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, 2013.
U.S. Physical Therapy’s net income attributable to common shareholders from continuing operations for the three months ended December 31, 2013 was $3.9 million and diluted earnings per share were $0.32.
Net income attributable to common shareholders from continuing operations for the year 2013 was $17.5 million and diluted earnings per share were $1.45.
In the third quarter of 2013, the Company sold the remaining piece of its former Physician Services business, which was treated as a discontinued operation for financial reporting purposes. During the year the Company incurred losses from physician services of $4.8 million, or $0.40 per diluted share, which represents the operational loss of the business and write-down of its net assets, inclusive of intangible assets, less sale proceeds net of appropriate reserves. Net income attributable to common shareholders, inclusive of discontinued operations for 2013, was $12.7 million, or $1.05 per diluted share.
Fourth Quarter 2013 Compared to Fourth Quarter 2012 from Continuing Operations
- Net revenues increased 10.0% from $62,381,000 in the fourth quarter of 2012 to $68,605,000 in the fourth quarter of 2013, due to an increase in visits of 11.1% from 574,000 to 638,000 offset by a decrease in the average net patient revenue per visit of $.85 to $105.47 from $106.32.
- Total clinic operating costs were $52,467,000, or 76.5% of net revenues, in the fourth quarter of 2013, as compared to $48,002,000, or 76.9% of net revenues, in the 2012 period. The increase was attributable to $4,497,000 in operating costs of new clinics opened or acquired in the past 12 months offset by a reduction in operating costs of $32,000 for those clinics opened or acquired prior to the past 12 months. The fourth quarter 2013 results include a pre-tax charge of $850,000 for an estimated refund due to a payor for overpayments to a partnership clinic group over several years. Without that expense operating costs in the recent quarter for older clinics would have decreased by $882,000. Total clinic salaries and related costs, including that from new clinics, were 53.2% of net revenues in the recent quarter versus 53.9% in the 2012 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 21.5% for the recent quarter versus 20.9% in the 2012 period. The provision for doubtful accounts as a percentage of net revenues was 1.4% for the 2013 period and 1.9% in the 2012 period.
- The gross margin for the fourth quarter of 2013 increased by 12.2% to $16,138,000 from $14,379,000 in the fourth quarter of 2012. The gross margin percentage was 23.5% for the 2013 quarter as compared to 23.1% for the comparable 2012 period.
- Corporate office costs were $6,766,000 in the fourth quarter of 2013 as compared to $6,078,000 in the 2012 fourth quarter. Corporate office costs were 9.9% of net revenues in the 2013 period and 9.7% in the 2012 period.
- Operating income for the recent quarter increased by 12.9% to $9,372,000 compared to $8,301,000 in the 2012 fourth quarter.
- Interest expense was $140,000 in the fourth quarter of 2013 versus $108,000 in the fourth quarter of last year.
- The provision for income taxes for the 2013 period includes $569,000 which represents an adjustment of $393,000 related to the year 2012 from the completion of the income tax reconciliation between the tax returns and provision for 2012 (“tax true-up”) and $156,000 to increase the 2013 effective tax rate to 40%. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest was 33.6% in the 2012 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.
- Net income attributable to non-controlling interests, inclusive of discontinued operations, was $1,893,000 in the recent quarter as compared to $1,750,000 in the year earlier period.
- Net income attributable to common shareholders for the three months ended December 31, 2013 was $3,903,000 compared to $4,230,000 for the three months ended December 31, 2012. Diluted earnings per share were $0.32 for the 2013 period and $0.35 for the 2012 period.
- Same store visits increased 4.0% for de novo and acquired clinics open for one year or more while revenue increased 2.4% as the average net rate per visit decreased by $1.60.
Year 2013 Compared to Year 2012 from Continuing Operations Unless Otherwise Noted
- Net revenues increased 5.8% from $249,651,000 in 2012 to $264,058,000 in 2013, due to a 5.5% increase in visits from 2,314,000 to 2,441,000 and an increase in the average net patient revenue per visit to $105.83 from $105.50 in 2012.
