U S PHYSICAL THERAPY INC NV
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
USPH$99.49+2.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001140361-24-024976
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001140361-24-037313
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 106 previous paragraphs and 147 current paragraphs.
61 unchanged; 37 reworded; 38 added; 8 removed; 0 previous and 11 current paragraphs rearranged.
Tables are not compared: 52 previous and 58 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (38)
Current report
as a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected;
Current report
Net income attributable to our shareholders was $15.6 million for the 2024 Six Months compared to $18.3 million for the 2023 Six Months. Earnings per share for the 2024 Six Months was $0.93 compared to $1.22 for the 2023 Six Months, due in part to the increase in shares outstanding associated with the Company’s secondary offering completed in May 2023.
Current report
Adjusted EBITDA was $22.1 million for the 2024 Second Quarter, compared to $21.7 million in the 2023 Second Quarter while Operating Results was $11.0 million in the 2024 Second Quarter compared to $10.4 million in the 2023 Second Quarter. On a per share basis, Operating Results was $0.73 in the 2024 Second Quarter compared to $0.76 in the 2023 Second Quarter, with the decrease primarily attributable to the increase in shares outstanding associated with the Company’s secondary offering completed in May 2023.
Current report
Adjusted EBITDA was $38.9 million for 2024 Six Months compared to $40.1 million in 2023 Six Months while Operating Results was $18.8 million for the 2024 Six Months compared to $18.1 million for the 2023 Six Months. On a per share basis, Operating Results was $1.25 per share in the 2024 Six Months compared to $1.36 per share in the 2023 Six Months, with the decrease primarily attributable to the increase in shares outstanding associated with our secondary offering completed in May 2023.
Current report
2024 Second Quarter versus 2023 Second Quarter
Current report
(6) Not meaningful.
Current report
Other revenues increased approximately $0.3 million, or 8.7%, to $3.2 million for the 2024 Second Quarter from $3.0 million for the 2023 Second Quarter primarily due to the increase in management contract revenue since the comparable prior year period.
Current report
Total salaries and related costs increased to $81.5 million in the 2024 Second Quarter from $74.4 million, in the 2023 Second Quarter, an increase of $7.1 million, or 9.5%. Salaries and related costs per visit (excluding management contracts), increased to $59.66 for the 2024 Second Quarter from $57.59 for the 2023 Second Quarter.
Current report
Gross profit from physical therapy operations increased $0.6 million, or 2.0%, to $28.8 million in the 2024 Second Quarter from $28.2 million in the 2023 Second Quarter. The gross profit margin from physical therapy operations was 20.1% in the 2024 Second Quarter compared to 21.3% in the 2023 Second Quarter.
Current report
IIP revenues increased $4.5 million, or 23.2%, to $23.7 million for the 2024 Second Quarter as compared to $19.2 million for the 2023 Second Quarter. Excluding the Company’s IIP acquisition during the 2024 Second Quarter, IIP revenues increased 13.5%. IIP operating costs increased $3.4 million, or 22.0%, versus the comparable prior year period. Gross profit from IIP operations in the 2024 Second Quarter increased $1.1 million, or 27.5%, to $5.1 million from $4.0 million in the 2023 Second Quarter. Excluding the Company’s IIP acquisition in the 2024 Second Quarter, IIP gross profit increased 15.7%. The gross profit margin from IIP operations increased to 21.4% in the 2024 Second Quarter from 20.7% in the 2023 Second Quarter.
Current report
Corporate office costs were $14.2 million, or 8.5% of revenue in the 2024 Second Quarter compared to $12.1 million, or 8.0% of net revenue in the 2023 Second Quarter.
Current report
Operating income was $19.6 million for the 2024 Second Quarter compared to $20.1 million for the 2023 Second Quarter.
Current report
We revalued an outstanding put right liability and recognized an expense of $0.2 million for the 2024 Second Quarter compared to an expense of $0.1 million for the 2023 Second Quarter. The put-right (expiring in 2027) relates to the potential future purchase of a company within our IIP business. The company provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.
Current report
2024 Six Months versus 2023 Six Months
Current report
Not meaningful
Current report
Total net revenue for the 2024 Six Months increased $22.9 million, or 7.6%, to $322.9 million from $300.0 million for the 2023 Six Months while operating costs increased $23.7 million, or 10.0%, to $260.6 million from $236.9 million over the same periods, respectively. As a percentage of net revenue, total operating cost was 80.7% for the 2024 Six Month as compared to79.0% for the 2023 Six Months. Gross profit for the 2024 Six Months was $62.3 million, or 19.3% of net revenue, compared to $63.1 million for the 2023 Six Months, or 21.0% of net revenue.
Current report
(6) Not meaningful.
Current report
Revenues
Current report
Revenues from physical therapy operations increased $16.5 million, or 6.3%, to $277.9 million in the 2024 Six Months compared to $261.4 million in 2023 Six Months. This increase was primarily due to an increase in visits from the 25 net new clinics added since the comparable prior year period as well as an increase in net rate per patient visit to $104.23 for 2024 Six Months from $102.56 for the 2023 Six Months. Total patient visits increased 108,707, or 4.4%, to 2,603,337 in the 2024 Six Months from 2,494,630 in the 2023 Six Months. Average daily visits per clinic was 30.0 for the 2024 Six Months compared to 30.1 in the comparable prior year period. The increase in net rate per patient visit was mainly driven by higher reimbursement rates from commercial and other payors which reflects our strategic priority of increasing reimbursement rates through contract negotiations as well as an increase in workers compensation as a percent of our total net patient revenues.
