Houston, TX – 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, 2014.
In the fourth quarter of 2014, U.S. Physical Therapy’s net income attributable to common shareholders from continuing operations prior to revaluation of redeemable non-controlling interests, net of tax (“operating results”) increased by 27.5% to $5.0 million as compared to approximately $3.9 million in the fourth quarter of 2013. Diluted earnings per share from operating results rose to $0.41 in the recent quarter as compared to $0.32 in the comparable 2013 period.
For the year 2014, U.S. Physical Therapy’s operating results increased by 19.2% to $20.9 million as compared to approximately $17.5 million for the 2013 year. Diluted earnings per share from operating results rose to $1.71 in 2014 as compared to $1.45 in 2013.
Fourth Quarter 2014 Compared to Fourth Quarter 2013 from Continuing Operations Unless Otherwise Noted
- Net revenues increased 15.7% from $68.6 million in the fourth quarter of 2013 to $79.4 million in the fourth quarter of 2014, due to an increase in patient visits of 15.6% from 638,000 to 737,000 and an increase in the average net revenue per visit of $0.32 to $105.79 from $105.47.
- Total clinic operating costs were $60.5 million, or 76.1% of net revenues, in the fourth quarter of 2014, as compared to $52.5 million, or 76.5% of net revenues, in the 2013 period. Of the dollar increase, $4.3 million was attributable to operating costs of new clinics opened or acquired in the past 12 months. Total clinic salaries and related costs, including that from new clinics, were 54.9% of net revenues in the recent quarter versus 53.2% in the 2013 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were reduced to 19.7% for the recent quarter versus 21.5% in the 2013 period. The provision for doubtful accounts as a percentage of net revenues was 1.3% for the 2014 period and 1.4% in the 2013 period.
- The gross margin for the fourth quarter of 2014 increased by 17.4% to $18.9 million from $16.1 million in the fourth quarter of 2013. The gross margin percentage increased to 23.9% for the 2014 period as compared to 23.5% for the 2013 period.
- Corporate office costs were $8.2 million in the fourth quarter of 2014 as compared to $6.8 million in the 2013 fourth quarter. Corporate office costs as a percentage of net revenues were 10.3% for the 2014 period and 9.9% in the 2013 period.
- Operating income for the recent quarter increased by 14.8% to $10.8 million as compared to $9.4 million in the 2013 fourth quarter.
- Interest expense was $0.3 million in the fourth quarter of 2014 versus $0.1 million in the fourth quarter of last year. The increase in interest expense is due to a higher average debt balance as the result of acquisitions.
- The provision for income taxes for the 2014 period was $3.2 million and for the 2013 period $3.4 million. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest was 39.4% in the 2014 fourth quarter and 46.8% in the 2013 period. In the current period, after a reconciliation of the 2013 federal and state tax returns to our book provision, we reduced our 2014 tax rate to 40.0% from 41.0% previously accrued for the first nine months of 2014 and recorded an additional provision of $0.2 million for 2013.
- Net income attributable to non-controlling interests, inclusive of discontinued operations, was $2.3 million in the recent quarter as compared to $1.9 million in the period 2013.
- Net income attributable to common shareholders for the three months ended December 31, 2014 increased by 27.5% to $5.0 million compared to $3.9 million for the three months ended December 31, 2013. Diluted earnings per share from operating results were $0.41 for the 2014 period and $0.32 for the 2013 period.
- Same store visits increased 2.8% for de novo and acquired clinics open for one year or more while same store revenue increased 2.0% as the average net rate per visit decreased by $0.81.
Year 2014 Compared to Year 2013 from Continuing Operations Unless Otherwise Noted
- Net revenues increased 15.5% from $264.1 million in 2013 to $305.1 million in 2014, due to an increase in patient visits of 15.5% from 2,441,000 to 2,819,000 and an increase in the average net revenue per visit to $106.08 for the past year from $105.83 in 2013.
- Total clinic operating costs were $228.9 million or 75.0% of net revenues for 2014, as compared to $199.4 million or 75.5% of net revenues, for 2013. The dollar increase included $10.2 million in operating costs of new clinics opened or acquired in 2014. Of the remaining increase, $18.5 million was from clinics added throughout 2013. Total clinic salaries and related costs were 53.6% of net revenues in 2014 versus 53.7% in 2013. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 20.1% for the past year versus 20.0% in 2013. The provision for doubtful accounts as a percentage of net revenues was 1.3% for 2014 and 1.7% in 2013.
- The gross margin for 2014 increased by 17.7% to $76.2 million from $64.7 million in 2013. The gross margin percentage increased to 25.0% in 2014 as compared to 24.5% in 2013.
- Corporate office costs were $30.4 million for 2014 as compared to $25.9 million for 2013. Corporate office costs were 10.0% of net revenues for 2014 and 9.8% for 2013.
- Operating income increased 18.1% to $45.8 million in 2014 as compared to $38.8 million in 2013.
- Interest expense was $1.1 million in 2014 versus $0.5 million in 2013. The increase in interest expense is due to a higher average outstanding debt balance as the result of acquisitions.
- The provision for income taxes for 2014 was $14.3 million and for 2013 it was $12.2 million.
- The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest was 40.6% in 2014 and 41.1% in 2013.
- Net income attributable to non-controlling interests, inclusive of discontinued operations, was $9.6 million in 2014 as compared to $8.3 million in 2013.
- Net income attributable to common shareholders for the year ended December 31, 2014 increased 19.2% to $20.9 million as compared to $17.5 million for the year ended December 31, 2013. Diluted earnings per share from operating results rose to $1.71 for 2014 versus $1.45 for 2013.
- Same store visits increased 4.6% for de novo and acquired clinics open for one year or more and same store revenue increased 3.8% as the average net rate per visit decreased by $0.79.
Chris Reading, Chief Executive Officer, said, “I am very pleased with the strong results that our entire team delivered for the year. Our organic and acquired partnerships are growing, we are attracting great talent in all areas of our Company and we are rolling out new programs which will further help us to impact more patient lives in a very positive way. Our development activities are generating great results and are bringing some exciting newly acquired partnerships into our already strong family of partners. In 2015 we remain focused on all of the core initiatives that helped to produce an exceptional 2014.”
Larry McAfee, Chief Financial Officer, noted, “Despite increasing the Company’s dividend and opening or acquiring 35 clinics during the year the Company’s ending debt balance was reduced by approximately $5.9 million, or 14%, in 2014 as cash flow from operations remained strong.”
U.S. Physical Therapy Declares Quarterly Dividend
The Company is increasing its quarterly dividend by 25% to $.15 from $.12. The first quarterly dividend of 2015 will be paid on April 3, 2015 to shareholders of record as of March 20, 2015.
Management 2015 Earnings Guidance
Although the Company’s new patient referrals thus far in 2015 have been good, the severe winter weather in many parts of the country in January and February negatively affected the number of patient visits by more than 16,000 with an estimated negative earnings impact of $.05 to $.07 per share. After allowing for that, management currently expects the Company’s earnings from continuing operations for the year 2015 to be in the range of $22.3 million to $22.9 million in net income and $1.80 to $1.86 in diluted earnings per share. Please note that management’s guidance range represents projected earnings from existing operations only and excludes 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.
The complete earnings release is available here: U.S. Physical Therapy Q4 & FY 2014 Results (PDF)
Source: US Physical Therapy