material impact on financial statements[71](index=71&type=chunk)[72](index=72&type=chunk) [2. ACQUISITIONS OF BUSINESSES](index=15&type=section&id=2.%20ACQUISITIONS%20OF%20BUSINESSES) This note details the company's 2020 and 2019 acquisitions, outlining purchase prices and preliminary asset allocation, including **goodwill** and **intangibles** - On February 27, 2020, the Company acquired interests in a four-clinic **physical therapy practice** for **$11.9 million** (**$11.6 million cash**, **$0.3 million seller note**), resulting in a **65.0%** overall ownership[81](index=81&type=chunk) 2020 Acquisition Allocation Data | 2020 Acquisition Allocation (in thousands) | Amount | | :--------------------------------------- | :----- | | Total consideration | $11,933 | | Net tangible assets acquired | $922 | | Referral relationships | $1,600 | | Non-compete | $750 | | Tradename | $1,500 | | Goodwill | $13,632 | | Fair value of non-controlling interest | $(6,471) | - 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 company** for **$22.9 million**, increasing its ownership in Briotix Health to approximately **76.0%**[86](index=86&type=chunk)[158](index=158&type=chunk) 2019 Acquisition Allocation Data | 2019 Acquisition Allocation (in thousands) | IIPS | Clinic Practice | Total | | :--------------------------------------- | :--- | :-------------- | :---- | | Total consideration | $22,913 | $12,470 | $35,383 | | Net tangible assets acquired | $(365) | $908 | $543 | | Referral relationships | $1,500 | $1,500 | $3,000 | | Non-compete | $590 | $700 | $1,290 | | Tradename | $2,500 | $1,600 | $4,100 | | Goodwill | $18,688 | $13,991 | $32,679 | | Fair value of non-controlling interest | - | $(6,229) | $(6,229) | [3. REVENUE RECOGNITION](index=17&type=section&id=3.%20REVENUE%20RECOGNITION) This note details **revenue recognition** policies across services, discussing **Medicare** changes, **telehealth waivers**, and **contractual allowance** methodology Revenue Category Data | Revenue Category (Three Months Ended March 31) | 2020 (in thousands) | 2019 (in thousands) | Change | | :--------------------------------------------- | :------------------ | :------------------ | :----- | | Net patient revenues | $100,126 | $106,650 | -$6,524 | | Management contract revenues | $2,149 | $2,146 | +$3 | | Industrial injury prevention services revenues | $9,876 | $6,900 | +$2,976 | | Other revenues | $566 | $535 | +$31 | | Total Net revenues | $112,717 | $116,231 | -$3,514 | - **Medicare reimbursement** for physical/occupational therapy services could see an estimated **8%** decrease in payment effective January 1, 2021, due to proposed changes in code valuations[102](index=102&type=chunk) - Effective March 1, 2020, CMS provided a temporary waiver allowing physical and occupational therapists to perform and be reimbursed for **telehealth visits** for **Medicare beneficiaries**, applicable to approximately **60%** of the Company's clinics enrolled as private practices[103](index=103&type=chunk) - The **CARES Act** temporarily suspended the **2% Medicare payment adjustment** from May 1, 2020, through December 31, 2020[106](index=106&type=chunk) - **Net patient revenue** from **Medicare** was approximately **$27.5 million** in Q1 2020, down from **$28.3 million** in Q1 2019[112](index=112&type=chunk) [4. EARNINGS PER SHARE](index=21&type=section&id=4.%20EARNINGS%20PER%20SHARE) This note details **basic and diluted EPS** computation, highlighting the inclusion of **revaluation of redeemable non-controlling interest** EPS Computation Data | EPS Computation (Three Months Ended March 31) | 2020 (in thousands, except per share) | 2019 (in thousands, except per share) | | :-------------------------------------------- | :------------------------------------ | :------------------------------------ | | Net income attributable to USPH shareholders | $1,016 | $8,443 | | Revaluation of redeemable non-controlling interest | $2,129 | $(4,661) | | Tax effect at statutory rate (26.25%) | $(559) | $1,224 | | Total for EPS calculation | $2,586 | $5,006 | | Earnings per share (basic and diluted) | $0.20 | $0.39 | | Shares used in computation | 12,796 | 12,707 | [5. REDEEMABLE NON-CONTROLLING INTEREST](index=21&type=section&id=5.