Current report
Other revenues increased $1.0 million, or 18.6%, to $6.6 million for the 2024 Six Months from $5.5 million for the 2023 Six Months due to an increase in management contract revenue since the comparable prior year period.
Current report
Operating costs
Current report
Operating costs from physical therapy operations increased by $19.0 million, or 9.2% to $255.1 million in the 2024 Six Months from $206.1 million in the 2023 Six Months primarily driven by costs associated with the 25 net new clinics added since the comparable prior year period. Operating costs were 81.0% of net revenue for the 2024 Six Months compared to 78.8% of net revenue for the 2023 Six Months. On a per visit basis, operating costs (excluding management contracts) increased to $84.97 for the 2024 Six Months from $81.28 for the 2023 Six Months.
Current report
Total rent, supplies, contract labor and other costs related to clinics increased to $60.5 million in the 2024 Six Months from $54.7 million in the 2023 Six Months, an increase of $5.8 million, or 10.6% mostly due to the 25 net new clinics added since the comparable prior year period. On a per visit, rent, supplies, contract labor and other costs (excluding management contract costs) increased to $23.17 for the 2024 Six Months compared to $21.70 for the 2023 Six Months.
Current report
The provision for credit losses was $3.3 million for the 2024 Six Months and $3.1 million for the 2023 Six Months. As a percentage of net revenues, the provision for credit losses was 1.0% for both the 2024 Six Months and 2023 Six Months.
Current report
Gross Profit
Current report
Corporate Office Costs
Current report
Corporate office costs were $28.3 million in the 2024 Six Months compared to $26.0 million in the 2023 Six Months.
Current report
Operating Income
Current report
Operating income was $33.9 million for the 2024 Six Months compared to $37.1 million for the 2023 Six Months.
Current report
Other (Expenses) Income
Current report
Interest Expense, Debt and Other
Current report
Interest expense decreased $1.2 million to $3.9 million for the 2024 Six Months compared to $5.2 million in the 2023 Six Months due to a lower outstanding balance on our Revolving Facility, which we paid down in May 2023. The interest rate on our Senior Credit Facility was 4.7% for the 2024 Six Months and 5.7% for the 2023 Six Months, with an all-in effective interest rate, including all associated costs, of 5.4% and 6.9% over the same periods, respectively.
Current report
Interest income from investment
Current report
We revalued contingent earn-out consideration related to certain acquisitions resulting in a loss of $3.4 million for the 2024 Six Months compared to a gain of $10 thousand dollars in the comparative prior year period.
Current report
Provision for Income Taxes
Current report
The provision for income taxes was $6.2 million in the 2024 Six Months compared to $7.2 million during the 2023 Six Months while the effective tax rates were 28.6% and 28.2% over the same periods, respectively.
Current report
Net income attributable to redeemable non-controlling interest (temporary equity) was $5.5 million in the 2024 Six Months compared to $5.6 million in the 2023 Six Months. Net income attributable to non-controlling interest (permanent equity) was $2.2 million for the 2024 Six Months and $2.3 million for the 2023 Six Months.
Current report
On April 30, 2024, we acquired 100% of an IIP business through one of its primary IIP businesses, Briotix Health Limited Partnership, for a purchase price of approximately $24.0 million, of which $0.5 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and the interest are payable on May 1, 2025. As part of the transaction, we agreed to pay additional contingent consideration if future operational objectives are met. There is no maximum payout. The contingent consideration was valued at $2.1 million as of June 30, 2024. We contributed the capital for this purchase therefore, subsequent to this transaction, our interest in the IIP business of Briotix Health Limited Partnership increased to 92.1%.
Removed paragraphs (8)
Previous report
2024 First Quarter versus 2023 First Quarter
Previous report
Adjusted EBITDA was $16.7 million for the 2024 First Quarter compared to $18.5 million in the 2023 First Quarter, with the variance due to the Medicare rate reductions that took effect at the beginning of the year and the adverse impact of weather events in January 2024. The Medicare rate reductions decreased Adjusted EBITDA by approximately $1.7 million while the adverse weather resulted in a decrease in Adjusted EBITDA of approximately $1.3 million.
Previous report
Operating Results was $7.7 million, or $0.51 per share, in the 2024 First Quarter as compared to $7.7 million, or $0.59 per share, in the 2023 First Quarter, with the decrease attributable to the increase in shares outstanding associated with the Company's secondary offering completed in May 2023, as well as the Medicare rate reduction and adverse impact of weather events in January 2024.
Previous report
Physical Therapy Operations
Previous report
Average daily visits per clinic was 29.5 for the 2024 First Quarter compared to 29.8 in the comparable prior year quarter. Total patient visits were 1,268,002 in the 2024 First Quarter, a 3.3% increase from 2023 First Quarter. Average daily visits per clinic in January 2024 of 27.4 were lower than the prior year of 28.9, while average daily visits per clinic in February and March of 2024 were higher than the prior year, the highest volumes for those two months in the Company’s history.
