Provides 2017 Earnings Guidance
U.S. Physical Therapy, Inc. ("USPH" or the “Company”) (NYSE:
USPH), a national operator of outpatient physical therapy clinics,
today reported results for the fourth quarter and year ended
December 31, 2016.
For the year 2016, USPH’s net income attributable to common
shareholders prior to interest expense – mandatorily redeemable
non-controlling interests – change in redemption value, net of tax
(“operating results”) was $24.3 million as compared to $22.2
million in 2015. Diluted earnings per share from operating results,
a non-GAAP measure, was $1.94 in 2016 as compared to $1.79 in 2015.
Operating results was at the upper end of management’s earnings
guidance range of $23.7 million to $24.5 million and $1.90 to $1.96
per share.
In the fourth quarter of 2016, USPH’s operating results was $6.1
million as compared to $6.0 million in the fourth quarter of 2015.
Diluted earnings per share from operating results, was $0.49 in the
fourth quarter of 2016 as compared to $0.48 in the comparable
period of 2015. The fourth quarter of 2016, with 63 business days,
had one fewer business day than the fourth quarter of 2015.
For the year 2016, USPH’s net income attributable to its
shareholders, in accordance with generally accepted accounting
principles (“GAAP”), was $20.6 million, or $1.64 per diluted share,
as compared to $20.6 million, or $1.66 per diluted share, for the
year 2015. For the fourth quarter 2016, net income attributable to
shareholders in accordance with GAAP, was $6.0 million, or $0.48
per diluted share, as compared to $4.8 million, or $0.38 per
diluted share for the 2015 period. See schedule on page 11 for a
reconciliation of net income attributable to USPH shareholders to
operating results.
The FASB issued guidance during 2016 relevant to stock
compensation accounting provisions. This amends how excess tax
benefits should be classified. Under the guidance excess tax
benefits, which have previously been accounted for in additional
paid-in capital, will be a component of the income tax
provision/benefit in the period in which they occur. This revised
accounting became effective for all entities in 2017 but early
adoption was permitted. As previously disclosed in the Form 10Q for
the third quarter of 2016, the Company adopted this accounting
treatment in the fourth quarter of 2016. The adoption resulted
in an effective tax rate of 28.0% for the fourth quarter of 2016
and 36.6% for the year.
Year 2016 Compared to Year
2015
- Net revenues increased 7.6% from $331.3
million in 2015 to $356.5 million in 2016, due to an increase in
total patient visits of 7.7% from 3,080,200 to 3,316,800 and offset
by a slight decrease in the average net revenue per visit to
$105.18 from $105.28. Net revenues from new clinics opened or
acquired in the past 12 months was $12.8 million.
- Total clinic operating costs were
$274.5 million, or 77.0% of net revenues for 2016, as compared to
$252.9 million, or 76.3% of net revenues, in the 2015 period. Of
the dollar increase, $10.9 million was in operating costs of new
clinics opened or acquired in 2016. Total clinic salaries and
related costs, including those from new clinics, were 55.7% of net
revenues for 2016 versus 54.5% for 2015. Rent, clinic
supplies, contract labor and other costs as a percentage of net
revenues were 20.2% for 2016 versus 20.5% for 2015. The provision
for doubtful accounts as a percentage of net revenues was 1.1% for
2016 and 1.3% in 2015.
- The gross margin for 2016 increased
4.7% to $82.0 million, or 23.0% of revenue, as compared to $78.4
million, or 23.7% of revenue, for the 2015 period.
- Corporate office costs were $32.5
million for 2016 compared to $31.1 million for 2015. Corporate
office costs were 9.1% of net revenues for 2016 compared to 9.4% of
net revenues for 2015.
- Operating income increased 4.7% to
$49.5 million in 2016 as compared to $47.3 million in 2015.
