What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-07 compared with 2020-05-21 · 290 added, 122 removed, 162 unchanged (72% of the section changed)

11 unchanged sentences

We operate outpatient physical therapy clinics that provide pre- and post-operative care and treatment for a variety of orthopedic-related disorders and sports-related injuries, neurologically-related injuries and rehabilitation of injured workers.

We also operate an industrial injury prevention services business which include onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments services.

Business Update Related to COVID-19

The total repercussions of the coronavirus disease 2019 (“COVID-19”) pandemic on the results of our operations and overall financial performance remain uncertain.

We have provided certain performance metrics that will assist our readers in understanding how the COVID-19 pandemic affected our business during the one month ended March 31,2020, including our 1) net revenues for the two months ended February 29, 2020 and February 28, 2019 (excluding net revenues for the clinics sold in the partnership in June), 2) net revenues for the one month ended March 31, 2020 and March 31, 2019 (excluding net revenues for the clinics sold in the partnership in June), 3) net revenues for the three months ended March 31, 2020 and March 31, 2019, and 4) certain operating data for the previously mentioned periods.

Please refer to our risk factors discussed in Part II, Item 1A, “Risk Factors” of this Form 10-Q and as previously reported in the 2019 Annual Report for more information.

Beginning in mid-March, hospitals and other medical facilities began to halt elective and non-essential surgeries.

Additionally, state governments in areas with significant growth of COVID-19 infections implemented mandatory closures of non-essential and non-life sustaining businesses, executed stay-at-home orders, imposed restrictions on travel and closed schools.

These actions continued to develop and towards the end of March, most states had significant restrictions on businesses and individuals.

The suspension of elective surgeries, decrease in physician office visits and recommendations of social distancing along with the aforementioned limitations had an adverse impact on our volume of patient visits.

Due to these impacts and measures, we have experienced significant and unpredictable reductions and cancellations of our patient visits.

We have provided below certain performance benchmarks and measures to help explain the adverse impact of COVID-19 on our Operating Results (as defined below).

For the first quarter ended March 31, 2020, we have defined the pre-COVID-19 period as the two months ended February 29, 2020 and the post-COVID-19 period as the one month ended March 31, 2020.

The following performance measures and operating data excludes the effects of the clinics in the partnership sold in June 2019 and should be evaluated in conjunction with the Operating Results for the entire quarters ended March 31, 2020 and 2019.

The performance measures and operating data presented for the two months ended February 29, 2020 and one month ended March 31, 2020 are, when combined, equal to the performance measures and operating data presented for the full quarter ended March 31, 2020.

Two months ended February 29,

One month ended March 31,

Three months ended March 31,

Selected Financial Data:

Net revenues (in thousands) - reported

Net revenues (in thousands) - without sold clinics

Operating Statistics (without sold clinics):

Number of clinics, at the end of period

Average visits per day per clinic

Total patient visits

Net patient revenue per visit

We continue to experience significantly lower physical therapy revenue than normal and in the near term expects to incur losses.

Our physical therapy patient volumes in April declined to as low as 45% of normal.

In a number of our markets, patient volume is increasing albeit at a slow pace.

We are currently at approximately slightly above 60% of normal patient volume but that varies significantly by region.

As of May 20, 2020, we have 69 clinics that are closed as a result of this pandemic;

34 of these clinics are anticipated to be closed only temporarily.

At least 35 clinics likely will not reopen, of which 22 of those were closed in late March.

Our industrial injury prevention business has also experienced a reduction in business, although not as significant as experienced by our physical therapy operations.

We have taken a number of steps to mitigate operating losses primarily through furloughs and salary cuts and to a lesser extent through terminations.

To date, we have furloughed or terminated more than 2,150 employees (1,400 furloughs and 750 terminations), comprising approximately 40% of the employees across the Company.

In the corporate office, across-the-board employee salary reductions have been implemented from 20% to 25%, as well as a 35% to 40% salary reductions for executives, and a 50% reduction in fees paid to our Board of Directors.

A number of our clinic partnerships have made salary reductions as well.

We estimate that these workforce and pay reductions would equate to annualized savings of approximately $87 million.

The Company continues to (i) deploy a telehealth and e-visit solutions to perform services remotely, (ii) renegotiate leases, (iii) slow development of new clinics, (iv) delay potential acquisitions and (v) reduce other expenses.

Given the rapid and evolving nature of COVID-19, our revenue will be negatively affected, and it is uncertain how COVID-19 will affect operations generally if these impacts continue to persist for an extended period of time.

Any of these aforementioned impacts would have a significant adverse effect on our business, financial condition and results of operations, and at this point, the extent of the impact of COVID-19 remains uncertain.

As previously disclosed in a series of filings with the SEC and further described in detail in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 21, 2020, the our results have been negatively impacted by the effects of the COVID-19 pandemic.

Management has taken a number of steps to reduce costs, stem operating losses incurred in March and April and increase profits subsequently.

In March, with the onset of the COVID-19 pandemic, we began to furlough or terminate approximately 40% of its 5,500 full and part-time workforce.

Since early May, over 750 of the furloughed employees have returned to work on a full or part-time basis.

As of the filing of this quarterly report, we continue to experience lower physical therapy revenues;

however we have seen recent improvement.

The Company’s physical therapy daily patient volumes in April declined to as low as 45% of normal.

For the month of April recent average visits per day per clinic were 16.4, in May that increased to 18.6 and in June rose to an average of 21.8 visits per day per clinic.

Our industrial injury prevention business has been less effected by the pandemic and is currently running at approximately 90% of normal.

Management estimates that the physical therapy visits in the month of July 2020, reached 80% to 85% of pre-COVID-19 volume.

Selected Operating and Financial Data

At March 31, 2020, we operated 567 clinics in 39 states.

In addition to our ownership and operation of outpatient physical therapy clinics, we also manage physical therapy facilities for third parties, such as physicians and hospitals, with 30 such third-party facilities under management as of March 31, 2020.

At June 30, 2020, we operated 554 clinics (of which 8 are not currently seeing patients) in 39 states.