Previous report
Industrial Injury Prevention Services
Previous report
Corporate costs increased $0.2 million, or 1.6%, to $14.1 million in the 2024 First Quarter from $13.9 million in 2023 First Quarter due to an increase in support costs related to the larger number of clinics and the timing of certain expenses.
Previous report
Operating income was $14.3 million for the 2024 First Quarter compared to $17.0 million for the 2023 First Quarter.
Reworded paragraphs (37)
Previous wording
During the three months ended March 31, 2024 (“2024 First Quarter”) and for the year ended December 31, 2023, we completed the acquisitions of clinic practices and IIP businesses detailed below:
Current wording
During the six months ended June 30, 2024 and for the year ended December 31, 2023, we completed the acquisitions of clinic practices and IIP businesses detailed below:
Previous wording
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice. The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies. The following is a summary of significant regulatory changes which have affected our results of operations as well as the policies and payment rates that may affect our future results of operations.
Current wording
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice. The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies.
Previous wording
For calendar years 2021, 2022 and 2023, CMS’s expected decreases in Medicare reimbursement were partially offset by one-time increases in payments as a result of other legislation passed by Congress., resulting in decreases of approximately 3.5%, 0.75% and 2.0% in each of these years, respectively. For January 1 through March 8 of 2024, CMS’s final rule resulted in an approximate 3.5% decrease in Medicare payments for the therapy specialty. However, effective as of March 9, 2024, pursuant to the Consolidated Appropriations Act, 2024, Congress minimized the reduction in Medicare payments for therapy services for the balance of 2024, resulting in an approximate 1.8% reduction in Medicare payments for therapy services (rather than the 3.5% decrease).
Current wording
For calendar years 2021, 2022 and 2023, Centers for Medicare and Medicaid Services (“CMS”) expected decreases in Medicare reimbursement were partially offset by one-time increases in payments as a result of other legislation passed by Congress, resulting in decreases of approximately 3.5%, 0.75% and 2.0% in each of these years, respectively. For January 1 through March 8 of 2024, CMS’s final rule resulted in an approximate 3.5% decrease in Medicare payments for the therapy specialty. However, effective as of March 9, 2024, pursuant to the Consolidated Appropriations Act, 2024, Congress minimized the reduction in Medicare payments for therapy services for the balance of 2024, resulting in an approximate 1.8% reduction in Medicare payments for therapy services (rather than the 3.5% decrease). The MPFS proposed by CMS for 2025, if enacted, is expected to decrease Medicare reimbursement for therapy services by approximately 2.8% as compared to the reimbursement rates in effect for most of 2024.
Previous wording
In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required. Also, when the same service (code) is furnished separately by the physical therapist and PTA, CMS applies the de minimis standard to each 15-minute unit of codes, not on the total physical therapist and PTA time of the service. For dates of service on and after January 1, 2022, CMS pays for physical therapy and occupational therapy services provided by PTAs and occupational therapist assistants (“OTAs”) at 85% of the otherwise applicable Part B payment amount. CMS allows a timed service to be billed without a CQ (for PTA’s) or CO (for OTA’s) modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes. This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint. The calendar year 2024 MPFS final rule did not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapy assistants.
Current wording
In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required. Also, when the same service (code) is furnished separately by the physical therapist and PTA, CMS applies the de minimis standard to each 15-minute unit of codes, not on the total physical therapist and PTA time of the service. For dates of service on and after January 1, 2022, CMS pays for physical therapy and occupational therapy services provided by PTAs and occupational therapist assistants (“OTAs”) at 85% of the otherwise applicable Part B payment amount. CMS allows a timed service to be billed without a CQ (for PTA’s) or CO (for OTA’s) modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes. This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint. The proposed 2025 MPFS final rule does not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapist assistants.
Previous wording
Net income attributable to our shareholders, a Generally Accepted Accounting Principle (“GAAP”) measure, was $8.0 million for the 2024 First Quarter compared to $7.4 million for the 2023 First Quarter. In accordance with GAAP, the revaluation of redeemable non-controlling interest, net of taxes, is not included in net income but is charged directly to retained earnings; however, this change is included in the computation of earnings per share. Earnings per share for the 2024 First Quarter was $0.46 compared to $0.58 for the 2023 First Quarter.
Current wording
Net income attributable to our shareholders, a Generally Accepted Accounting Principle (“GAAP”) measure, was $7.5 million for the 2024 Second Quarter compared to $10.9 million for the 2023 Second Quarter. In accordance with GAAP, the revaluation of redeemable non-controlling interest, net of taxes, is not included in net income but is charged directly to retained earnings; however, this change is included in the computation of earnings per share. Earnings per share for the 2024 Second Quarter was $0.47 compared to $0.64 for the 2023 Second Quarter, due in part to the increase in shares outstanding associated with the Company’s secondary offering completed in May 2023.
Previous wording
Adjusted EBITDA is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out consideration, Relief Funds, changes in revaluation of put-right liability, equity-based awards compensation expense, other income and related portions for non-controlling interests.
Current wording
Adjusted EBITDA, a non-GAAP measure is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out consideration, Relief Funds, changes in revaluation of put-right liability, equity-based awards compensation expense, clinic closure costs, other income and related portions for non-controlling interests.
