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U.S. Physical Therapy Reports 2012 Results

- WorkCompWire

Houston, TX -(BusinessWire)- U.S. Physical Therapy, Inc. (NYSE:USPH), a national operator of outpatient physical therapy clinics, recently reported results for the fourth quarter and year ended December 31, 2012.

U.S. Physical Therapy’s net income for the three months ended December 31, 2012 increased 18.1% to $4.0 million from adjusted net income of $3.4 million for the three months ended December 31, 2011. Diluted earnings per share rose to $0.34 for the 2012 period versus adjusted net income per diluted share of $0.29 for the 2011 period. The 2011 result was adjusted for a gain of $4.8 million related to a purchase price settlement of an outpatient physical therapy group. Reported net income for the three months ended December 31, 2011 was $8.2 million, or $0.69 per diluted share.

U.S. Physical Therapy’s net income for the year ended December 31, 2012 increased 10.9% to $17.9 million from adjusted net income of $16.2 million for year ended December 31, 2011. Diluted earnings per share rose to $1.51 for 2012 versus adjusted net income per diluted share of $1.35 for 2011. The 2011 result was adjusted for a gain of $4.8 million related to a purchase price settlement of an outpatient physical therapy group. Reported net income for the year ended December 31, 2011 was $21.0 million, or $1.75 per diluted share.

Fourth Quarter 2012 compared to Fourth Quarter 2011

  • Net revenues increased 3.3% from $60,678,000 in the fourth quarter of 2011 to $62,694,000 in the fourth quarter of 2012, primarily due to an increase in patient visits of 2.9% from 559,000 to 575,000. The average net patient revenue per visit for the recent quarter was $106.37 as compared to $105.09 in the comparable 2011 period.
  • Total clinic operating costs were $48,605,000, or 77.5% of net revenues, in the fourth quarter of 2012, as compared to $45,875,000, or 75.6% of net revenues, in the 2011 period. The increase was primarily attributable to $2,387,000 in operating costs of new clinics opened or acquired in the past 12 months. Clinic salaries and related costs were 54.2% of net revenues in the recent quarter versus 52.6% in the 2011 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 21.2% for the recent quarter versus 20.9% in the 2011 period. The provision for doubtful accounts as a percentage of net revenues was 1.9% for the 2012 period versus 2.0% in the 2011 quarter.
  • Corporate office costs were $6,147,000 in the fourth quarter of 2012 as compared to $7,088,000 in the 2011 fourth quarter. The 2011 period included higher accrued incentive compensation and a legal settlement charge. Quarterly corporate office costs were 9.8% of net revenues in 2012 period versus 11.7% in 2011.
  • Operating income for the fourth quarter of 2012 was $7,942,000 compared to $7,715,000 in the 2011 fourth quarter.
  • In the 2011 period, interest and other income included a pretax gain of $5.4 million related to a purchase price settlement of an outpatient physical therapy group acquired in 2010. As required by accounting standards, this amount was recorded as a gain rather than as a reduction of goodwill.
  • Interest expense was $108,000 in the fourth quarter of 2012 versus $165,000 in the fourth quarter of 2011.
  • Net income attributable to non-controlling interests was $1,751,000 in the recent quarter as compared to $1,913,000 in the year earlier period.
  • The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interests was 33.6% in the 2012 period and 25.7% in the 2011 period. For the 2012 period, the income tax provision was reduced by $350,000 related to the write down of an intercompany loan that was charged to additional-paid-in-capital and is tax deductible. For the 2011 period, $3.8 million of the $5.4 million gain discussed was non-taxable.
  • Reported net income attributable to common shareholders in the fourth quarter of 2012 was $4,043,000 compared to $8,229,000 in the fourth quarter of 2011. Reported diluted earnings per share were $0.34 for the 2012 period and $0.69 for the 2011 period. Included in the 2011 results is a gain of $4.8 million, net of tax effect, or $0.40 per diluted share, related to a purchase price settlement of an outpatient physical therapy group. Earnings per share were $0.34 for the fourth quarter of 2012 as compared to adjusted earnings per share of $0.29 in the year earlier period.
  • Same store revenues, visits and the average net rate per visit for de novo and acquired clinics open for one year or more remained relatively flat. Patient visits for the fourth quarter of 2012 would have been higher were it not for the effect of Hurricane Sandy which impacted more than 50 of the Company’s clinics.