- Total clinic operating costs were $199,357,000 or 75.5% of net revenues in 2013 as compared to $186,741,000 or 74.8% of net revenues in 2012. The increase was primarily attributable to $10,220,000 in operating costs of new clinics opened or acquired in the past 12 months and an increase in operating costs of $6,270,000 for those clinics opened or acquired in 2012 offset by a decrease in operating costs of $3,874,000 for those clinics opened or acquired prior to 2012. Included in the 2013 results is a pre-tax charge of $850,000 related to an estimated refund due to a payor for overpayments to a partnership clinic group over several years. Without this charge, operating costs for those clinics opened or acquired prior to 2012 would have been reduced by $4,724,000. Clinic salaries and related costs were 53.7% of net revenues in 2013 versus 52.7% in 2012. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 20.0% for 2013 versus 20.1% in 2012. The provision for doubtful accounts as a percentage of net revenues was 1.7% for 2013 versus 1.9% in 2012.
- Gross margin for 2013 was $64,701,000, or 24.5%, compared to $62,910,000, or 25.2%, for 2012.
- Corporate office costs were $25,931,000 in 2013 as compared to $24,504,000 in 2012. Corporate office costs were 9.8% of net revenues in both 2013 and 2012.
- Operating income for 2013 was $38,770,000 compared to $38,406,000 in 2012.
- Interest expense was $538,000 in 2013 versus $557,000 in 2012.
- The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interests was 41.1% in 2013 and 38.1% in 2012. For 2013, the provision for income taxes for the 2013 period includes an adjustment of $393,000 related to the tax true-up for 2012. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interests is 40% for 2013 and expected to be at a comparable tax rate in 2014. 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.
- Net income attributable to non-controlling interests, inclusive of discontinued operations, was $8,273,000 in 2013 as compared to $8,284,000 in 2012.
- Net income attributable to common shareholders was $17,492,000 in 2013 as compared to $18,212,000 in 2012. Diluted earnings per share were $1.45 for 2013 as compared to $1.53 for 2012.
- Same store visits increased 1.5% and same store revenue increased 1.0% while the average net rate per visit was down $0.52.
Larry McAfee, Chief Financial Officer, noted, “The Company experienced a nice pick-up in patient volume in the fourth quarter. Unfortunately this was somewhat overshadowed by the combined $.09 per share impact from the payor refund and the tax adjustment.”
Chris Reading, Chief Executive Officer, said, “2013 was in many ways a challenging year largely as a result of government reimbursement cuts, however, I am proud of our team for rising to the challenge. We were able to finish 2013 with same store volume growth for both the quarter as well as the year. Additionally, this was by far the best development year in the Company’s history. We made five acquisitions adding 42 clinics. These new partnerships, in combination with our strong base of existing partners, position us well for 2014. Given the continued challenges for standalone physical therapy practices, we expect to continue to provide a good home to those owners who wish to partner with a company which will robustly support them.”
Management Earnings Guidance
U.S. Physical Therapy’s management expects the Company’s earnings from continuing operations for the year 2014 to be in the range of $18.8 million to $19.6 million in net income and $1.54 to $1.60 in diluted earnings per share. This guidance range is net of approximately a $.07 to $.08 earnings per share impact from MPPR and Sequestration being in effect for 12 months in 2014 as compared to nine months in 2013. Additionally through March 5, 2014, management estimates that although new patient referrals have been solid, due to the adverse weather conditions in many parts of the country more than 10,000 patient visits have been cancelled since January 1st resulting in an estimated earnings impact of at least $.04 per share. Management’s guidance range represents projected earnings from existing operations only and excludes future potential 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.
U.S. Physical Therapy Declares Quarterly Dividend
The Company is increasing its quarterly dividend rate by 20% from $.10 to $.12 per share. The first quarterly dividend of 2014 for $.12 per share will be paid on April 4 to shareholders of record as of March 19.
The complete earnings release is available here: U.S. Physical Therapy 2013 Results (PDF)