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

August 05, 2010 | About:

U.S. Physical Therapy Inc. (NYSE:USPH) filed Quarterly Report for the period ended 2010-06-30.

U.s. Physical Therapy Inc. has a market cap of $207.1 million; its shares were traded at around $17.83 with a P/E ratio of 17.7 and P/S ratio of 1. 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 $27.6 million for the 2010 Second Quarter from $26.4 million for the 2009 Second Quarter, an increase of $1.2 million, or 4.6%. The $1.2 million increase included costs of $1.4 million attributable to the New Clinics offset by $0.2 million decrease in costs related to Mature Clinics. Salaries and related costs as a percentage of net revenues were 51.1% for the 2010 Second Quarter and 51.0% for the 2009 Second Quarter.

Salaries and related costs increased to $54.4 million for the 2010 Six Months from $51.8 million for the 2009 Six Months, an increase of $2.6 million, or 5.0%. The $2.6 million increase included costs of $2.2 million attributable to the New Clinics and a $0.4 million increase related to Mature Clinics. Salaries and related costs as a percentage of net revenues were 52.1% for the 2010 Six Months and 51.9% for the 2009 Six Months.

Interest expense was $145,000 for the 2010 Six Months and $201,000 for the 2009 Six Months, which represents a decrease of $56,000, or 27.9%, due to a decrease in average borrowings outstanding during the 2010 period compared to the 2009 period. At June 30, 2010, $3.6 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 $0.7 million from December 31, 2009 to June 30, 2010 was due to $12.5 million provided by operations, $3.2 million of net proceeds from our Credit Agreement and $0.9 million of net proceeds on the sale of fixed assets and business, offset by major uses of cash which included: purchase of businesses and noncontrolling interests ($9.1 million), purchase of fixed assets ($1.6 million), distributions to noncontrolling interest partners ($4.8 million) and payments on notes payable ($0.5 million).

Effective August 27, 2007, we entered into the Credit Agreement with a commitment for a $30.0 million revolving credit facility which was increased to $50.0 million effective June 4, 2008. Effective March 18, 2009, we amended the Credit Agreement to permit the Company to purchase up to $15,000,000 of its common stock subject to compliance with certain covenants, including the requirement that after giving effect to any stock purchase, our consolidated leverage ratio (as defined in the Credit Agreement) be less than 1.0 to 1.0 and that any stock repurchased be retired within seven days of purchase. In addition, the Credit Agreement was amended to adjust the pricing grid which is based on our consolidated leverage ratio with the applicable spread over LIBOR ranging from 1.5% to 2.5%. The Credit Agreement has a four year term maturing August 31, 2011, is unsecured and has loan covenants, including requirements that we comply with a consolidated fixed charge coverage ratio and consolidated leverage ratio, as defined in the Credit Agreement . Proceeds from the Credit Agreement may be used for acquisitions, working capital, purchases of our common stock, capital expenditures and other corporate purposes. Fees under the Credit Agreement include a closing fee of .25% and an unused commitment fee ranging from .1% to .35% depending on our consolidated leverage ratio and the amount of funds outstanding under the Credit Agreement. On June 30, 2010, the outstanding balance on the revolving credit facility was $3.6 million leaving $46.4 million in availability, and we were in compliance with all of the covenants thereunder.

In connection with the acquisition of a 65% interest in Rehab Management Group (RMG) in October 2008, we incurred a note payable in the amount of $157,100 payable in equal annual installments of $78,550 which began 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. At June 30, 2010, the principal amount outstanding related to this note was $78,550. 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 RMGs operating results for the first year. Such amount was recorded as additional goodwill.

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