In addition to our ownership and operation of outpatient physical therapy clinics, we also manage physical therapy facilities for third parties, such as physicians and hospitals, with 29 such third-party facilities under management as of June 30, 2020.

Our reportable segments include the physical therapy operations segment and the industrial injury prevention services segment.

Our physical operations consist of physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries.

Services provided by industrial injury prevention services segment include onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments.

The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies.

Other clients include large insurers and their contractors.

We perform these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and highly specialized certified athletic trainers (ATCs).

In March 2017, we acquired a 55% interest in an initial industrial injury prevention business.

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The acquired business was then combined with Briotix Health increasing our ownership position in the partnership to approximately 76.0%.

Services provided include onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments.

The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies.

Other clients include large insurers and their contractors.

We perform these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and highly specialized certified athletic trainers (ATCs).

On February 27, 2020, we acquired interests in a four-clinic physical therapy practice.

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The note accrues interest at 5.0% per annum.

During the six months ended June 30, 2020, we sold 11 previously closed clinics.

The aggregate sales price was $1.1 million, of which $0.7 million was paid in cash and $0.4 million in a note receivable payable in two equal installments of principal and any accrued interest on June 15, 2021 and 2022.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

For the 2020 First Quarter, our Operating Results (as defined below) were $3.9 million, or $0.30 per diluted share, as compared to $8.4 million, or $0.66 per diluted share for the first quarter ended March 31, 2019 (“2019 First Quarter”).

Operating Results, a non-GAAP measure, equals net income attributable to our shareholders per the consolidated statement of net income plus charges incurred for CFO search and closure costs, both net of tax.

Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019

For the second quarter ended June 30, 2020 (“2020 Second Quarter”), our Operating Results (as defined below) was $10.9 million, or $0.85 per diluted share, inclusive of relief funds received from the Public Health and Social Services Emergency Fund as part of the CARES Act (“Relief Funds”), as compared to $10.3 million, or $0.81 per diluted share, in quarter ended June 30, 2019 (“2019 Second Quarter”).

For the 2020 Second Quarter, our Operating Results was $5.0 million, or $0.39 per diluted share, without the Relief Funds.

Operating Results, a non-GAAP measure, equals net income attributable to our shareholders per the consolidated statement of net income plus charges incurred for closure costs less gain on sale of partnership interest and clinics and Relief Funds, all net of tax.

The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest.

For the 2020 First Quarter, our net income attributable to our shareholders, in accordance with GAAP, was $1.0 million as compared to $8.4 million for the 2019 First Quarter.

Inclusive of the credit or charge for the revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with GAAP, in the 2020 First Quarter, the amount is $2.6 million, or $0.20 per share, as compared to $5.0 million, or $0.39 per share.

For the 2020 Second Quarter, our net income attributable to its shareholders, in accordance with GAAP, was $10.3 million as compared to $14.6 million for the comparable period of 2019.

Inclusive of the credit or charge for the revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with GAAP, in the 2020 Second Quarter, the amount is $12.7 million, or $0.99 per share, as compared to $10.8 million, or $0.85 per share in the 2019 Second Quarter.

In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but charged or credited directly to retained earnings;

however, the charge or credit for this change is included in the earnings per basic and diluted share calculation.

See above for a discussion of the effects of COVID-19 pandemic on our operations.

The following table provides details of the diluted earnings per share computation and reconciles net income attributable to our shareholders calculated in accordance with GAAP to Operating Results.

Management believes providing Operating Results to investors is useful information for comparing our period-to-period results.

Operating Results, a non-GAAP measure, equals net income attributable to our shareholders per the consolidated statement of net income plus charges incurred for our CFO search and closure costs, both net of tax.

The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest.

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Operating Results should not be considered in isolation or as an alternative to, or substitute for, net income attributable to our shareholders presented in the consolidated financial statements.

Three Months Ended March 31,

Three Months Ended June 30,

Computation of earnings per share - USPH shareholders:

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Closure costs

Gain on sale of partnership interest and clinics

Receipts from the CARES Act Provider Relief Fund ("Relief Fund")

Allocation to non-controlling interest

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 26.25%

Operating Results

Basic and diluted Operating Results per share

Operating Results (without receipts from Relief Fund)

Receipts from Relief Fund

Tax effect at statutory rate (federal and state) of 26.25%

Operating Results (including receipts from Relief Fund)

Basic and diluted Operating Results (without receipts from Relief Fund) per share

Basic and diluted Operating Results (including receipts from Relief Fund) per share

Shares used in computation - basic and diluted

Excluding the loss of revenues from the clinics within the partnership sold in June of 2019 (“sold clinics”) of $5.7 million for the 2019 First Quarter, net revenues for the 2020 First Quarter of $112.7 million increased 2.0% from adjusted revenue of $110.5 million ($116.2 million less the $5.7 million) in 2019 First Quarter despite the adverse effects, beginning in mid-March, of the COVID-19 pandemic on the Company’s clinics.

Net patient revenues from physical therapy operations decreased $6.5 million, or 6.1%, to $100.1 million in the 2020 First Quarter from $106.7 million in the 2019 First Quarter primarily due to the $5.7 million of lost revenue from sold clinics and the adverse effects of COVID-19.

Total patient visits were 971,000 in the 2020 First Quarter and 1,001,510 for the 2019 First Quarter (inclusive of 49,300 for the sold clinics).

The average net patient revenue per visit was $103.11 for the 2020 First Quarter and $106.49 for the 2019 First Quarter.

Excluding the 49,300 visits, the net revenue per visit was $106.02 for the 2019 First Quarter.

Of the $0.8 million ($6.5 million less $5.7 million) decrease in net patient revenues, $5.4 million related to a decrease in business of clinics opened or acquired prior to April 1, 2019 (“Mature Clinics”) and was offset by $4.6 million related to clinics opened or acquired after March 31, 2019 (“New Clinics”).

Revenue from physical therapy management contracts was $2.1 million for both 2020 and 2019 first quarters.

Revenue from the industrial injury prevention business increased 43.1% to $9.9 million in the 2020 First Quarter compared to $6.9 million in the 2019 First Quarter due to internal growth and an acquisition in the second quarter of 2019.