%20REDEEMABLE%20NON-CONTROLLING%20INTEREST) This note explains **redeemable non-controlling interests** in clinic partnerships, their accounting treatment, and changes in carrying amount - **Redeemable non-controlling interests** are equity interests in acquired partnerships held by selling shareholders, subject to **put/call rights** based on a multiple of trailing twelve months earnings[122](index=122&type=chunk) - The **revaluation of redeemable non-controlling interest**, net of tax, is adjusted directly to **retained earnings** and included in **EPS calculation**, but not net income[54](index=54&type=chunk)[117](index=117&type=chunk) Changes in Redeemable Non-Controlling Interests Data | Changes in Redeemable Non-Controlling Interests (in thousands) | Three Months Ended March 31, 2020 | Year Ended December 31, 2019 | | :----------------------------------------------------------- | :-------------------------------- | :--------------------------- | | Beginning balance | $137,750 | $133,943 | | Operating results allocated | $1,796 | $10,659 | | Distributions | $(1,611) | $(10,221) | | Changes in fair value | $(2,129) | $11,893 | | Purchases | $(1,852) | $(8,934) | | Acquired interest | $6,471 | $6,230 | | Ending balance | $140,498 | $137,750 | [6. GOODWILL](index=24&type=section&id=6.%20GOODWILL) This note details changes in **goodwill**, including acquisitions and a **$1.9 million** write-off for **COVID-19** related clinic closures Changes in Goodwill Data | Changes in Goodwill (in thousands) | Three Months Ended March 31, 2020 | Year Ended December 31, 2019 | | :--------------------------------- | :-------------------------------- | :--------------------------- | | Beginning balance | $317,676 | $293,525 | | Goodwill acquired | $13,632 | $31,330 | | Goodwill write-off related to closed clinics | $(1,859) | - | | Goodwill adjustments | $1,320 | $146 | | Ending balance | $330,769 | $317,676 | - The Company derecognized (wrote-off) **$1.9 million** in **goodwill** related to permanently closed clinics due to **COVID-19**[50](index=50&type=chunk)[126](index=126&type=chunk) - Despite current economic conditions and declining **patient visits** in March 2020 due to the **COVID-19 pandemic**, the Company determined that **goodwill** and **tradenames** of reporting units were not impaired as of March 31, 2020[47](index=47&type=chunk) [7. INTANGIBLE ASSETS, NET](index=24&type=section&id=7.%20INTANGIBLE%20ASSETS,%20NET) This note provides a breakdown of **intangible assets**, their **amortization periods**, and the **amortization expense** incurred for the quarter Intangible Assets Data | Intangible Assets (in thousands) | March 31, 2020 | December 31, 2019 | | :------------------------------- | :------------- | :---------------- | | Tradenames | $33,549 | $32,049 | | Referral relationships, net | $19,354 | $18,367 | | Non-compete agreements, net | $2,745 | $2,172 | | Total | $55,648 | $52,588 | Amortization Expense Data | Amortization Expense (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Referral relationships | $613 | $533 | | Non-compete agreements | $177 | $169 | | Total | $790 | $702 | - **Tradenames** have an indefinite life and are tested annually for **impairment**; **referral relationships** are amortized over **6-16 years**, and **non-compete agreements** over **5-6 years**[127](index=127&type=chunk) [8. ACCRUED EXPENSES](index=25&type=section&id=8.%20ACCURRED%20EXPENSES) This note details **accrued expenses**, which significantly increased due to **dividends payable** and **COVID-19** related **closure costs** Accrued Expenses Data | Accrued Expenses (in thousands) | March 31, 2020 | December 31, 2019 | | :------------------------------ | :------------- | :---------------- | | Salaries and related costs | $19,230 | $19,340 | | Credit balances due to patients and payors | $5,115 | $4,303 | | Group health insurance claims | $2,499 | $2,277 | | Dividends payable | $4,110 | - | | Closure costs | $1,843 | - | | Federal income taxes payable | $1,891 | - | | Other | $5,957 | $4,935 | | Total | $40,645 | $30,855 | - **Closure costs** of **$1.8 million** are included, primarily for remaining **lease commitments** and write-off of leasehold improvements for **22 clinics** closed in late March due to **COVID-19**[129](index=129&type=chunk) [9. NOTES PAYABLE AND AMENDED CREDIT AGREEMENT](index=25&type=section&id=9.%20NOTES%20PAYABLE%20AND%20AMENDED%20CREDIT%20AGREEMENT) This note details the company's debt structure, increased borrowings, and ongoing discussions for **credit agreement covenant** amendments due to **COVID-19** Notes Payable and Credit Agreement Data | Notes Payable & Credit Agreement (in thousands) | March 31, 2020 | December 31, 2019 | | :-------------------------------------------- | :------------- | :---------------- | | Credit Agreement outstanding | $114,000 | $46,000 | | Various notes payable | $5,330 | $5,089 | | Total | $119,330 | $51,089 | | Less current portion | $(728) | $(728) | | Long term portion | $118,602 | $50,361 | - The Company has a **$125.0 million revolving credit facility**, with **$114.0 