Previous wording
Operating Results equals net income attributable to our shareholders less, changes in revaluation of a put-right liability, Relief Funds, changes in fair value of contingent earn-out consideration, and any allocations to non-controlling interests, all net of taxes. Operating Results per share also excludes the impact of the revaluation of redeemable non-controlling interest and the associated tax impact.
Current wording
Operating Results, a non-GAAP measure equals net income attributable to our shareholders less, changes in revaluation of a put-right liability, Relief Funds, clinic closure costs, changes in fair value of contingent earn-out consideration, and any allocations to non-controlling interests, all net of taxes. Operating Results per share also excludes the impact of the revaluation of redeemable non-controlling interest and the associated tax impact.
Previous wording
Total net revenue for the 2024 First Quarter increased $7.2 million, or 4.8%, to $155.7 million from $148.5 million for the 2023 First Quarter while operating costs increased $9.6 million, or 8.2%, to $127.3 million from $117.7 million over the same periods, respectively. Total operating cost was $127.3 million for the 2024 First Quarter, or 81.8% of total revenue, as compared to $117.7 million or 79.2% of total revenue for the 2023 First Quarter. Gross profit for the 2024 First Quarter was $28.4 million, or 18.2% of net revenue, compared to $30.9 million for the 2023 First Quarter, or 20.8% of net revenue.
Current wording
Total net revenue for the 2024 Second Quarter increased $15.7 million, or 10.4%, to $167.2 million from $151.5 million for the 2023 Second Quarter while operating costs increased $14.1 million, or 11.8%, to $133.3 million from $119.3 million over the same periods, respectively. As a percent of total net revenue, total operating cost was 79.7% for the 2024 Second Quarter, as compared to 78.7% for the 2023 Second Quarter. Gross profit for the 2024 Second Quarter was $33.9 million, or 20.3% of net revenue, compared to $32.2 million, or 21.3% of net revenue, for the 2023 Second Quarter.
Previous wording
(2) Includes 14 clinics added during the 2024 First Quarter and 46 clinic added during the year ended December 31, 2023.
Current wording
(2) Includes 21 clinics added during the six months ended June 30, 2024 and 46 clinic added during the year ended December 31, 2023.
Previous wording
(3) Includes six clinics closed during the 2024 First Quarter and 15 clinics closed during the year ended December 31, 2023.
Current wording
(3) Includes 11 clinics closed during the six months ended June 30, 2024 and 15 clinics closed during the year ended December 31, 2023.
Previous wording
Net revenue from physical therapy operations increased $5.3 million, or 4.1%, to $134.4 million for the 2024 First Quarter from $129.2 million for the 2023 First Quarter. This increase was primarily due to the increase in visits from the 32 net new clinics added since the comparable prior year period partially offset by an approximate $3.6 million adverse impact of weather in January 2024. Additionally, net rate per patient visit increased to $103.37 for the 2024 First Quarter from $103.12 for the 2023 First Quarter. This increase was mainly driven by higher reimbursement rates from commercial and other payors as a result of contract negotiations and an increase in workers compensation as a percent of the Company’s total net patient revenues, partially offset by the Medicare rate reductions that took effect at the beginning of the year which decreased net patient revenues by approximately $1.9 million for the 2024 First Quarter. The Medicare rate reductions will be less impactful in future quarters as the Consolidated Appropriations Act of 2024 adjusted the Medicare rate reduction to 1.8% from 3.5%, effective on March 9, 2024. Other revenues increased $0.8 million, or 29.9%, to $3.4 million for the 2024 First Quarter from $2.6 million for the 2023 First Quarter due to the increase in the number of management contracts since the comparable prior year period.
Current wording
Net revenue from physical therapy operations increased $11.2 million, or 8.5%, to $143.5 million for the 2024 Second Quarter from $132.2 million for the 2023 Second Quarter. This increase was primarily due to the increase in visits from the 25 net new clinics added since the comparable prior year period, an increase in visits at mature clinics and an increase in net rate per patient visit. Total patient visits increased 68,195, or 5.4%, to 1,335,335 in the 2024 Second Quarter from 1,267,140 in the 2023 Second Quarter. Average daily visits per clinic was 30.6 for the 2024 Second Quarter compared to 30.4 in the comparable prior year quarter. Net rate per patient visit for the 2024 Second Quarter increased to $105.05 from $102.03 for the 2023 Second Quarter, an increase of 3.0%, despite the 1.8% Medicare rate reduction in effect for the 2024 Second Quarter. The increase in net rate per patient visit was mainly driven by higher reimbursement rates from commercial and other payors which reflects our strategic priority of increasing reimbursement rates through contract negotiations as well as an increase in workers compensation as a percent of our total net patient revenues.
Previous wording
Operating costs from physical therapy operations increased by $8.3 million or 8.1% to $110.4 million in the 2024 First Quarter from $102.1 million in the 2023 First Quarter primarily driven by costs associated with the 32 net new clinics added since the comparable prior year period. Operating costs were 82.1% of net revenue for the 2024 First Quarter compared to 79.0% of net revenue for the 2023 First Quarter. On a per visit basis (excluding management contracts), operating costs increased to $85.50 for the 2024 First Quarter from $81.97 for the 2023 First Quarter.