Management estimates that the industrial injury prevention business lost approximately $126,000 in revenue and contribution margin due to the pandemic.

Other miscellaneous revenue was $0.6 million in the 2020 First Quarter and $0.5 million in the 2019 First Quarter.

The following table summarizes financial data by segment for the periods indicated and reconciles the data to our consolidated financial statements:

Three Months Ended

June 30, 2020

June 30, 2019

(in thousands)

Net operating revenues:

Physical therapy operations

Industrial injury prevention services

Total Company

Gross profit:

Physical therapy operations (excluding closure costs)

Industrial injury prevention services

Physical therapy operations - closure costs

Reported net revenues in the 2020 Second Quarter was $83.9 million as compared to $126.4 million in the 2019 Second Quarter.

Adjusted for the clinics sold in 2019 and 2020, net patient revenues were $83.7 million ($83.9 million less $0.2 million related to sold clinics) in the 2020 Second Quarter compared to $118.8 million ($126.4 million less $7.6 million related to sold clinics) in the 2019 Second Quarter.

The remaining reduction in revenue of $35.1 million is due to the adverse effects of the COVID-19 pandemic.

Please see table below.

Three Months Ended

June 30, 2020

June 30, 2019

(in thousands)

Reported net revenues

2019 sold clinics

2020 sold clinics

Net patient revenues from physical therapy operations were approximately $72.3 million in the 2020 Second Quarter and $113.4 million in the 2019 Second Quarter.

Included in net patient revenues for the 2020 Second Quarter was $5.0 million related to clinics opened or acquired after June 30, 2019 (“New Clinics”).

Included in net patient revenues for the 2019 Second Quarter was $7.8 million related to clinics sold in the six months ended June 30, 2019 and 2020.

During the 2019 Second Quarter, the Company sold its interest in a partnership that included 30 clinics and during the 2020 Second Quarter, the Company sold its interest in eleven closed clinics.

The average net patient revenue per visit was $106.97 for the 2020 Second Quarter and $107.16 for the 2019 Second Quarter.

Total patient visits were 675,700 in the 2020 Second Quarter and 1,058,000 for the 2019 Second Quarter.

Adjusted for the clinics sold in 2020 and 2019, total patient visits were 674,600 in the 2020 Second Quarter and 992,200 for the 2019 Second Quarter.

The reduction in adjusted total patient visits is due to the adverse effects of the COVID-19 pandemic.

Net patient revenues are based on established billing rates less allowances for patients covered by contractual programs and workers’ compensation.

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Payments received under contractual programs and workers’ compensation are based on predetermined rates and are generally less than the established billing rates.

Also included in physical therapy operations was revenue from physical therapy management contracts which was $1.6 million for the 2020 Second Quarter and $2.2 million in 2019 Second Quarter.

Other miscellaneous revenue from physical therapy operations was $0.3 million in the 2020 Second Quarter and $0.5 million in the 2019 Second Quarter.

Other miscellaneous revenue include physical therapy services, including athletic trainers, provided on-site such as for schools.

Revenue from the industrial injury prevention services business decreased 6.1% to $9.7 million in the 2020 Second Quarter compared to $10.3 million in the 2019 Second Quarter.

The reduction is primarily attributable to the adverse effects of the COVID-19 pandemic.

Currently, the industrial injury prevention services business is running at slightly over 90% of normal.

Operating Costs

Total operating costs, excluding closure costs, were $93.3 million in the 2020 First Quarter, or 82.7% of net revenues, as compared to $89.5 million in the 2019 First Quarter, or 77.0% of net revenues.

The $3.8 million increase was attributable to $5.2 million in operating costs related to New Clinics and $2.6 million related to the industrial injury prevention business, primarily related to the acquisition, offset by a decrease of $4.0 million related to Mature Clinics.

Closure costs of $3.8 million include estimates of remaining lease obligations, write-off of goodwill and other costs.

The Company will incur additional closure costs in the second quarter of 2020.

Total operating costs, excluding closure costs, were $64.5 million in the 2020 Second Quarter, or 76.9% of net revenues, as compared to $94.9 million in the 2019 Second Quarter, or 75.1% of net revenues.

Total operating costs for the physical therapy operations, excluding closure costs, were $58.0 million in the 2020 Second Quarter, or 78.2% of physical therapy operations revenues, as compared to $87.7 million in the 2019 Second Quarter, or 75.5% of physical therapy operations revenues.

Included in operating costs for the physical therapy operations for the 2020 Second Quarter was $3.8 million related to New Clinics, of which $2.6 million related the clinics acquired in September 2019 and February 2020.

Adjusted for the operating costs for clinics related to the partnership interest sold in 2019 and 2020 of $6.6 million in 2019 Second Quarter and $0.5 million in 2020 Second Quarter, operating costs for clinic opened or acquired prior to July 1, 2019 (“Mature Clinics”) decreased by $26.5 million in the 2020 Second Quarter compared to the 2019 Second Quarter.

Operating costs, included in physical therapy operations, related to management contracts decreased by $0.7 million.

Closure costs of $0.1 million include estimates of remaining lease obligations and other costs offset by settlement of certain lease commitments recorded in the first quarter of 2019 due to closed clinics.

Total operating costs for the industrial injury prevention services business, were $6.5 million in the 2020 Second Quarter, or 67.1% of industrial injury prevention services revenues, as compared to $7.3 million in the 2019 Second Quarter, or 70.8% of net industrial injury prevention revenues.

Each component of operating costs is discussed below:

Operating Costs—Salaries and Related Costs

Salaries and related costs increased to $69.0 million for the 2020 First Quarter from $66.3 million for the 2019 First Quarter, an increase of $2.7 million.

Salaries and related costs for New Clinics amounted to $3.4 million for the 2020 First Quarter.

Salaries and related costs for the industrial injury prevention business was $6.9 million in the 2020 First Quarter compared to $4.3 million 2019 First Quarter, an increase of $2.6 million primarily due to the acquisition in April 2019.

For Mature Clinics, salaries and related costs decreased by $3.3 million in the 2020 First Quarter compared to the 2019 First Quarter.