- Interest expense – mandatorily
redeemable non-controlling interest – change in redemption value
increased to $6.2 million in 2016 from $2.7 million in 2015. The
change in redemption value for acquired partnerships is based on
the redemption amount (which is derived from a formula based on a
specified multiple times the underlying business’ trailing twelve
months of earnings before interest, taxes, depreciation,
amortization and our internal management fee) at the end of the
reporting period compared to the end of the previous period. See
“Correction of Accounting for Redeemable Non-Controlling Interests”
on page 4 of this release. The increased charge in 2016 is a direct
result of increases in the profitability of the applicable
partnerships from 2015.
- Interest expense – mandatorily
redeemable non-controlling interest – earnings allocable, which
represent the portion of earnings allocable to the holders of
mandatorily redeemable non-controlling interest, increased to $4.1
million in 2016 from $3.5 million in 2015.
- Interest expense – debt and other was
$1.3 million in 2016 and $1.0 million in 2015.
- The provision for income taxes for 2016
was $14.4 million and for 2015 was $14.7 million. The provision for
income taxes as a percentage of income before taxes less net income
attributable to non-controlling interest was 36.6% in 2016 and
39.8% in 2015.
- Net income attributable to
non-controlling interests was $5.7 million in 2016 as compared to
$5.9 million in 2015.
- Operating results attributable to
common shareholders for 2016 rose 9.3% to $24.3 million as compared
to $22.3 million for 2015. Diluted earnings per share from
operating results were $1.94 for 2016 and $1.79 for 2015.
- Same store visits increased 2.2% for de
novo and acquired clinics open for one year or more and same store
revenue increased 2.6%. The average same store net rate per visit
increased by 0.4%.
Fourth Quarter 2016 Compared to Fourth
Quarter 2015
- Net revenues increased 4.8% from $86.7
million in the fourth quarter of 2015 to $90.9 million in the
fourth quarter of 2016, due to an increase in total patient visits
of 4.7% from 808,300 to 846,000 and an increase in the average net
revenue per visit to $105.14 for the 2016 fourth quarter from
$105.01 for the 2015 period. Net revenues in the fourth quarter of
2016 from new clinics opened or acquired in 2016 was $5.3
million.
- Total clinic operating costs were $72.1
million, or 79.3% of net revenues, in the fourth quarter of 2016,
as compared to $65.2 million, or 75.2% of net revenues, in the 2015
period. Of the dollar increase, $4.9 million was attributable to
operating costs of new clinics opened or acquired in 2016. Also,
there were two unusual items in the fourth quarter of 2016. First,
the Company incurred unusually high claims related to the health
insurance provided to its employees amounting to an additional
$588,000 charge, and the second related to the Company’s decision
to combine two acquired operations in Georgia which resulted in a
$250,000 charge to write-off the remaining book value of the
tradename to no longer be used. These two items combined yielded an
after tax charge of $504,000, or just over $0.04 per share.
Employee health insurance claims have since returned to normal
historical levels.
- Total clinic salaries and related
costs, including those from new clinics combined with the unusually
high employee health insurance claims, were 57.2% of net revenues
in the recent quarter versus 53.6% in the 2015 period. Rent, clinic
supplies, contract labor and other costs as a percentage of net
revenues were 20.8% for the recent quarter versus 20.3% in the 2015
period. The provision for doubtful accounts as a percentage of net
revenues was 1.2% for the 2016 period and for the 2015 period.
- The gross margin for the fourth quarter
of 2016 was $18.8 million or 20.7%, as compared to $21.5
million, or 24.8% in the 2015 fourth quarter.
- Corporate office costs were $7.8
million in the fourth quarter of 2016 compared to $8.9 million in
the 2015 fourth quarter. Corporate office costs were 8.6% of net
revenues for the 2016 fourth quarter compared to 10.3% of net
revenues for the 2015 period.
- Operating income for the fourth quarter
of 2016 was $11.0 million or 12.1% compared to $12.6 million
or 14.5% in the 2015 fourth quarter.
- Interest expense – mandatorily
redeemable non-controlling interest – change in redemption value
was $0.1 million in the fourth quarter of 2016 and $2.0 million in
2015 period.