Current wording
Operating costs from physical therapy operations increased $10.7 million, or 10.3%, to $114.7 million in the 2024 Second Quarter from $104.0 million in the 2023 Second Quarter primarily driven by costs associated with the 25 net new clinics added since the comparable prior year period. Operating costs were 79.9% of net revenue for the 2024 Second Quarter compared to 78.7% of net revenue for the 2023 Second Quarter. On a per visit basis (excluding management contracts), operating costs increased to $84.46 for the 2024 Second Quarter from $80.61 for the 2023 Second Quarter.
Previous wording
Rent, supplies, contract labor and other costs related to clinics (excluding management contracts) increased to $28.9 million in the 2024 First Quarter from $26.5 million in the 2023 First Quarter, an increase of $2.4 million, or 9.0% mostly due to the 32 net new clinics added since the comparable prior year period. Rent, supplies, contract labor and other costs, increased on a per visit basis to $22.80 for the 2024 First Quarter compared to $21.60 for the 2023 First Quarter. Operating costs related to management contracts increased $0.5 million from $1.4 million in the 2023 First Quarter to $1.9 million in the 2024 First Quarter.
Current wording
Total rent, supplies, contract labor and other costs related to clinics increased to $31.5 million in the 2024 Second Quarter from $28.1 million in the 2023 Second Quarter, an increase of $3.5 million, or 12.4% due to the 25 net new clinics added since the comparable prior year period. On a per visit basis, rent, supplies, contract labor and other costs (excluding management contracts costs), increased to $23.52 for the 2024 Second Quarter compared to $21.79 for the 2023 Second Quarter.
Previous wording
The provision for credit losses was $1.6 million for the 2024 First Quarter and $1.5 million for the 2023 First Quarter. As a percentage of net revenues, the provision for credit losses was 1.0% for both the 2024 First Quarter and the 2023 First Quarter. Our provision for credit losses as a percentage of total patient accounts receivable was 5.0% on both March 31, 2024, and December 31, 2023.
Current wording
The provision for credit losses was $1.7 million for the 2024 Second Quarter and $1.6 million for the 2023 Second Quarter. As a percentage of net revenues, the provision for credit losses was 1.0% for both the 2024 Second Quarter and the 2023 Second Quarter. Our provision for credit losses as a percentage of total patient accounts receivable was 5.5% on June 30, 2024, as compared to 5.0% on December 31, 2023.
Previous wording
Interest expense decreased $0.6 million to $2.0 million (net of $0.9 million savings from the Company’s interest rate swap arrangement discussed below in the “Liquidity and Capital Resources –Interest Rate Swap”) for the 2024 First Quarter compared to $2.6 million (net of $0.6 million savings from the interest rate swap arrangement) in the 2023 First Quarter due to a lower outstanding balance on our revolver, which we paid down in May 2023. The interest rate on the Company’s term loan was 4.7% for the 2024 First Quarter and 4.9% for the 2023 First Quarter, with an all-in effective interest rate, including all associated costs, of 5.3% and 5.5% over the same periods, respectively.
Current wording
Interest expense decreased $0.7 million to $2.0 million for the 2024 Second Quarter compared to $2.6 million in the 2023 Second Quarter due to a lower outstanding balance on our Revolving Facility(as defined in Liquidity and Capital Resources – Senior Credit Facilities), which we paid down in May 2023. The interest rate on the Company’s Senior Credit Facilities was 4.7% and 5.7% for the 2024 Second Quarter and 2023 Second Quarter, respectively, with an all-in effective interest rate, including all associated costs, of 5.4% and 6.0% over the same periods, respectively.
Previous wording
Interest income from investing excess cash (primarily proceeds from the secondary offering sale of the Company’s stock completed in May 2023) in a high-yield savings account was $1.5 million during the 2024 First Quarter.
Current wording
Interest income from investing excess cash (primarily proceeds from the secondary offering sale of our stock completed in May 2023) in a high-yield savings account was $1.1 million during the 2024 Second Quarter compared to $0.5 million in the 2023 Second Quarter.
Previous wording
We revalued contingent earn-out consideration related to certain acquisitions resulting in a gain of $0.6 million for the 2024 First Quarter compared to an expense of $0.7 million for the 2023 First Quarter.
Current wording
We revalued contingent earn-out consideration related to certain acquisitions resulting in a loss of $4.0 million for the 2024 Second Quarter compared to a gain of $0.7 million for the 2023 Second Quarter.
Previous wording
For both the 2024 First Quarter and 2023 First Quarter, we recognized an income of $0.3 million from a joint venture which provides physical therapy services for patients at hospitals. Since we are deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.
Current wording
We recognized an income of $0.2 million for the 2024 Second Quarter and $0.3 million for the 2023 Second Quarter from a joint venture which provides physical therapy services for patients at hospitals. Since we are deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.
Previous wording
The provision for income taxes was $3.1 million in the 2024 First Quarter compared to $3.0 million during the 2023 First Quarter while the effective tax rates were 28.1% and 28.6% over the same periods, respectively.
Current wording
The provision for income taxes was $3.1 million in the 2024 Second Quarter compared to $4.2 million during the 2023 Second Quarter while the effective tax rates were 29.1% and 27.9% over the same periods, respectively.