For management contracts, salaries and related costs increased slightly by $0.1 million for the 2020 First Quarter compared to the 2019 First Quarter.

Salaries and related costs as a percentage of net revenues were 61.2% for the 2020 First Quarter and 57.0% for the 2019 First Quarter.

Salaries and related costs, including physical therapy operations and the industrial injury prevention services business, were 51.8% of net revenues in the 2020 Second Quarter versus 55.9% in the 2019 Second Quarter primarily due to a reduction in staffing and salary reductions due to management response to the COVID-19 pandemic.

Please see discussion in Business Update Related to COVID-19 for further information.

Salaries and related costs for the physical therapy operations were $37.9 million in the 2020 Second Quarter, or 51.1% of physical therapy operations revenues, as compared to $64.6 million in the 2019 Second Quarter, or 55.6% of physical therapy operations revenues.

Included in salaries and related costs for the physical therapy operations for the 2020 Second Quarter was $2.2 million related to New Clinics.

Adjusted for the salaries and related costs for clinics related to the partnership interest sold in 2019 and 2020 of $4.9 million in the 2019 Second Quarter and $0.1 million in the 2020 Second Quarter, salaries and related costs for Mature Clinics decreased by $23.5 million in the Second Quarter 2020 compared to the Second Quarter 2019 .

Salaries and related costs, included in physical therapy operations, related to management contracts decreased by $0.6 million.

Salaries and related costs for the industrial injury prevention services business, were $5.5 million in the 2020 Second Quarter, or 56.9% of industrial injury prevention services revenues, as compared to $6.0 million in the 2019 Second Quarter, or 58.7% of net industrial injury prevention services revenues.

Operating Costs—Rent, Supplies, Contract Labor and Other

Rent, supplies, contract labor and other were $22.9 million for the 2020 First Quarter and $22.0 million for the 2019 First Quarter.

For New Clinics, rent, supplies, contract labor and other amounted to $1.7 million for the 2020 First Quarter.

For Mature Clinics, rent, supplies, contract labor and other decreased by $1.1 million in the 2020 First Quarter compared to the 2019 First Quarter.

For the industrial injury prevention business, rent, supplies, contract labor and other increased by $0.3 million for the respective periods.

Rent, supplies, contract labor and other as a percentage of net revenues was 20.3% for the 2020 First Quarter and 19.0 % for the 2019 First Quarter.

Rent, supplies, contract labor and other costs, including physical therapy operations and the industrial injury prevention services business, were 24.2% of net revenues in the 2020 Second Quarter versus 18.2% in the 2019 Second Quarter.

Rent, supplies, contract labor and other costs for the physical therapy operations were $19.3 million in the 2020 Second Quarter, or 26.0% of physical therapy operations revenues, as compared to $21.8 million in the 2019 Second Quarter, or 18.8% of physical therapy operations revenues.

Included in rent, supplies, contract labor and other costs for the physical therapy operations for the 2020 Second Quarter was $1.5 million related to New Clinics.

Adjusted for the rent, supplies, contract labor and other costs for clinics related to the partnership interest sold in 2019 and 2020 of $1.6 million in the 2019 Second Quarter and $0.4 million in the 2020 second quarter, rent, supplies, contract labor and other costs for Mature Clinics decreased by $2.6 million in the Second Quarter 2020 compared to the Second Quarter 2019 .

Rent, supplies, contract labor and other costs, included in physical therapy operations, related to management contracts decreased slightly.

Rent, supplies, contract labor and other costs for the industrial injury prevention services business, were $1.0 million in the 2020 Second Quarter, or 10.2% of industrial injury prevention services revenues, as compared to $1.2 million in the 2019 Second Quarter, or 12.1% of net industrial injury prevention services revenues.

Operating Costs—Provision for Doubtful Accounts

The provision for doubtful accounts was $1.4 million for the 2020 First Quarter and $1.2 million for the 2019 First Quarter.

The provision for doubtful accounts for patient accounts receivable as a percentage of net patient revenues was 1.2% for the 2020 First Quarter and 1.0% for the comparable period in 2019.

Our provision for doubtful accounts for patient accounts receivable as a percentage of total patient accounts receivable was 5.66% at March 31, 2020, as compared to 5.50% at December 31, 2019.

Our days’ sales outstanding were both 33 days at March 31, 2020 and December 31, 2019.

Gross profit for 2020 First Quarter, excluding closure costs, was $19.4 million, as compared to $26.7 million in the 2019 First Quarter.

The gross profit percentage, excluding closure costs, decreased and was 17.2% of net revenue in the 2020 First Quarter as compared to 23.1% in the 2019 First Quarter.

The gross profit percentage for our physical therapy clinics, excluding closure costs, was 17.3% in the 2020 First Quarter as compared to 23.0% in the 2019 First Quarter.

The gross profit percentage on physical therapy management contracts was 15.7% in the 2020 First Quarter as compared to 18.5% in the 2019 First Quarter.

The gross profit for the industrial injury prevention business was $1.7 million, or 16.8% in the 2020 First Quarter as compared to $1.5 million, or 22.3%, in the 2019 First Quarter.

The provision for doubtful accounts as a percentage of net revenue was 0.9% in the 2020 Second Quarter and 1.0% for the comparable period in 2019.

Our provision for doubtful accounts for patient accounts receivable as a percentage of total patient accounts receivable was 6.4% at June 30, 2020, as compared to 5.6% at December 31, 2019.

Our days’ sales outstanding were 36 days at June 30, 2020 and 33 days at December 31, 2019.

Gross profit, including physical therapy operations, without closure costs, and the industrial injury prevention service business, was $19.4 million, or 23.1% of net revenue, as compared to $31.4 million, or 24.9% of net revenues, in the 2019 Second Quarter.

Gross profit for the physical therapy operations was $16.2 million in the 2020 Second Quarter, or 21.8% of physical therapy operations revenues, as compared to $28.4 million in the 2019 Second Quarter, or 24.5% of physical therapy operations revenues.

Gross profit for the physical therapy operations, excluding management contracts, was $15.8 million in the 2020 Second Quarter, or 21.7% of net patient revenues, as compared to $28.1 million in the 2019 Second Quarter, or 24.7% of net patient revenues.