- Interest expense – mandatorily
redeemable non-controlling interest – earnings allocable was $0.9
million in both the fourth quarter of 2016 and 2015.
- Interest expense – debt and other was
$0.3 million in the fourth quarter of 2016 and 2015.
- The provision for income taxes for the
2016 period was $2.4 million and for the 2015 period $3.3 million.
The provision for income taxes as a percentage of income before
taxes less net income attributable to non-controlling interest was
28.0% in the 2016 fourth quarter and 40.8% in the 2015 fourth
quarter. Included in the fourth quarter of 2016 is the excess tax
benefit for the 2016 year of $1.0 million related to the adoption
of revised guidance on accounting for stock compensation as
discussed above.
- Net income attributable to
non-controlling interests was $1.3 million in the fourth quarter of
2016 as compared to $1.5 million in the year earlier period.
- Operating results attributable to
common shareholders for the three months ended December 31, 2016
was $6.1 million versus $6.0 million for the 2015 period. Diluted
earnings per share from operating results were $0.49 for the 2016
period and $0.48 for the 2015 period.
- Same store visits increased by 2.5% for
de novo and acquired clinics open for one year or more while same
store revenue increased slightly as the average same store net rate
per visit decreased 2.2%. Same store revenues and visits were
adjusted to reflect the number of days in each period as the 2016
quarter included 63 operating days while the 2015 quarter included
64 days.
Other Financial Measures
For the year 2016 the Company's Adjusted EBITDA grew by 6.3% to
$53.5 million from $50.3 million in 2015. In the fourth quarter of
2016, the Company's Adjusted EBITDA was $12.6 million as compared
to $13.7 million in the fourth quarter of 2015. See schedule
on page 11.
Correction of Accounting for Redeemable
Non-Controlling Interests
Shortly before the planned issuance of the Company’s 2016 annual
financial statements, it was determined that previous accounting
for redeemable non-controlling interests was incorrect. This error
resulted in the reporting of a material weakness in financial
controls as relates to this issue and required the restatement of
prior period financials.
Non-controlling interests which have a redemption feature are
now classified as mandatorily redeemable non-controlling interests.
The mandatorily redeemable non-controlling interests in the
consolidated financial statements consist of those owners who have
certain redemption rights, whether currently exercisable or not,
and which currently, or in the future, require that the Company
purchase the non-controlling interest of those owners at a
predetermined formula based on a multiple of trailing twelve months
earnings performance as defined in the respective limited
partnership agreements. The redemption rights are triggered at such
time as both of the following events have occurred: 1) termination
of the owner’s employment, regardless of the reason for such
termination, and 2) the passage of specified number of years after
the closing of the transaction, typically three to five years, as
defined in the limited partnership agreement.
On the date the Company acquires a controlling interest in a
partnership and the limited partnership agreement contains
mandatory redemption rights, the fair value of the non-controlling
interest is recorded in the long-term liabilities section of the
consolidated balance sheet under the caption – Mandatorily
redeemable non-controlling interests. Then, in each reporting
period thereafter until purchased by the Company, the redeemable
non-controlling interest is adjusted to its then current redemption
value, based on the predetermined formula defined in the respective
partnership agreement. The Company reflects any adjustment in the
redemption value and any earnings attributable to the mandatorily
redeemable non-controlling interest in its consolidated statements
of net income by recording the adjustments and earnings to other
income and expense in the captions - Interest expense – mandatorily
redeemable non-controlling interests – change in redemption value
and Interest expense – mandatorily redeemable non-controlling
interests – earnings allocable.
Accordingly, the Company, in its Annual Report Form 10-K for the
year ended December 31, 2016, corrected its consolidated financial
statements for the years ended December 31, 2014 and 2015. In
addition, any prior year information, within footnotes, including
quarterly data, affected by this correction was updated within the
annual report.