Previous wording
Net income attributable to redeemable non-controlling interest (temporary equity) was $2.2 million in the 2024 First Quarter compared to $2.7 million in the 2023 First Quarter. Net income attributable to non-controlling interest (permanent equity) was $1.3 million for both the 2024 First Quarter and the 2023 First Quarter.
Current wording
Net income attributable to redeemable non-controlling interest (temporary equity) was $3.3 million in the 2024 Second Quarter compared to $2.9 million in the 2023 Second Quarter. Net income attributable to non-controlling interest (permanent equity) was $0.9 million for the 2024 Second Quarter and $1.0 million for the 2023 Second Quarter.
Previous wording
Salaries and related costs related to clinics (excluding management contracts) increased to $77.9 million in the 2024 First Quarter from $72.6 million, in the 2023 First Quarter, an increase of $5.3 million, or 7.3%. Salaries and related costs per visit, related to clinics increased to $61.42 for the 2024 First Quarter from $59.14 for the 2023 First Quarter.
Current wording
Total salaries and related costs related to clinics increased to $161.2 million in the 2024 Six Months from $148.3 million, in the 2023 Six Months, an increase of $13.0 million, or 8.7%. Salaries and related costs per visit (excluding management contracts) increased to $60.52 for the 2024 Six Months from $58.35 for the 2023 Six Months.
Previous wording
Gross profit from physical therapy operations in the 2024 First Quarter decreased $3.0 million, or 11.2%, to $24.1 million from $27.1 million in the 2023 First Quarter. The gross profit margin from physical therapy operations decreased to 17.9% in the 2024 First Quarter from 21.0% in the 2023 First Quarter.
Current wording
Gross profit from physical therapy operations in the 2024 Six Months decreased $2.5 million, or 4.5%, to $52.8 million from $55.3 million in the 2023 Six Months. The gross profit margin from physical therapy operations decreased to 19.0% in the 2024 Six Months from 21.2% in the 2023 Six Months.
Previous wording
IIP revenues increased $1.9 million, or 9.8%, to $21.3 million for the 2024 First Quarter as compared to $19.4 million for the 2023 First Quarter. IIP operating costs increased $1.3 million, or 8.5%, versus the comparable prior year period. Gross profit from IIP operations in the 2024 First Quarter increased $0.6 million, or 15.1%, to $4.3 million from $3.8 million in the 2023 First Quarter. The gross profit margin from IIP operations increased to 20.4% in the 2024 First Quarter from 19.5% in the 2023 First Quarter.
Current wording
IIP revenues increased $6.4 million, or 16.5%, to $45.0 million for the 2024 Six Months as compared to $38.6 million for the 2023 Six Months. IIP operating costs increased $4.7 million, or 15.2%, versus the comparable prior year period. Gross profit from IIP operations in the 2024 Six Months increased $1.7 million, or 21.4%, to $9.4 million from $7.8 million in the 2023 Six Months. The gross profit margin from IIP operations increased to 20.9% in the 2024 Six Months from 20.1% in the 2023 Six Months.
Previous wording
We recorded an expense of $0.1 million on the revaluation of a put right liability for both 2024 First Quarter and 2023 First Quarter. The put-right relates to a prior IIP acquisition and the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.
Current wording
We recorded an expense of $0.3 million on the revaluation of a put right liability for 2024 Six Months and $0.2 million for the 2023 Six Months. The put-right relates to the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.
Previous wording
We believe that our business has sufficient cash to allow us to meet our short-term cash requirements. Total cash and cash equivalents were $132.3 million as of March 31, 2024 and $152.8 million as of December 31, 2023. Additionally, we had $143.4 million of outstanding borrowings and $175.0 million in available credit under our Revolving Facility as of March 31, 2024, compared to $144.4 million of outstanding borrowings and $175.0 million in available credit under our Revolving Facility as of December 31, 2023.
Current wording
We believe that our business has sufficient cash to allow us to meet our short-term cash requirements. Total cash and cash equivalents were $112.9 million as of June 30, 2024, and $152.8 million as of December 31, 2023. Additionally, we had $142.5 million of outstanding borrowings and $175.0 million in available credit under our Revolving Facility as of June 30, 2024, compared to $144.4 million of outstanding borrowings and $175.0 million in available credit under our Revolving Facility as of December 31, 2023.
Previous wording
Historically, we have generated sufficient cash from operations to fund our development activities and to cover operational needs. We plan to continue developing new clinics and making additional acquisitions. We have, from time to time, purchased the non-controlling interests of limited partners in our existing partnerships. We may purchase additional non-controlling interests in the future. Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using our cash, financing, or a combination of the two.
Current wording
Historically, we have generated sufficient cash from operations to fund our development activities and to cover operational needs. We plan to continue developing new clinics and making acquisitions. We have, from time to time, purchased the non-controlling interests of limited partners in our existing partnerships. We may purchase additional non-controlling interests in the future. Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using our cash, financing, or a combination of the two.