million** outstanding as of March 31, 2020, and has since drawn all available funds (**$125.0 million**)[132](index=132&type=chunk)[182](index=182&type=chunk) - The Company was in compliance with all **credit agreement covenants** as of March 31, 2020, but is in discussions with its lender for an amendment to maintain compliance by the end of Q2 2020 due to **COVID-19** uncertainties[134](index=134&type=chunk)[185](index=185&type=chunk) - Subsequent aggregate annual payments of principal required for **notes payable** and the **credit agreement** are **$728,000** for the **12 months** ended March 31, 2021, and **$118.6 million** for the **12 months** ended March 31, 2022[136](index=136&type=chunk) [10. LEASES](index=26&type=section&id=10.%20LEASES) This note details **operating lease accounting** under **ASC 842**, including **right-of-use assets**, **liabilities**, **lease expenses**, and future payment obligations Lease Expense Data | Lease Expense (in thousands) | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--------------------------- | :-------------------------------- | :-------------------------------- | | Operating lease cost | $7,812 | $7,587 | | Short-term lease cost | $294 | $371 | | Variable lease cost | $1,532 | $1,581 | | Total lease cost | $9,638 | $9,539 | Future Lease Payments Data | Future Lease Payments (in thousands) | Amount | | :----------------------------------- | :----- | | 2020 (excluding Q1) | $22,273 | | 2021 | $24,801 | | 2022 | $18,922 | | 2023 | $13,514 | | 2024 | $8,298 | | 2025 and therafter | $9,318 | | Total lease payments | $97,126 | | Less: imputed interest | $7,723 | | Total operating lease liabilities | $89,403 | - The weighted-average remaining lease term for **operating leases** was **4.25 years** at March 31, 2020, with a weighted-average discount rate of **3.9%**[142](index=142&type=chunk) [11. COMMON STOCK](index=27&type=section&id=11.%20COMMON%20STOCK) This note outlines the company's **common stock repurchase program**, detailing shares purchased and remaining available for repurchase - The Company has an authorized **share repurchase program** (**March 2009 Authorization**) for up to **1.2 million shares**, with no expiration date[143](index=143&type=chunk) - As of March 31, 2020, **859,499 shares** have been purchased, with an estimated **217,391 shares** remaining for repurchase. No shares were purchased during the three months ended March 31, 2020[144](index=144&type=chunk)[197](index=197&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's **financial condition** and **results of operations**, focusing on **COVID-19** impacts, mitigation strategies, and Q1 2020 performance [EXECUTIVE SUMMARY](index=28&type=section&id=EXECUTIVE%20SUMMARY) This summary highlights **COVID-19's** adverse impact on **patient volumes** and operations, detailing immediate mitigation strategies and **cost-saving measures** - The Company operates **outpatient physical therapy clinics** and an **industrial injury prevention business**[147](index=147&type=chunk)[154](index=154&type=chunk) - **COVID-19** caused significant and unpredictable reductions in **patient visits**, declining to as low as **45% of normal** in April and currently slightly above **60% of normal**[149](index=149&type=chunk)[152](index=152&type=chunk) - **Mitigation efforts** include **furloughing/terminating over 2,150 employees** (**40% of workforce**), implementing **salary reductions** (**20-25%** for corporate, **35-40%** for executives, **50%** for Board), and pursuing telehealth solutions, lease renegotiations, and delayed acquisitions, with estimated **annualized savings** of **$87 million**[152](index=152&type=chunk) Operating Statistics Data | Operating Statistics (without sold clinics) | Feb 29, 2020 (2 months) | Feb 28, 2019 (2 months) | % Change | Mar 31, 2020 (1 month) | Mar 31, 2019 (1 month) | % Change | Mar 31, 2020 (3 months) | Mar 31, 2019 (3 months) | % Change | | :---------------------------------------- | :---------------------- | :---------------------- | :------- | :--------------------- | :--------------------- | :------- | :---------------------- | :---------------------- | :------- | | Net revenues (in thousands) | $78,193 | $72,232 | 8.3% | $34,524 | $38,314 | -9.9% | $112,717 | $110,546 | 2.0% | | Number of clinics, at end of period | 587 | 561 | | 567 | 559 | | 567 | 559 | | | Average visits per day per clinic | 27.7 | 26.5 | | 22.7 | 27.9 | | 26.2 | 27.0 | | | Total patient visits | 676,328 | 623,943 | | 294,695 | 328,288 | | 971,023 | 952,231 | | | Net patient revenue per visit | $103.06 | $105.89 | | $103.22 | $106.29 | | $103.11 | $106.02 | | [RESULTS OF