Management’s Comments
Chris Reading, Chief Executive Officer, said, “The year 2016
ended with another solid quarter for same store visit growth and
with excellent development activity. For the year we opened,
primarily within our top 20 partnerships, the largest number of new
de novo locations in the past 10 years, plus added a number of
additional facilities through acquisition. Our strong development
progress has continued thus far in 2017. We are pleased to be able
to get back out to meet with our shareholders and to provide an
updated, and current, outlook for our Company.”
Management 2017 Earnings
Guidance
Management currently expects the Company’s operating results for
the year 2017 to be in the range of $26.0 million to $27.3 million
and $2.07 to $2.16 in diluted earnings per share as compared to
$24.3 million and $1.94, respectively, for the year 2016. This
earnings range is based on an assumed annual corporate tax rate of
approximately 37%. Please note that management’s guidance range
represents projected earnings from existing operations excluding
potential 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.
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:
- the risk that the restatement of prior
financial statements due to the correction in the accounting method
for redeemable non-controlling interests could adversely affect the
Company’s ability to make timely filings with the Securities and
Exchange Commission;
- cost, risks and uncertainties
associated with the Company’s recent restatement of its prior
financial statements due to the correction of its accounting
methodology for redeemable non-controlling partnership interests,
and including any pending and future claims or proceedings relating
to such matters;
- changes as the result of government
enacted national healthcare reform;
- changes in Medicare rules and
guidelines and reimbursement or failure of our clinics to maintain
their Medicare certification status;
- revenue we receive from Medicare and
Medicaid being subject to potential retroactive reduction;
- business and regulatory conditions
including federal and state regulations;
- governmental and other third party
payor inspections, reviews, investigations and audits;
- compliance with federal and state laws
and regulations relating to the privacy of individually
identifiable patient information, and associated fines and
penalties for failure to comply;
- legal actions; which could subject us
to increased operating costs and uninsured liabilities;
- changes in reimbursement rates or
payment methods from third party payors including government
agencies and deductibles and co-pays owed by patients;
- revenue and earnings expectations;
- general economic conditions;
- availability and cost of qualified
physical therapists;
- personnel productivity and retaining
key personnel;
- competitive, economic or reimbursement
conditions in our markets which may require us to reorganize or
close certain clinics and thereby incur losses and/or closure costs
including the possible write-down or write-off of goodwill and
other intangible assets;
- acquisitions, purchase of
non-controlling interests (minority interests) and the successful
integration of the operations of the acquired businesses;
- maintaining adequate internal
controls;
- maintaining necessary insurance
coverage;
- our ability to design and maintain
effective internal control over financial reporting and remediate
the material weakness in internal control over financial reporting
related to our accounting for redeemable non-controlling
partnership interests;
- 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 562
outpatient physical therapy clinics in 41 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 31 physical therapy facilities for unaffiliated
third parties, including hospitals and physician groups. The
Company also provides onsite services for clients’ employees
including injury prevention, rehabilitation, ergonomic assessments
and performance optimization.
More information about U.S. Physical Therapy, Inc. is available
at www.usph.com. The information
included on that website is not incorporated into this press
release.