Gross profit for management contracts was $0.4 million in the 2020 Second Quarter, or 26.9% of management contract revenues, as compared to $0.3 million in the 2019 Second Quarter, or 15.4% of net patient revenues.

The gross profit for the industrial injury prevention service business was $3.2 million, or 32.9%, in the 2020 Second Quarter as compared to $3.0 million, or 29.2%, in the 2019 Second Quarter.

Corporate Office Costs

Corporate office costs, consisting primarily of salaries, incentive compensation, and benefits of corporate office personnel, rent, insurance costs, depreciation and amortization, travel, legal, accounting, professional, and recruiting fees, were $11.7 million for the 2020 First Quarter and $11.3 million for the 2019 First Quarter.

As a percentage of net revenues, corporate office costs were 10.4% for the 2020 First Quarter and 9.7% for the 2019 First Quarter.

Corporate office costs, consisting primarily of salaries, incentive compensation, and benefits of corporate office personnel, rent, insurance costs, depreciation and amortization, travel, legal, accounting, professional, and recruiting fees, were $9.0 million for the 2020 Second Quarter and $11.5 million for the 2019 Second Quarter primarily due to a reduction in staffing and salary reductions due to management response to the COVID-19 pandemic.

Please see discussion in Business Update Related to COVID-19 for further information.

As a percentage of net revenues, corporate office costs were 10.8% for the 2020 Second Quarter and 9.1% for the 2019 Second Quarter.

Operating Income

Operating income for the 2020 First Quarter was $4.0 million as compared to $15.4 million 2019 First Quarter.

Operating income as a percentage of net revenue decreased by 970 basis points from 13.3% in the 2019 period to 3.6% in 2020.

See discussion above related to the effects of COVID-19 on our business for more.

Operating income for the 2020 Second Quarter was $10.3 million as compared to $19.9 million for the 2019 Second Quarter.

Operating income as a percentage of net revenue decreased from 15.7% in the 2019 period to 12.2% in 2020.

For the 2020 Second Quarter, operating income increased $6.2 million or 3.6% compared to the first quarter of 2020.

See discussion above related to the effects of COVID-19 on our business and results of operation.

Included in other income in the 2020 Second Quarter was $7.9 million of Relief Funds.

The Relief Funds do not have to be repaid and were used for operations and offset of losses due to the COVID-19 pandemic.

Gain on Sale of Partnership Interest and Clinics

Included in other income was a gain of $1.1 million in the 2020 Second Quarter resulting from the sale of 11 previously closed clinics.

A gain of $5.8 million was recognized in the 2019 Second Quarter resulting from the sale of a partnership interest which included 30 clinics.

Interest Expense

Interest expense was $0.4 million in the 2020 First Quarter compared to $ 0.3 million in the 2019 First Quarter due to higher borrowings under our revolving credit line.

At March 31, 2020, $114.0 million was outstanding under our Amended Credit Agreement (as defined below).

Interest expense was $653,000 in the 2020 Second Quarter and $607,000 in the 2019 Second Quarter due to higher average borrowings under the Company’s Amended Credit Agreement.

At June 30, 2020, $33.0 million was outstanding under our Amended Credit Agreement (as defined below).

See “—Liquidity and Capital Resources” below for a discussion of the terms of our Amended Credit Agreement.

Provision for Income Taxes

The provision for income tax for the 2020 First Quarter was $0.3 million and $2.7 million in the 2019 First Quarter.

The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 22.3% for the 2020 First Quarter and 24.3% for the 2019 First Quarter.

The provision for income tax was $3.9 million for the 2020 Second Quarter and $5.3 million for the 2019 Second Quarter.

The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 27.5% for the 2020 Second Quarter and 26.7% for the 2019 Second Quarter.

See table below detailing calculation of the provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest ($ in thousands):

Three Months Ended

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Income before taxes

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Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests (permanent equity) was $0.5 million in the 2020 First Quarter and $1.5 million in the 2019 First Quarter.

Net income attributable to redeemable non-controlling interests (temporary equity) was $1.8 million in the 2020 First Quarter and $2.4 million in the 2019 First Quarter.

Net income attributable to non-controlling interests (permanent equity) was $1.5 million in the 2020 Second Quarter and $1.8 million in the 2019 Second Quarter.

Net income attributable to redeemable non-controlling interests (temporary equity) was $3.0 million in the 2020 Second Quarter and $3.4 million in the 2019 Second Quarter.

Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

For the six months ended June 30, 2020 (“2020 Six Months”), our Operating Results (as defined below), was $14.8 million, or $1.15 per diluted share, inclusive of Relief Funds, as compared to $18.8 million, or $1.47 per diluted share in the six months ended June 30, 2019 (“2019 Six Months”).

For the 2020 Six Months, our Operating Results, was $8.9 million, or $0.70 per diluted share, without the Relief Funds.

Please see page 32 for the definition of Operating Results.

For the 2020 Six Months, our net income attributable to its shareholders, in accordance with GAAP, was $11.2 million as compared to $23.0 million for the 2019 Six Months.

Inclusive of the credit or charge for the revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with GAAP, in the 2020 Six Months, the amount is $15.3 million, or $1.19 per share, as compared to $15.8 million, or $1.24 per share, in the 2019 Six Months.

however, the charge or credit for this change is included in the earnings per basic and diluted share calculation.

The following table provides details of the diluted earnings per share computation and reconciles net income attributable to our shareholders calculated in accordance with GAAP to Operating Results.

Management believes providing Operating Results to investors is useful information for comparing our period-to-period results.

The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest.

In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is included in the earnings per basic and diluted share calculation, although it is not included in net income but charged directly to retained earnings.

Management uses Operating Results, which eliminates certain items described above that can be subject to volatility and unusual costs, as one of the principal measures to evaluate and monitor financial performance period over period.

Management believes that Operating Results is useful information for investors to use in comparing our period-to-period results as well as for comparing with other similar businesses since most do not have redeemable non-controlling interest instruments and therefore have different liability and equity structures.

Operating Results is not a measure of financial performance under GAAP.