OPERATIONS](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) Q1 2020 **operating results** show a significant decline in **GAAP net income** and **diluted EPS** due to **COVID-19** and increased **operating costs** Operating Results Summary | Metric (Three Months Ended March 31) | 2020 (in thousands, except per share) | 2019 (in thousands, except per share) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Net income attributable to USPH shareholders (GAAP) | $1,016 | $8,443 | | Diluted EPS (GAAP) | $0.20 | $0.39 | | Operating Results (Non-GAAP) | $3,881 | $8,443 | | Basic and diluted Operating Results per share (Non-GAAP) | $0.30 | $0.66 | - **Net revenues** for Q1 2020 were **$112.7 million**, a **2.0%** increase from adjusted Q1 2019 revenues (excluding sold clinics), despite **COVID-19** impacts[166](index=166&type=chunk) - **Net patient revenues** decreased by **$6.5 million** (**6.1%**) to **$100.1 million**, primarily due to **$5.7 million** lost from sold clinics and **COVID-19** effects. Total **patient visits** were **971,000**, down from **1,001,510** (including sold clinics) in Q1 2019[166](index=166&type=chunk) - **Industrial injury prevention business revenue** increased **43.1%** to **$9.9 million**, driven by internal growth and a 2019 acquisition, despite an estimated **$126,000** loss due to the **COVID-19 pandemic**[166](index=166&type=chunk) - **Total operating costs** (excluding **closure costs**) increased by **$3.8 million** to **$93.3 million** (**82.7% of net revenues**) in Q1 2020, up from **$89.5 million** (**77.0%**) in Q1 2019. **Closure costs** of **$3.8 million** were incurred in Q1 2020[167](index=167&type=chunk) - **Operating income** for Q1 2020 was **$4.0 million**, a significant decrease from **$15.4 million** in Q1 2019, with **operating income** as a percentage of **net revenue** falling from **13.3%** to **3.6%**[175](index=175&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=34&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains strong **liquidity** with **$89.5 million** cash, supported by a fully drawn **credit facility** and **CARES Act** funds, managing debt and covenants - **Cash and cash equivalents** increased from **$23.5 million** at Dec 31, 2019, to **$89.5 million** at March 31, 2020, and further to approximately **$110.0 million** by the filing date[181](index=181&type=chunk)[182](index=182&type=chunk) - The Company has fully drawn its **$125.0 million revolving credit facility** and received **$12.4 million** from **MAAPP** and **$5.7 million** from the **Relief Fund** under the **CARES Act**[182](index=182&type=chunk) - The Company was in compliance with **credit agreement covenants** as of March 31, 2020, but is discussing amendments with its lender to ensure continued compliance by the end of Q2 2020[185](index=185&type=chunk) - Major **cash uses** in Q1 2020 included **$11.6 million** for acquisitions, **$2.3 million** for **non-controlling interest distributions**, **$2.7 million** for **fixed assets**, and **$1.9 million** for **redeemable non-controlling interest purchases**[186](index=186&type=chunk) - The Company did not purchase any shares of its **common stock** during Q1 2020, with approximately **217,391 shares** remaining available for repurchase under its program[197](index=197&type=chunk) [FACTORS AFFECTING FUTURE RESULTS](index=36&type=section&id=FACTORS%20AFFECTING%20FUTURE%20RESULTS) This section highlights risks from **COVID-19**, **healthcare regulations**, **legal actions**, economic conditions, and operational challenges affecting future results - The company is subject to significant risks from **public health crises** like **COVID-19**, which has an unquantifiable financial magnitude and could cause a global recession[202](index=202&type=chunk)[216](index=216&type=chunk) - Key risks include changes in **Medicare rules** and **reimbursement rates**, **governmental audits**, compliance with **privacy laws (HIPAA)**, **legal actions**, availability of **qualified personnel**, and **competitive pressures**[202](index=202&type=chunk) - The impact on business and **cash reserves** resulting from the retirement or resignation of key partners and the resulting purchase of their **non-controlling interests** is also a significant risk[202](index=202&type=chunk)[219](index=219&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company's primary **market risk exposure** is **interest rate** changes on its variable-rate **credit agreement**, with a **$1.14 million** annual impact per **1%** change - The primary **market risk exposure** is to changes in **interest rates** on the variable-rate **Amended Credit