U.S. PHYSICAL THERAPY, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET
INCOME*(IN THOUSANDS, EXCEPT PER SHARE
DATA)(unaudited)
For the Three Months Ended For the Year Ended As Restated *
As Restated * December 31, 2016 December 31, 2015 December 31, 2016
December 31, 2015 Net patient revenues $ 88,946 $ 84,881 $
348,839 $ 324,293 Other revenues 1,918 1,843
7,707 7,009 Net revenues 90,864
86,724 356,546 331,302 Clinic operating costs: Salaries and related
costs 51,986 46,470 198,495 180,514 Rent, clinic supplies, contract
labor and other 18,930 17,612 71,868 68,046 Provision for doubtful
accounts 1,078 1,051 4,040 4,170 Closure costs 77
86 131 211 Total clinic
operating costs 72,071 65,219
274,534 252,941 Gross margin 18,793
21,505 82,012 78,361 Corporate office costs 7,839
8,894 32,479 31,067
Operating income 10,954 12,611 49,533 47,294 Interest
and other income, net 31 33 93 81 Interest expense Mandatorily
redeemable non-controlling interests - change in redemption value
(113 ) (1,973 ) (6,169 ) (2,670 ) Mandatorily redeemable
non-controlling interests - earnings allocable (911 ) (864 ) (4,057
) (3,538 ) Debt and other (298 ) (266 ) (1,252
) (1,031 ) Total interest expense (1,322 ) (3,103 ) (11,478
) (7,239 ) Income before taxes 9,663 9,541 38,148 40,136
Provision for income taxes 2,355 3,276
11,880 13,647 Net income
7,308 6,265 26,268 26,489 Less: net income attributable to
non-controlling interests (1,263 ) (1,504 )
(5,717 ) (5,874 ) Net income attributable to USPH
shareholders $ 6,045 $ 4,761 $ 20,551 $ 20,615
Basic and diluted earnings per share attributable to
USPH shareholders $ 0.48 $ 0.38 $ 1.64 $ 1.66
Shares used in computation - basic 12,519
12,421 12,500 12,392
Shares used in computation - diluted 12,519
12,421 12,500 12,392
Dividends declared per common share $ 0.17 $
0.15 $ 0.68 $ 0.60
*See Notes 1 and 2 on page 12.
U.S. PHYSICAL THERAPY, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS*(IN
THOUSANDS, EXCEPT SHARE DATA)(unaudited)
December 31, 2016 December 31,
2015 ASSETS (restated) Current assets: Cash and cash equivalents $
20,047 $ 15,778 Patient accounts receivable, less allowance for
doubtful accounts of $1,792 and $1,444, respectively 38,840 36,231
Accounts receivable - other, less allowance for doubtful accounts
of $-0- and $198, respectively 2,649 2,388 Other current assets
4,428 5,803 Total current assets 65,964
60,200 Fixed assets: Furniture and equipment 48,426 44,749
Leasehold improvements 26,765 25,160
Fixed assets, gross 75,191 69,909 Less accumulated depreciation and
amortization 56,018 53,255 Fixed
assets, net 19,173 16,654 Goodwill 226,806 195,373 Other
identifiable intangible assets, net 38,060 30,296 Other assets
1,228 1,234 Total assets $ 351,231
$ 303,757 LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable - trade $ 1,634 $ 1,636
Accrued expenses 21,756 16,596 Current portion of notes payable
1,227 775 Total current liabilities
24,617 19,007 Notes payable 4,596 4,335 Revolving line of credit
46,000 44,000 Mandatorily redeemable non-controlling interests
69,190 45,974 Deferred taxes 15,736 15,508 Deferred rent 1,575
1,395 Other long-term liabilities 829 1,228
Total liabilities 162,543 131,447 Commitments and
contingencies U.S. Physical Therapy, Inc. ("USPH") shareholders’
equity: Preferred stock, $.01 par value, 500,000 shares authorized,
no shares issued and outstanding - - Common stock, $.01 par value,
20,000,000 shares authorized, 14,732,699 and 14,635,874 shares
issued, respectively 147 146 Additional paid-in capital 68,687
64,238 Retained earnings 150,342 138,301 Treasury stock at cost,
2,214,737 shares (31,628 ) (31,628 ) Total USPH
shareholders’ equity 187,548 171,057 Non-controlling interests
1,140 1,253 Total USPH shareholders'
equity and non-controlling interests 188,688
172,310 Total liabilities, USPH shareholders' equity and
non-controlling interests $ 351,231 $ 303,757
* See Note 2 on page 12.