Operating Results should not be considered in isolation or as an alternative to, or substitute for, net income attributable to our shareholders presented in the consolidated financial statements.

Six Months Ended June 30,

Computation of earnings per share - USPH shareholders:

Net income attributable to USPH shareholders

Credit (charges) to retained earnings:

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 26.25%

Earnings per share (basic and diluted)

Charges incurred for CFO search

Closure costs

Gain on sale of partnership interest and clinics

Receipts from the CARES Act Provider Relief Fund ("Relief Fund")

Allocation to non-controlling interest

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 26.25%

Operating Results (without receipts from Relief Fund)

Receipts from Relief Fund

Tax effect at statutory rate (federal and state) of 26.25%

Operating Results (including receipts from Relief Fund)

Basic and diluted Operating Results (without receipts from Relief Fund) per share

Basic and diluted Operating Results (including receipts from Relief Fund) per share

Shares used in computation - basic and diluted

The following table summarizes financial data by segment for the periods indicated and reconciles the data to our consolidated financial statements:

Six Months Ended

June 30, 2020

June 30, 2019

(in thousands)

Net operating revenues:

Physical therapy operations

Industrial injury prevention services

Total Company

Gross profit:

Physical therapy operations (excluding closure costs)

Industrial injury prevention services

Physical therapy operations - closure costs

Total Assets:

Physical therapy operations

Industrial injury prevention services

Total Company

Reported net revenues in the 2020 Six Months was $196.6 million as compared to $242.6 million in the 2019 Six Months.

Adjusted for the clinics sold in 2019 and 2020, net patient revenues were $195.6 million ($196.6 million less $1.0 million related to sold clinics) in the 2020 Six Months compared to $228.4 million ($242.6 million less $14.2 million related to sold clinics) in the 2019 Six Months.

The remaining reduction in revenue of $32.8 million is due to the adverse effects of the COVID-19 pandemic.

Please see table below.

Six Months Ended

June 30, 2020

June 30, 2019

(in thousands)

Reported net revenues

2019 sold clinics

2020 sold clinics

Net patient revenues from physical therapy operations were approximately $172.4 million in the 2020 Six Months and $220.0 million in the 2019 Six Months.

Included in net patient revenues for the 2020 Six Months was $9.1 million related to New Clinics.

Included in net patient revenues for the 2020 Six Months was $1.0 million related to the clinics sold in 2020.

For the 2019 Six Months, net patient revenue included $7.8 million related to the clinics sold in the six months ended June 30, 2019 and 2020.

During the 2019 Six Months, the Company sold its interest in a partnership that included 30 clinics and during the 2020 six month period, the Company sold its interest in 11 closed clinics.

The average net patient revenue per visit was $104.70 for the 2020 Six Months and $106.83 for the 2019 Six Months.

Total patient visits were 1,646,700 in the 2020 Six Months and 2,059,000 for the 2019 Six Months.

Adjusted for the clinics sold in 2020 and 2019, total patient visits were 1,637,800 in the 2020 Six Months and 1,934,500 for the 2019 Six Months.

The reduction in adjusted total patient visits is due to the adverse effects of the COVID-19 pandemic.

Net patient revenues are based on established billing rates less allowances for patients covered by contractual programs and workers’ compensation.

Net patient revenues are determined after contractual and other adjustments relating to patient discounts from certain payors.

Payments received under contractual programs and workers’ compensation are based on predetermined rates and are generally less than the established billing rates.

Also included in physical therapy operations was revenue from physical therapy management contracts which was $3.7 million for the 2020 Six Months and $4.4 million in 2019 Six Months.

Other miscellaneous revenue from physical therapy operations was $0.9 million in the 2020 Six Months and $1.0 million in the 2019 Six Months.

Other miscellaneous revenue include physical therapy services, including athletic trainers, provided on-site such as for schools.

Revenue from the industrial injury prevention services business increased 13.6% to $19.5 million in the 2020 Six Months compared to $17.2 million in the 2019 Six Months.

The increase is primarily attributable to the acquisition in April 2019 offset by the adverse effects of the COVID-19 pandemic.

Currently, the industrial injury prevention services business is running at slightly over 90% of normal.

Operating Costs

Total operating costs, excluding closure costs, were $157.8 million in the 2020 Six Months, or 80.3% of net revenues, as compared to $184.5 million in the 2019 Six Months, or 76.0% of net revenues.

Total operating costs for the physical therapy operations, excluding closure costs, were $143.1 million in the 2020 Six Months, or 80.8% of physical therapy operations revenues, as compared to $171.8 million in the 2019 Six Months, or 76.2% of physical therapy operations revenues.

Included in operating costs for the physical therapy operations for the 2020 Six Months was $7.3 million related to New Clinics, of which $4.7 million related the clinics acquired in September 2019 and February 2020.

Adjusted for the operating costs for clinics related to the partnership interests sold in 2019 and 2020 of $6.6 million in the 2019 Six Months and $0.5 million in the 2020 Six Months, operating costs for clinic opened or acquired prior to July 1, 2019 (“Mature Clinics”) decreased by $26.5 million in the Second Quarter 2020 compared to the Second Quarter 2019.

Operating costs, included in physical therapy operations, related to management contracts decreased by $0.7 million.

Closure costs of $0.1 million include estimates of remaining lease obligations and other costs offset by settlement of certain lease commitments recorded in the 2019 First Quarter due to closed clinics.

Operating costs for the industrial injury prevention services business, were $14.7 million in the 2020 Six Months, or 74.7% of industrial injury prevention services revenues, as compared to $12.7 million in the 2019 Six Months, or 52.1% of net industrial injury prevention revenues.

Each component of operating costs is discussed below:

Operating Costs—Salaries and Related Costs

Salaries and related costs, including physical therapy operations and the industrial injury prevention services business, were 57.2% of net revenues in the 2020 Six Months versus 56.4% in the 2019 Six Months primarily due to a reduction in staffing and salary reductions due to management response to the COVID-19 pandemic.

Please see discussion in Business Update Related to COVID-19 for further information .

Salaries and related costs for the physical therapy operations were $100.0 million in the 2020 Six Months, or 56.5% of physical therapy operations revenues, as compared to $126.5 million in the 2019 Six Months, or 56.1% of physical therapy operations revenues.

