U.S. Physical Therapy, Inc. (NasdaqGS: USPH), a national operator of outpatient physical therapy clinics, today reported results for the quarter and nine months ended September 30, 2011.
U.S. Physical Therapy’s net income for the quarter ended September 30, 2011 increased 5.8% to $4.1 million from $3.9 million in the third quarter of 2010. Diluted earnings per share rose to $.34 from $.33. As described below, a physician services franchisee of the Company defaulted during the third quarter of 2011 which negatively impacted earnings per share by approximately $.04.
Net income for the nine months ended September 30, 2011 increased 10.8% to $12.7 million from $11.5 million in the first nine months of 2010. Diluted earnings per share rose to $1.06 from $.97.
Third Quarter 2011 compared to Third Quarter 2010
- Net revenue increased 11.8% from $53,398,000 in the third quarter of 2010 to $59,675,000 in the third quarter of 2011, due to an increase in patient visits of 13.6% from 483,000 to 549,000, offset by a decrease in average net patient revenue per visit of $2.68 from $107.11 to $104.43. Other revenues included a $0.4 million year-over-year quarterly increase in physician services revenue. During the quarter a large physician services franchisee defaulted on making payments. The Company recognized none of the $446,000 in revenue contractually due from the franchisee in the quarter and, as described below, fully reserved to bad debt the outstanding receivable balance.
- Total clinic operating costs were $45,881,000, or 76.9% of net revenue, in the third quarter of 2011, as compared to $38,867,000, or 72.8% of net revenue, in the 2010 period. Clinic salaries and related costs were 54.3% of net revenue in the 2011 period versus 52.4% in the 2010 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenue were 20.1% of net revenue in the 2011 period versus 19.0% in the 2010 period. The Company’s provision for doubtful accounts was $1,426,000 during the third quarter of 2011 as compared to $695,000 in the comparable quarter in 2010. In the most recent quarter, the bad debt expense attributable to the physician services franchisee default was $750,000. The provision for doubtful accounts as a percentage of net revenue was 2.4% for the 2011 period versus 1.3% in the 2010 period. The combination of the lost franchisee revenue of $446,000 coupled with the $750,000 related bad debt charge accounts for most of the margin contraction in the quarter.
- Corporate office costs were $5,142,000 in the third quarter of 2011 versus $5,798,000 in the 2010 third quarter. Corporate office costs were less in the most recent quarter due to a significant reduction in accrued incentive compensation and bonus expense as compared to the third quarter in 2010. Corporate office costs were 8.6% of net revenue in the 2011 period versus 10.9% in the 2010 period.
- Operating income for the third quarter of 2011 was $8,652,000 compared to $8,733,000 in the 2010 third quarter.
- Interest expense increased to $149,000 in the third quarter of 2011 from $50,000 in the third quarter of 2010.
- Net income attributable to non-controlling interests was reduced from $2,302,000 in the third quarter of 2010 to $1,754,000 in the third quarter of 2011. The reduction is attributable to the Company’s increased ownership interest in certain physical therapy partnerships and the reduced earnings in the Company’s principal physician services partnership as the result of the franchisee default.
- Provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interests was 39.3% in both periods.
- Net income attributable to common shareholders in the third quarter of 2011 was $4,099,000, or $.34 per diluted share, compared to $3,875,000, or $.33 per diluted share, in the third quarter of 2010. The third quarter 2011 impact from the physician services franchisee default was approximately $.04 per diluted share.
- Same store revenues for de novo and acquired clinics open for one year or more decreased 1.9%. The average net rate per visit decreased 1.3% while same store visits declined less than 1%.
- During the third quarter of 2011, the Company acquired 20 clinics, opened eight start-up de novo clinics and closed six clinics. The Company ended the period with 420 clinics.