Agreement**[204](index=204&type=chunk) - A **1%** change in the **interest rate** would result in an **annual interest expense** change of **$1.14 million**, based on **$114.0 million** outstanding at March 31, 2020[204](index=204&type=chunk) - The Company does not maintain any **derivative instruments**, interest rate swap arrangements, hedging contracts, or futures contracts[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) **Disclosure controls and procedures** were effective as of March 31, 2020, with no **material changes** in **internal control over financial reporting** - **Disclosure controls and procedures** were evaluated and deemed effective as of March 31, 2020[205](index=205&type=chunk) - No **material changes** in **internal control over financial reporting** occurred during Q1 2020[206](index=206&type=chunk) - The adoption of **new accounting standards** (**CECL** and **goodwill impairment**) on January 1, 2020, had no significant impact on **internal control over financial reporting**[206](index=206&type=chunk) [PART II—OTHER INFORMATION](index=38&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending a **qui tam lawsuit** alleging **Medicare** "upcoding" by a subsidiary, with the **government** declining to intervene - The Company is a party to various **legal actions**, proceedings, claims, and **regulatory audits** in the ordinary course of business[208](index=208&type=chunk) - A **qui tam lawsuit**, U.S. ex rel. Bonnie Elsdon, v. **U.S. Physical Therapy, Inc.**, was filed in August 2019, alleging "upcoding" of **Medicare billings** by The Hale Hand Center, Limited Partnership[210](index=210&type=chunk)[211](index=211&type=chunk) - The **U.S. Government** declined to intervene in the **lawsuit**, and the Company believes the **allegations lack merit** and intends to **vigorously defend the action**[210](index=210&type=chunk)[213](index=213&type=chunk) [Item 1A. RISK FACTORS.](index=39&type=section&id=Item%201A.%20RISK%20FACTORS.) This section updates **risk factors**, emphasizing **COVID-19's** uncertain impact, **Medicare** changes, **regulatory compliance**, and **personnel availability** - The company is subject to risks associated with **public health crises** and **epidemics/pandemics**, such as **COVID-19**, which has caused disruption and volatility in global **capital markets** and an **economic slowdown**[216](index=216&type=chunk) - **COVID-19** is adversely impacting operations through increased patient appointment cancellations and declines in new appointments, leading to significant and unpredictable reductions in **patient visits**[217](index=217&type=chunk) - The extent of **COVID-19's** impact on the business, **financial condition**, and **results of operations** remains uncertain[218](index=218&type=chunk) - The company faces risks related to changes in **Medicare rules**, **governmental audits**, **legal actions**, availability of **qualified personnel**, and the financial impact of purchasing **non-controlling interests** from retiring or resigning partners[202](index=202&type=chunk)[219](index=219&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the **Form 10-Q**, including **certifications**, **incentive plans**, and amendments to **employment agreements** - Exhibits include **Rule 13a-14(a)/15d-14(a) Certifications** of the **Chief Executive Officer**, **Chief Financial Officer**, and **Corporate Controller**, as well as **Certification Pursuant to 18 U.S.C 1350**[221](index=221&type=chunk) - **Long-term incentive plans** and amendments to **employment agreements** for **senior management** are also filed as exhibits[221](index=221&type=chunk) [Signatures](index=41&type=section&id=Signatures) The report was duly signed by the **Chief Financial Officer** and **Corporate Controller** on behalf of **U.S. Physical Therapy, Inc.** on May 21, 2020 - The report was signed by Lawrance W. McAfee, **Chief Financial Officer**, and Jon C. Bates, **Vice President/Corporate Controller**, on May 21, 2020[226](index=226&type=chunk)

TABLE OF CONTENTS 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, 2019 OR o 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 ...

U.S. Physical Therapy, Inc. (NYSE:USPH) Q4 2019 Earnings Conference Call February 27, 2020 10:30 AM ET Company Participants Chris Reading - Chief Executive Officer Larry McAfee - Executive Vice President & Chief Financial Officer Jon Bates - Vice President & Controller Graham Reeve - COO, East Glenn McDowell - COO Rick Binstein - General Counsel Conference Call Participants Brian Tanquilut - Jefferies Larry Solow - CJS Securities Matt Larew - William Blair Mitra Ramgopal - Sidoti Operator Ladies and gentlem ...