Included in salaries and related costs for the physical therapy operations for the 2020 Six Months was $4.5 million related to New Clinics.

Adjusted for the salaries and related costs for clinics related to the partnership interest sold in 2019 and 2020 of $9.6 million in the 2019 Six Months and $0.6 million in the 2020 Six Months, salaries and related costs for Mature Clinics decreased by $21.4 million in the Second Quarter 2020 compared to the Second Quarter 2019.

Salaries and related costs, included in physical therapy operations, related to management contracts decreased by $0.7 million.

Salaries and related costs for the industrial injury prevention services business, were $12.4 million in the 2020 Six Months, or 63.6% of industrial injury prevention services revenues, as compared to $10.4 million in the 2019 Six Months, or 60.4% of net industrial injury prevention services revenues.

Operating Costs—Rent, Supplies, Contract Labor and Other

Rent, supplies, contract labor and other costs, including physical therapy operations and the industrial injury prevention services business, were 22.0% of net revenues in the 2020 Six Months versus 18.6% in the 2019 Six Months.

Rent, supplies, contract labor and other costs for the physical therapy operations were $40.9 million in the 2020 Six Months, or 23.1% of physical therapy operations revenues, as compared to $45.1 million in the 2019 Six Months, or 20.0% of physical therapy operations revenues.

Included in rent, supplies, contract labor and other costs for the physical therapy operations for the 2020 Six Months was $2.4 million related to New Clinics.

Adjusted for the rent, supplies, contract labor and other costs for clinics related to the partnership interest sold in 2019 and 2020 of $3.1 million in the 2019 Six Months and $0.2 million in the 2020 Six Months, rent, supplies, contract labor and other costs for Mature Clinics decreased by $1.4 million in the Second Quarter 2020 compared to the Second Quarter 2019.

Rent, supplies, contract labor and other costs, included in physical therapy operations, related to management contracts increased slightly.

Rent, supplies, contract labor and other costs for the industrial injury prevention services business, were $2.3 million in both the 2020 and 2019 Six Months.

As a percentage of industrial injury prevention services revenues, rent, supplies, contract labor and other costs were 11.6% and 13.1% of net industrial injury prevention services revenues for the 2020 and 2019 Six Months, respectively.

Operating Costs—Provision for Doubtful Accounts

The provision for doubtful accounts as a percentage of net revenue was 1.1% in the 2020 Six Months and 1.0% for the 2019 Six Months.

Our provision for doubtful accounts for patient accounts receivable as a percentage of total patient accounts receivable was 6.4% at June 30, 2020, as compared to 5.6% at December 31, 2019.

Our days’ sales outstanding were 36 days at June 30, 2020 and 33 days at December 31, 2019.

Gross profit, including physical therapy operations, without closure costs, and the industrial injury prevention services business, was $38.8 million, or 19.7% of net revenue, as compared to $58.2 million, or 24.0% of net revenues, in the 2019 Six Months.

Gross profit for the physical therapy operations was $34.0 million in the 2020 Six Months, or 19.2% of physical therapy operations revenues, as compared to $53.6 million in the 2019 Six Months, or 23.8% of physical therapy operations revenues.

Gross profit for the physical therapy operations, excluding management contracts, was $33.2 million in the 2020 Six Months, or 19.2% of net patient revenues, as compared to $52.9 million in the 2019 Six Months, or 23.9% of net patient revenues.

Gross profit for management contracts was $0.8 million in the 2020 Six Months, or 20.5% of management contract revenues, as compared to $0.7 million in the 2019 Six Months, or 16.9% of net patient revenues.

The gross profit for the industrial injury prevention services business was $4.8 million, or 24.8%, in the 2020 Six Months as compared to $4.5 million, or 26.4%, in the 2019 Six Months.

Corporate Office Costs

Corporate office costs, consisting primarily of salaries, incentive compensation, and benefits of corporate office personnel, rent, insurance costs, depreciation and amortization, travel, legal, accounting, professional, and recruiting fees, were $20.7 million for the 2020 Six Months and $22.8 million for the 2019 Six Months primarily due to a reduction in staffing and salary reductions due to management response to the COVID-19 pandemic.

As a percentage of net revenues, corporate office costs were 10.5% for the 2020 Six Months and 9.4% for the 2019 Six Months.

Operating Income

Operating income for the 2020 Six Months was $14.3 million as compared to $35.3 million for the 2019 Six Months.

Operating income as a percentage of net revenue decreased from 14.6% in the 2019 Six Months to 7.3% in 2020.

See discussion above related to the effects of COVID-19 on our business and results of operations.

Included in other income in the 2020 Six Months was $7.9 million of Relief Funds.

The Relief Funds do not have to be repaid and were used for operations and offset of losses due to the COVID-19 pandemic.

Gain on Sale of Partnership Interest and Clinics

Included in other income was a gain of $1.1 million in the 2020 Six Months resulting from the sale of 11 previously closed clinics and, as previously disclosed, a gain of $5.8 million in the 2019 Six Months resulting from the sale of a partnership interest which included 30 clinics.

Interest Expense

Interest expense was $1.1 million in the 2020 Six Months and $1.0 in the 2019 Six Months due to higher average borrowings under the Company’s Amended Credit Agreement.

At June 30, 2020, $33.0 million was outstanding under our Amended Credit Agreement (as defined below).

See “—Liquidity and Capital Resources” below for a discussion of the terms of our Amended Credit Agreement.

Provision for Income Taxes

The provision for income tax was $4.2 million for the 2020 Six Months and $8.0 million for the 2019 Six Months.

The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 27.1% for the 2020 Six Months and 25.8% for the 2019 Six Months.

See table below detailing calculation of the provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest ($ in thousands):

Six Months Ended

June 30, 2020

June 30, 2019

Income before taxes

net income attributable to non-controlling interests:

Non-controlling interests - permanent equity

Redeemable non-controlling interests - temporary equity

Income before taxes less net income attributable to non-controlling interests

Provision for income taxes

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests (permanent equity) was $2.0 million in the 2020 Six Months and $3.3 million in the 2019 Six Months.