U.S. PHYSICAL THERAPY, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS(IN THOUSANDS, EXCEPT PER SHARE
DATA)(unaudited)
Year Ended December 31, 2016 December 31,
2015 OPERATING ACTIVITIES (restated) Net income
including non-controlling interests $ 26,268 $ 26,489 Adjustments
to reconcile net income including non-controlling interests to net
cash provided by operating activities: Depreciation and
amortization 8,779 7,952 Provision for doubtful accounts 4,040
4,170 Equity-based awards compensation expense 4,962 4,491 Loss on
sale of fixed assets 152 84 Excess tax benefit from equity-based
awards - (947 ) Deferred income tax 2,979 5,953 Other - 180
Changes in operating assets and
liabilities:
Increase in patient accounts receivable (3,275 ) (5,519 ) Increase
in accounts receivable - other (400 ) (852 ) Increase in other
assets (1,399 ) (1,375 ) Increase (decrease) in accounts payable
and accrued expenses 2,994 (7,011 ) Increase in mandatorily
redeemable non-controlling interests 5,598 2,509 Increase in other
liabilities 352 1,396 Net cash provided
by operating activities 51,050 37,520
INVESTING
ACTIVITIES Purchase of fixed assets (8,260 ) (6,263 ) Purchase
of businesses, net of cash acquired (23,623 ) (18,965 )
Acquisitions of non-controlling interests (670 ) (968 ) Proceeds on
sale of fixed assets, net 61 71 Net
cash used in investing activities (32,492 ) (26,125 )
FINANCING ACTIVITIES Distributions to non-controlling
interests (5,718 ) (5,892 ) Cash dividends to shareholders - funded
(8,510 ) (7,449 ) Proceeds from revolving line of credit 168,000
103,000 Payments on revolving line of credit (166,000 ) (93,500 )
Payments to settle mandatorily redeemable non-controlling interests
(1,262 ) (6,115 ) Principal payments on notes payable (800 ) (884 )
Tax benefit from equity-based awards - 947 Other 1
5 Net cash used in financing activities (14,289 )
(9,888 ) Net increase in cash and cash equivalents 4,269
1,507 Cash and cash equivalents - beginning of period 15,778
14,271 Cash and cash equivalents - end of
period $ 20,047 $ 15,778
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the
period for: Income taxes $ 10,584 $ 7,779 Interest $ 784 $ 884
Non-cash investing and financing transactions during the period:
Purchase of business - seller financing portion $ 1,000 $ 1,800
Acquisition of non-controlling interest - seller financing portion
$ 387 $ - Payment to settle redeemable non-controlling interest -
financing portion $ 127 $ 3,077 Sale of non-controlling interests $
(138 ) $ -
U.S. PHYSICAL THERAPY, INC. AND
SUBSIDIARIES
OPERATING RESULTS AND ADJUSTED EBITDA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following tables reconcile net income attributable to USPH
shareholders calculated in accordance with GAAP to operating
results and Adjusted EBITDA. Management believes providing
operating results and Adjusted EBITDA to investors is useful
information for comparing the Company's period-to-period results.
Operating results is defined as USPH’s net income attributable to
common shareholders prior to interest expense – mandatorily
redeemable non-controlling interests – change in redemption value,
net of tax. Adjusted EBITDA is defined as earnings before interest,
taxes, depreciation, amortization and equity compensation expense.
Operating results and Adjusted EBITDA are not measures of financial
performance under GAAP. Adjusted EBITDA and Adjusted Net Income
should not be considered in isolation or as an alternative to, or
substitute for, net income attributable to USPH shareholders
presented in the consolidated financial statements.