Year 2012 compared to Year 2011

  • Net revenues increased 6.4% from $237,006,000 in the year ended December 31, 2011 to $252,088,000 in the year ended December 31, 2012, primarily due to an increase in patient visits of 7.0% from 2,164,000 to 2,315,000. The average net patient revenue per visit for 2012 was $105.57 as compared to $104.72 in 2011. The increase in net revenues was partially offset by a decrease in other revenues of $2,782,000 primarily due to a reduction in revenue from physician services.
  • Total clinic operating costs were $189,503,000, or 75.2% of net revenues, in 2012, as compared to $176,357,000, or 74.4% of net revenues, in 2011. The increase was primarily attributable to $7,174,000 of increased costs related to the clinics acquired in July 2011 due to a full year of operations in 2012 versus only five months in the 2011 year and $5,510,000 in operating costs of new clinics opened or acquired in 2012. Clinic salaries and related costs were 52.7% of net revenues in 2012 versus 52.8% in 2011. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 20.5% in 2012 versus 20.0% in 2011. The provision for doubtful accounts as a percentage of net revenues was 1.9% for 2012 versus 1.6% in 2011. In 2012, the gross margin from the Company’s core physical therapy business increased by $4,606,000 or 7.9% as compared to 2011 and the margin from the physician services business decreased by $2,670,000.
  • Corporate office costs remained relatively the same in 2012 as it was in 2011. Corporate office costs were reduced as a percentage of net revenues to 9.8% in 2012 as compared to 10.4% in 2011.
  • Operating income in 2012 rose to $37,803,000 compared to $35,931,000 in 2011.
  • In 2011, interest and other income included a pretax gain of $5.4 million related to a purchase price settlement of an outpatient physical therapy group acquired in 2010. As required by accounting standards, this amount was recorded as a gain rather than as a reduction of goodwill.
  • Interest expense increased to $557,000 in 2012 from $496,000 in 2011 due to higher average borrowings in 2012.
  • Net income attributable to non-controlling interests was $8,285,000 in 2012 as compared to $8,809,000 in 2011.
  • The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interests was 38.1% in 2012 and 34.6% in 2011. In 2012, the income tax provision was reduced by $350,000 related to a taxable deduction charged to additional-paid-in-capital for the reduction of a subsidiary intercompany loan. In 2011, $3.8 million of the $5.4 million gain discussed was non-taxable.
  • Reported net income attributable to common shareholders in 2012 was $17,933,000 compared to $20,974,000 in 2011. Reported diluted earnings per share were $1.51 in 2012 and $1.75 in 2011. Included in the 2011 results is a gain of $4.8 million, net of tax effect, or $0.40 per diluted share, related to a purchase price settlement of an outpatient physical therapy group acquired in 2010. Earnings per share for 2012 were $1.51 as compared to adjusted earnings per share of $1.35 in 2011.
  • Same store revenues for de novo and acquired clinics open for one year or more increased 4.4%. Higher same store visits and slightly higher average net rate per visit accounted for the same store revenues increase.

Chris Reading, Chief Executive Officer, said, “I am proud of our entire team for their work in 2012 which has positively impacted the lives of so many patients while producing our sixth straight year of record earnings from operations. As we look to 2013, we have a plan to overcome the impact created by several waves of recent government payment reductions as outlined in this release. While we are not without challenges, I have confidence in the strength of our team to be able to navigate these obstacles while continuing to expand organically as well as through acquisitions.”

Larry McAfee, Chief Financial Officer, noted, “U.S. Physical Therapy’s free cash flow continues to remain strong. Despite paying a special dividend of $4.8 million in December, the Company ended 2012 with net debt, that is debt less cash, of only $6.4 million.”

U.S. Physical Therapy Raises Quarterly Dividend
The Company will increase its quarterly dividend from $.09 to $.10 per share. The first quarterly dividend of 2013 will be paid on March 29 to shareholders of record as of March 15.

Announcement of a Recently Completed Acquisiton
On February 28, 2013, the Company acquired a 72% interest in a nine clinic physical therapy group. The practice sees approximately 34,000 patient visits per year with annual revenue of about $4 million.

2013 Guidance
As previously announced, the American Taxpayer Relief Act of 2012 enacted in January includes provisions which will reduce reimbursement for physical therapy services provided to Medicare patients. The new law increases the multiple procedures payment reduction (“MPPR”) to 50% effective April 1, 2013. The estimated impact in 2013 to the Company from this rate reduction is up to $0.18 per diluted share. On March 1, 2013, the sequester became effective which calls for an additional 2% cut in Medicare expenditures. The projected effect to the Company is to further reduce earnings by approximately $.04 per diluted share in 2013.

In January and February, although patient referrals were as planned, the Company’s volume of patient visits was significantly impacted by severe weather and the flu, particularly in the East and Midwest. Significant winter storms have continued in certain parts of the country thus far in March.

Normally, the Company’s management gives earnings guidance for the current year in the news release announcing the prior year’s results. Because of the changes and resulting uncertainties listed above, management, at this time, is deferring giving guidance.

The complete earnings release is available here: U.S. Physical Therapy Reports 2012 Results (PDF).

Source: BusinessWire