Previous wording
We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements. When possible, we submit our claims electronically. The collection process is time consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect. Medicare and other payor claims relating to new clinics awaiting CMS approval initially may not be submitted for six months or more. When all reasonable internal collection efforts have been exhausted, accounts are written off prior to sending them to outside collection firms. With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the account receivable has been outstanding for 120 days or longer. As of March 31, 2024, we have accrued $7.9 million related to credit balances, a portion of which is due to patients and payors. The credit balances are expected to be resolved or paid in the next twelve months.
Current wording
We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements. When possible, we submit our claims electronically. The collection process is time consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect. Medicare and other payor claims relating to new clinics awaiting CMS approval initially may not be submitted for six months or more. When all reasonable internal collection efforts have been exhausted, accounts are written off prior to sending them to outside collection firms. With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the account receivable has been outstanding for 120 days or longer. As of June 30, 2024, we have accrued $7.5 million related to credit balances, a portion of which is due to patients and payors. The credit balances are expected to be resolved or paid in the next twelve months.
Previous wording
Cash provided by operating activities was $4.4 million for the 2024 First Quarter as compared to $11.3 million for the 2023 First Quarter. This decrease in cash provided was mostly due to the timing of payments related to payroll.
Current wording
Cash provided by operating activities was $33.4 million for the 2024 Six Months as compared to $38.8 million for the 2023 Six Months. This decrease in cash provided was mostly due to the timing of payments related to payroll.
Previous wording
Cash used in investing activities for the 2024 First Quarter totaled $20.5 million and consisted of $19.2 million used in the purchase of interests in businesses and non-controlling interests (temporary and permanent), and $1.8 million of fixed assets purchases. These uses were partially offset by $0.1 million proceeds from the sale of non-controlling interests (temporary and permanent) and $0.4 million distributions received from an unconsolidated affiliate.
Current wording
Cash used in investing activities for the 2024 Six Months totaled $48.8 million and consisted of $45.5 million used in the purchase of interests in businesses and non-controlling interests (temporary and permanent), and $4.2 million of fixed assets purchases. These uses were partially offset by $0.1 million in proceeds from the sale of non-controlling interests (temporary and permanent), repayments of notes receivable of $0.3 million and $0.5 million distributions received from an unconsolidated affiliate.
Previous wording
Cash used in financing activities for the 2024 First Quarter, totaled $4.5 million and was comprised primarily of $3.2 million in distributions to non-controlling interests (temporary and permanent) and payments of $1.3 million related to notes payable and the term note.
Current wording
Cash used in financing activities for the 2024 Six Months, totaled $24.6 million and was comprised primarily of $13.3 million cash dividends paid to shareholders, $8.3 million in distributions to non-controlling interests (temporary and permanent) and payments of $3.0 million related to notes payable and the term note.
Previous wording
The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends, and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The Credit Agreement includes certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement also contains customary events of default.
Current wording
The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends, and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The Credit Agreement includes certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement also contains customary events of default. As of June 30, 2024, the Company was in compliance with all of the covenants contained in the Credit Agreement.
Previous wording
As of March 31, 2024, $142.1 million, net of unamortized debt issuance costs of $1.4 million, was outstanding on the Term Facility while none was outstanding under the Revolving Facility resulting in $175.0 million of credit availability. As of March 31, 2024, we were in compliance with all of the covenants contained in the Credit Agreement. The interest rate on the Company’s term loan was 4.7% for the 2024 First Quarter and 4.9% for the 2023 First Quarter, with an all-in effective interest rate, including all associated costs, of 5.3% and 5.5% over the same periods, respectively.
Current wording
As of June 30, 2024, $141.3 million (net of unamortized debt issuance costs of $1.2 million) was outstanding on the Term Facility while none was outstanding under the Revolving Facility resulting in $175.0 million of credit availability. The interest rate on the Senior Credit Facilities was 4.7% for the 2024 Second Quarter and 5.7% for the 2023 Second Quarter, with an all-in effective interest rate, including all associated costs, of 5.4% and 6.0% over the same periods, respectively. The interest rate on our Senior Credit Facilities was 4.7% for the 2024 Six Months and 5.7% for the 2023 Six Months, with an all-in effective interest rate, including all associated costs, of 5.4% and 6.9% over the same periods, respectively.
Previous wording
As of March 31, 2024, the fair value of the interest rate swap was $5.5 million, an increase of $1.3 million, net of a $0.5 million, income tax effect, as compared to December 31, 2023. The fair value of the interest rate swap is included in Other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized gain in our unaudited consolidated statements of comprehensive income. The interest rate swap arrangement has generated $0.9 million in interest savings for the period March 31, 2024. The average interest rate for the term facility, net of the savings from the swap, in the 2024 First Quarter was 4.7%.
Current wording
As June 30, 2024, the fair value of the interest rate swap was $5.5 million, an increase of $1.7 million, net of a $0.4 million, income tax effect, as compared to December 31, 2023. The fair value of the interest rate swap is included in Other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized gain in our unaudited consolidated statements of comprehensive income. The interest rate swap arrangement has generated $1.8 million in interest savings for the six months ended June 30, 2024. The average interest rate for the term facility, net of the savings from the swap, in the 2024 Second Quarter was 4.7%.