Net income attributable to redeemable non-controlling interests (temporary equity) was $4.8 million in the 2020 Six Months and $5.8 million in the 2019 Six Months.

LIQUIDITY AND CAPITAL RESOURCES

We believe that our business has sufficient cash to allow us to meet our short-term cash requirements.

At March 31, 2020 and December 31, 2019, we had $89.5 million and $23.5 million, respectively, in cash.

We believe that our cash is sufficient to fund the working capital needs of our operating subsidiaries through at least March 31, 2021.

As of the date of this filing, we have approximately $110.0 million in cash.

In addition to collections from our patient receivables, we have drawn all funds available under the Amended Credit Agreement of $125.0 million, received funds from (a) the Medicare Accelerated and Advance Payment Program (“MAAPP”) ($12.4 million to date) and (b) the Public Health and Social Services Emergency Fund (“Relief Fund”) ($5.7 million to date) as part of the Coronavirus Aid, Relief, and Economics Securities Act (“CARES Act”).

MAAPP funds received will be applied to future Medicare billings commencing in August 2020, with all such remaining amounts required to be repaid by us by November 2020.

At June 30, 2020 and December 31, 2019, we had $43.5 million and $23.5 million, respectively, in cash.

We believe that our cash is sufficient to fund the working capital needs of our operating subsidiaries through at least June 30, 2021.

Included in our cash at June 30, 2020 are the receipts from the Medicare Accelerated and Advance Payment Program (“MAAPP”) of $12.4 million.

Based on current regulations, MAAPP funds received will be applied to future Medicare billings commencing in August 2020, with all such remaining amounts required to be repaid by us by November 2020.

Beginning November 2020, any unpaid balance will begin accruing interest.

The Relief Fund monies do not have to be repaid.

In addition, we are taking advantage of the allowed deferral of the employer payroll taxes under the CARES Act.

Cash and cash equivalents increased by $20.0 million from December 31, 2019 to June 30, 2020.

During the 2020 Six Months, $48.4 million was provided by operations and $12.9 million from MAAPP, as described above.

The major uses of cash for investing and financing activities included:

net reduction in credit line ($33.0 million), distributions to non-controlling interests inclusive of those classified as redeemable non-controlling interests ($5.7 million), purchase of business ($11.6 million), purchase of fixed assets ($4.6 million), cash dividends paid to our shareholders ($4.1 million), and a purchase of redeemable non-controlling interests ($2.4 million).

During the 2020 Second Quarter, we were able to negotiate rent abatements and deferrals totaling $1.6 million.

Effective December 5, 2013, we entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility.

7 unchanged sentences

The November 2017 amendment, among other items, adjusted the pricing grid as described above, increased the aggregate amount we may pay in cash dividends to $20.0 million to our shareholders and extended the maturity date to November 30, 2021.

As of March 31, 2020, we were in compliance with all of the covenants contained in the credit agreement.

Management cannot be certain the Company will be in compliance with covenants at the end of second quarter of 2020.

Management is in discussions with our lender regarding an amendment to the facility so as to maintain compliance with all covenants.

Management anticipates an amendment will be in place by the end of the second quarter of 2020.

Cash and cash equivalents increased by $66.1 million from December 31, 2019 to March 31, 2020.

During the 2020 First Quarter, $16.4 million was provided by operations, and $68.0 million of net proceeds from our revolving line of credit.

The major uses of cash for investing and financing activities included:

purchases of interests in the four-clinic practice acquired ($11.6 million), distributions to non-controlling interests inclusive of those classified as redeemable non-controlling interests ($2.3 million), purchase of fixed assets ($2.7 million) and a purchase of redeemable non-controlling interests ($1.9 million).

As of June 30, 2020, we were in compliance with all of the covenants contained in the credit agreement.

Given the uncertainty inherent in operating results due to the COVID-19 pandemic, the Company continues to closely monitor covenant compliance.

The Company will engage as required in discussions with its lender regarding an amendment to the facility so as to maintain compliance with all covenants.

On February 27, 2020, we acquired interests in a four-clinic physical therapy practice.

23 unchanged sentences

We generally enter into various notes payable as a means of financing our acquisitions.

Our outstanding notes payable as of March 30, 2020 relate to certain of the acquisitions of businesses and purchases of redeemable non-controlling interests that occurred in 2018 through March 2020.

Our outstanding notes payable as of June 30, 2020 relate to certain of the acquisitions of businesses and purchases of redeemable non-controlling interests that occurred in 2018 through June 2020.

Typically, the notes are payable over two years plus any accrued and unpaid interest.

Interest accrues at various interest rates ranging from 3.25% to 5.5% per annum, subject to adjustment.

At March 31, 2020, the balance on these notes payable was $5.3 million.

At June 30, 2020, the balance on these notes payable was $5.3 million.

In addition, we assumed leases with remaining terms of 1 month to 6 years for the operating facilities.

In conjunction with the above mentioned acquisitions, in the event that a limited minority partner’s employment ceases at any time after a specified date that is typically between three and five years from the acquisition date, we have agreed to certain contractual provisions which enable such minority partners to exercise their right to trigger our repurchase of that partner’s non-controlling interest at a predetermined multiple of earnings before interest and taxes.

As of March 31, 2020, we have accrued $5.1 million related to credit balances due to patients and payors.

As of June 30, 2020, we have accrued $6.9 million related to credit balances due to patients and payors.

This amount is expected to be paid in the next twelve months.

4 unchanged sentences

There is no expiration date for the share repurchase program.

As of March 31, 2020, there are currently an additional estimated 217,391 shares (based on the closing price of $69.00 on March 31, 2020) that may be purchased from time to time in the open market or private transactions depending on price, availability and our cash position.

We did not purchase any shares of our common stock during the three months ended March 31, 2020.

As of June 30, 2020, there are currently an additional estimated 185,139 shares (based on the closing price of $81.02 on June 30, 2020) that may be purchased from time to time in the open market or private transactions depending on price, availability and our cash position.

We did not purchase any shares of our common stock during the six months ended June 30, 2020.

FACTORS AFFECTING FUTURE RESULTS

36 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis