U.S. Physical Therapy Inc. Reports Operating Results (10-Q)

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May 10, 2010
U.S. Physical Therapy Inc. (USPH, Financial) filed Quarterly Report for the period ended 2010-03-31.

U.s. Physical Therapy Inc. has a market cap of $194.53 million; its shares were traded at around $16.75 with a P/E ratio of 16.58 and P/S ratio of 0.97. U.s. Physical Therapy Inc. had an annual average earning growth of 5.3% over the past 10 years. GuruFocus rated U.s. Physical Therapy Inc. the business predictability rank of 5-star.USPH is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Salaries and related costs increased to $26.8 million for the 2010 First Quarter from $25.4 million for the 2009 First Quarter, an increase of $1.4 million, or 5.4%. The $1.4 million increase included costs of $1.0 million attributable to the New Clinics. The remaining increase was due to slightly higher costs of $0.4 million at the Mature Clinics. Salaries and related costs as a percentage of net revenues were 53.1% for the 2010 First Quarter and 52.7% for the 2009 First Quarter.

Rent, clinic supplies, contract labor and other decreased to $10.1 million for the 2010 First Quarter from $10.2 million for the 2009 First Quarter. For New Clinics, rent, clinic supplies, contract labor and other amounted to $0.4 million for the 2010 First Quarter. For Mature Clinics, rent, clinic supplies, contract labor and other decreased by $0.5 million in the 2010 First Quarter. Rent, clinic supplies, contract labor and other as a percentage of net revenues was 20.0% for the 2010 First Quarter and 21.2% for the 2009 First Quarter.

Interest expense was $64,000 for the 2010 First Quarter and $88,000 for the 2009 First Quarter, which represents a decrease of $24,000, or 27.3%, due to a decrease in average borrowings outstanding during the period in 2010 compared to 2009. At March 31, 2010, $10.9 million was outstanding under our revolving credit facility. See Liquidity and Capital Resources below for a discussion of the terms of our revolving credit facility contained in the Credit Agreement.

The increase in cash of $5.0 million from December 31, 2009 to March 31, 2010 was due to $6.0 million provided by operations, $10.5 million of net proceeds from our Credit Agreement and $0.1 million proceeds from the sale of fixed asset and business, offset by major uses of cash which included: purchase of businesses ($8.8 million), purchase of fixed assets ($0.6 million) and distributions to noncontrolling interest partners ($2.2 million).

In connection with the acquisition of a 65% interest in Rehab Management Group in October 2008, we incurred a note payable in the amount of $157,100 payable in equal annual installments totaling $78,550 beginning October 8, 2009, plus any accrued and unpaid interest. Interest accrues at a fixed rate of 5.00% per annum. The final principal payment and any accrued and unpaid interest then outstanding is due and payable on October 8, 2010. The purchase agreement also provides for possible contingent consideration of up to $3,781,000 based on the achievement of a designated level of operating results within a three-year period following the acquisition. In 2009, we paid $1.2 million of additional consideration related to this acquisition related to operating results for the first year. Such amount was recorded as goodwill. At March 31, 2010, the principal amount outstanding related to this note was $78,550.

In connection with the acquisition of a 65% interest in a multi-partner outpatient rehabilitation practice with nine clinics in June 2008, we incurred notes payable in the aggregate totaling $950,625 payable in equal annual installments totaling $475,312, plus any accrued and unpaid interest, which began June 11, 2009. Interest accrues at a fixed rate of 5.00% per annum. The final principal payment and any accrued and unpaid interest then outstanding is due and payable on June 11, 2010. The purchase agreement also provides for possible contingent consideration of up to $1,500,000 based on the achievement of a designated level of operating results within a three-year period following the acquisition. There was no contingent consideration earned based on the operating results of the first year. At March 31, 2010, the principal amount outstanding related to these notes was $475,312.

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