Previous wording
We generally enter into various notes payable as a means of financing our acquisitions. Our present outstanding notes payable primarily relate to the acquisitions of a business or acquisitions of majority interests in such businesses. At March 31, 2024, our remaining outstanding balance on these notes aggregated $3.9 million, of which $3.1 million is payable in 2025, and $0.8 million is payable in 2026. Notes are generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest. Interest accrues at various interest rates ranging from 3.5% to 8.5% per annum.
Current wording
We generally enter into various notes payable as a means of financing our acquisitions. Our present outstanding notes payable primarily relate to the acquisitions of a business or acquisitions of majority interests in such businesses. At June 30, 2024, our remaining outstanding balance on these notes aggregated $4.1 million, of which $1.3 million is due by December 31, 2024, $1.6 million is due in 2025 and $1.2 million is due in 2026. Notes are generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest. Interest accrues at various interest rates ranging from 3.5% to 8.5% per annum.
Previous wording
On March 29, 2024, we acquired a 50% equity interest in a nine-clinic physical therapy and hand therapy practice. The original owners of the practice retained the remaining 50%. The purchase price for the 50% equity interest was approximately $16.4 million, of which $0.5 million was in the form of a note payable. The note accrues interest of 4.5% per annum and the principal and the interest are payable on March 29, 2026. Additionally, we have an obligation to pay an additional amount based on certain future operational objectives being met. There is no maximum payout.
Current wording
On March 29, 2024, we acquired a 50% equity interest in a nine-clinic physical therapy and hand therapy practice. The original owners of the practice retained the remaining 50%. The purchase price for the 50% equity interest was approximately $16.4 million, of which $0.5 million was in the form of a note payable. The note accrues interest of 4.5% per annum and the principal and the interest are payable on March 29, 2026. Additionally, we have an obligation to pay an additional amount based on certain future operational objectives being met. There is no maximum payout. The contingent consideration was valued at $0.5 million as of June 30, 2024.
Previous wording
On May 31, 2023, we and a local partner together acquired a 75% interest in a four-clinic physical therapy practice. After the transaction, our ownership interest is 45%, our local partner’s ownership interest is 30%, and the practice’s pre-acquisition owners have a 25% ownership interest. The purchase price for the 75% equity interest was approximately $3.1 million, of which $1.7 million was paid in cash by us, $1.1 million was paid in cash by the local partner, and $0.3 million was in the form of a note payable, (of which $0.2 million will be paid by us and $0.1 million will be paid by the local partner). The note will be paid on July 1, 2024. We guaranteed the full payment of $0.3 million on its due date.
Current wording
On May 31, 2023, the Company and a local partner together acquired a 75% interest in a four-clinic physical therapy practice. After the transaction, the Company’s ownership interest is 45%, the Company’s local partner’s ownership interest is 30%, and the practice’s pre-acquisition owners have a 25% ownership interest. The purchase price for the 75% equity interest was approximately $3.1 million, of which $1.7 million was paid in cash by the Company, $1.1 million was paid in cash by the local partner, and $0.3 million was in the form of a note payable. On July 1, 2024, the note payable of $0.3 million was paid in full ($0.2 million was paid by us and $0.1 million was paid by the local partner).
Previous wording
Certain limited partnership agreements, as amended, provide that, upon the triggering events, we have a call right and the selling entity or individual has a put right for the purchase and sale of the limited partnership interest held by the partner. Once triggered, the put right and the call right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature. The purchase price of the partner’s limited partnership interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The fair value of the redeemable non-controlling interests on March 31, 2024, was $190.7 million.
Current wording
Certain limited partnership agreements, as amended, provide that, upon the triggering events, we have a call right and the selling entity or individual has a put right for the purchase and sale of the limited partnership interest held by the partner. Once triggered, the put right and the call right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature. The purchase price of the partner’s limited partnership interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The fair value of the redeemable non-controlling interests on June 30, 2024 was $184.4 million.
Rearranged current paragraphs (11)
Current report — wording carried from elsewhere
(1) See Glossary of Terms - Revenue Metrics for definitions.
Current report — wording carried from elsewhere
(2) Includes 21 clinics added during the six months ended June 30, 2024 and 46 clinic added during the year ended December 31, 2023.
Current report — wording carried from elsewhere
(3) Includes 11 clinics closed during the six months ended June 30, 2024 and 15 clinics closed during the year ended December 31, 2023.
Current report — wording carried from elsewhere
(4) Includes revenues and costs from management contracts.
Current report — wording carried from elsewhere
(5) Per visit costs excludes management contract costs.
Current report — wording carried from elsewhere
Interest income from investing excess cash (primarily proceeds from the secondary offering sale of our stock completed in May 2023) in a high-yield savings account was $2.6 million during the 2024 Six Months compared to $0.5 million during the 2023 Six Months.
Current report — wording carried from elsewhere
Change in fair value of contingent earn-out consideration
Current report — wording carried from elsewhere
Change in Revaluation of Put-Right Liability
Current report — wording carried from elsewhere
Equity in earnings of unconsolidated affiliate
Current report — wording carried from elsewhere
We recognized income from a joint venture which provides physical therapy services for patients at hospitals of $0.5 million for the 2024 Six Months and $0.6 million for the 2023 Six Months. Since we are deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.
Current report — wording carried from elsewhere
Net Income Attributable to Non-controlling Interest