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, 2019 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 OTH ...

U.S. Physical Therapy, Inc. (NYSE:USPH) Q3 2019 Results Earnings Conference Call November 7, 2019 10:30 AM ET Company Participants Chris Reading - Chief Executive Officer Larry McAfee - Executive Vice President & Chief Financial Officer Jon Bates - Vice President & Controller Graham Reeve - COO, East Conference Call Participants Brian Tanquilut - Jefferies Larry Solow - CJS Securities Matt Larew - William Blair Mitra Ramgopal - Sidoti Operator Good morning. My name is Sia and I will be the conference operat ...

U.S. Physical Therapy, Inc. (NYSE:USPH) Q2 2019 Earnings Conference Call August 8, 2019 10:30 AM ET Company Participants Chris Reading - Chief Executive Officer Larry McAfee - Executive Vice President & Chief Financial Officer Jon Bates - Vice President & Controller Conference Call Participants Brian Tanquilut - Jefferies Larry Solow - CJS Securities Matt Larew - William Blair Mitra Ramgopal - Sidoti Operator Good morning, ladies and gentlemen, and welcome to the U.S. Physical Therapy Second Quarter 2019 Ea ...

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, 2019 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 | Large accelerated filer | ☐ | Accelerated filer | ☒ | | --- | --- | --- | --- | | | | Smaller reporting | | | Non-acc ...

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, 2019 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 INC ...

Financial Data and Key Metrics Changes - Revenue increased by 7.3% in Q1 2019 to $116.2 million, with PT operations revenue rising by 6.1% to $106.7 million due to a 4.7% increase in patient visits [11][12] - Operating income increased by 18.2% to $15.4 million, with operating income as a percentage of revenue rising by 130 basis points from 12% to 13.3% [12][13] - Adjusted EBITDA grew by 11.7% to $15.6 million, with adjusted EBITDA as a percentage of net revenue increasing by 50 basis points from 12.9% to 13.4% [14] Business Line Data and Key Metrics Changes - Same-store revenue for Physical Therapy increased by 4.7%, with gross profit percentage improving by 120 basis points [6][11] - Industrial injury prevention business revenue increased by 42% to $6.9 million, primarily driven by internal growth rather than acquisitions [11][12] - Gross profit for the industrial injury prevention business improved by 650 basis points compared to Q1 2018 [6] Market Data and Key Metrics Changes - Patient visits exceeded 1 million for the quarter, with average net rate per visit increasing to $106.49 from $105.15 [11] - Average visits per day in clinics increased from 25.7 to 26.9 [11] Company Strategy and Development Direction - The company is focused on margin expansion and cost control, with recent acquisitions aimed at enhancing service offerings and cross-selling opportunities [8][9] - The management expressed confidence in the growth potential of the industrial injury prevention segment, expecting margins to settle higher than those of Physical Therapy [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of adverse weather conditions on performance but expressed optimism about future growth as the weather improves [19] - The company plans to continue investing in its industrial injury prevention business, including hiring additional resources in accounting and technology [53] Other Important Information - The provision for income taxes decreased to 24.3% from 25.8% year-over-year [13] - The company reported exceptional net cash flow, allowing for a significant reduction in its credit line [14] Q&A Session Summary Question: Thoughts on same-store sales growth and weather impact - Management noted that despite poor weather conditions, the performance was strong, and they are optimistic about continuing this trend [19] Question: Pricing trends and expectations - The net rate was higher than budgeted, and while it fluctuates, it is expected to remain at a reasonable level [20][21] Question: Clinic count and growth expectations - Management indicated that clinic openings have been steady, with a focus on meaningful long-term benefits rather than just increasing numbers [28][29] Question: Industrial injury prevention business cross-sell opportunities - Integration between the physical therapy and injury prevention sides is beginning, with expectations for future growth from this collaboration [31][32] Question: Cost per visit trends and efficiency - Management highlighted challenges in managing part-time staff and labor market inflation but remains optimistic about maintaining cost efficiency [35][36] Question: Tax rate assumptions in guidance - The assumed tax rate for guidance was set at 26.5%, with variations in the first quarter due to restricted shares [48] Question: Payer mix for the quarter - The payer mix included 46.4% from insurance companies, 15.5% from Worker's Comp, and 29.4% from Medicare and Medicaid combined [49]