Three Months
Ended December 31, For the Year Ended 2016
2015 2016 2015 (as restated) Net income
attributable to USPH shareholders $ 6,045 $ 4,761 $ 20,551 $ 20,615
Adjustments: Interest expense MRNCI * - change in redemption
value, net of tax 69 1,199 3,748
1,622 Operating results $ 6,114 $ 5,960
$ 24,299 $ 22,237 Basic and diluted
operating results per share $ 0.49 $ 0.48 $ 1.94
$ 1.79 Shares used in computation: Basic and
diluted 12,519 12,421 12,500
12,392
Three Months Ended
December 31, For the Year Ended 2016 2015
2016 2015 (as restated) Net income attributable to
USPH shareholders $ 6,045 $ 4,761 $ 20,551 $ 20,615
Adjustments: Depreciation and amortization 2,570 2,296 8,779 7,952
Interest income (31 ) (33 ) (93 ) (81 ) Interest expense MRNCI * -
change in redemption value 113 1,973 6,169 2,670 Interest expense -
debt and other 298 266 1,252 1,031 Provision for income taxes 2,355
3,276 11,880 13,647 Equity-based awards compensation expense
1,214 1,123 4,962 4,491
Adjusted EBITDA $ 12,564 $ 13,662 $
53,500 $ 50,325 * Mandatorily
redeemable non-controlling interest
U.S. PHYSICAL THERAPY, INC. AND
SUBSIDIARIES
RECAP OF CLINIC COUNT
March 31, 2015 494 June 30, 2015 501 September 30, 2015 506
December 31, 2015 508 March 31, 2016 512 June 30, 2016 516
September 30, 2016 524 December 31, 2016 540
- Note 1 – Included in the fourth quarter
and year ended December 31, 2016 is a credit to the provision for
income taxes of $1.0 million for the excess tax benefit related to
stock compensation. In March 2016, a new accounting regulation was
issued to simplify some provisions in stock compensation
accounting. Among other items, the guidance amends how excess tax
benefits should be classified. Prior to adoption of this new
regulation, excess tax benefits were recorded in additional paid-in
capital, but will now become a component of the income tax
provision/benefit in the period in which they occur. For public
business entities, this guidance is effective for fiscal years
starting after December 15, 2016, including interim periods within
those fiscal years but early adoption is allowed, which is what
USPH has done.
- Note 2 - Shortly before the planned
issuance of the Company’s 2016 annual financial statements, it was
determined that previous accounting for redeemable non-controlling
interests was incorrect. This error has resulted in the reporting
of a material weakness in internal controls over financial
reporting as relates to this issue and has required the restatement
of prior period financials.
Non-controlling interests which have a redemption feature are
now classified as mandatorily redeemable non-controlling interests.
The mandatorily redeemable non-controlling interests in the
consolidated financial statements consist of those owners who have
certain redemption rights, whether currently exercisable or not,
and which currently, or in the future, require that the Company
purchase the non-controlling interest of those owners at a
predetermined formula based on a multiple of trailing twelve months
earnings performance as defined in the respective limited
partnership agreements. The redemption rights are triggered at such
time as both of the following events have occurred: 1) termination
of the owner’s employment, regardless of the reason for such
termination, and 2) the passage of specified number of years after
the closing of the transaction, typically three to five years, as
defined in the limited partnership agreement.
On the date the Company acquires a controlling interest in a
partnership and the limited partnership agreement contains
mandatory redemption rights, the fair value of the non-controlling
interest is recorded in the long-term liabilities section of the
consolidated balance sheet under the caption – Mandatorily
redeemable non-controlling interests. Then, in each reporting
period thereafter until purchased by the Company, the redeemable
non-controlling interest is adjusted to its then current redemption
value, based on the predetermined formula defined in the respective
partnership agreement. The Company reflects any adjustment in the
redemption value and any earnings attributable to the mandatorily
redeemable non-controlling interest in its consolidated statements
of net income by recording the adjustments and earnings to other
income and expense in the captions - Interest expense – mandatorily
redeemable non-controlling interests – change in redemption value
and Interest expense – mandatorily redeemable non-controlling
interests – earnings allocable.
Accordingly, the Company, in its Annual Report Form 10-K for the
year ended December 31, 2016, corrected its consolidated financial
statements for the years ended December 31, 2014 and 2015. In
addition, any prior year information, within footnotes, including
quarterly data, affected by this correction was updated within the
annual report.
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U.S. Physical Therapy, Inc.Larry McAfee, (713) 297-7000Chief
Financial OfficerorChris Reading, (713) 297-7000Chief Executive
OfficerorThree Part AdvisorsJoe Noyons, (817) 778-8424
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