U S PHYSICAL THERAPY INC /NV 10-K

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock has traded on the New York Stock Exchange (“NYSE”) since August 14, 2012 under the symbol “USPH.” Prior to that, our common stock was traded on the Nasdaq Global Select Market under the symbol “USPH”. As of March 1, 2021, there were 79 holders of record of our outstanding common stock. DIVIDENDS On February 23, 2021, our Board of Directors declared a dividend of $0.35 per share which will be paid on April 9, 2021 to shareholders of record as of March 12, 2021. During 2020, we paid a cash dividend for the first quarter of 2020 of $0.32 per share on all shares of common stock issued and outstanding as of April 17, 2020 which amounted to $4.1 million. In March 2020, our Board of Directors announced the suspension of any further dividends in 2020. During 2019, we paid a quarterly dividend of $0.27 for the first and second quarters and $0.30 per share for the third and fourth quarters, totaling $1.14 per share for the year, which amounted to total aggregate cash payments of dividends to holders of our common stock in 2019 of approximately $14.5 million. During 2018, we paid a regular quarterly dividend of $0.23 per share, totaling $0.92 per share, which amounted to total aggregate cash payments of dividends to holders of our common stock in 2018 of approximately $11.7 million. We are currently restricted from paying dividends in excess of $50,000,000 in any fiscal year on our common stock under the Credit Agreement (as defined in ‘‘Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources’’). 23 Table of Contents FIVE YEAR PERFORMANCE GRAPH The performance graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference. In addition, the performance graph and the related description shall not be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C. On August 14, 2012, our common stock began trading on NYSE. The following performance graph compares the cumulative total stockholder return of our common stock to The NYSE Composite Index and the NYSE Health Care Index for the period from December 31, 2015 through December 31, 2020. The graph assumes that $100 was invested in our common stock and the common stock of each of the companies listed on The NYSE Composite Index and The NYSE Health Care Index on December 31, 2015 and that any dividends were reinvested. Comparison of Five Years Cumulative Total Return for the Year Ended December 31, 2020 12/15 12/16 12/17 12/18 12/19 12/20 U. S. Physical Therapy, Inc. 100 131 135 191 213 224 NYSE Composite 100 109 126 112 137 143 NYSE Healthcare Index 100 97 115 122 146 162 24 Table of Contents ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. EXECUTIVE SUMMARY Our Business. 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. At December 31, 2020, we operated 554 clinics in 39 states. The average age of our clinics at December 31, 2020 was 11.03 years. 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 38 such third-party facilities under management as of December 31, 2020. In March 2017, we acquired a 55% interest in the initial industrial injury prevention business. On April 30, 2018, we made a second acquisition and subsequently combined the two businesses. After the combination, the Company owned a 59.45% interest in the combined business, Briotix Health, Limited Partnership (“Briotix Health”). Services provided include onsite injury 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 specialized certified athletic trainers (ATCs). On April 11, 2019, we acquired a third company that is a provider of industrial injury prevention services. This acquired company specializes in delivering injury prevention and care, post offer employment testing, functional capacity evaluations and return-to-work services. It performs these services across a network in 45 states including onsite at eleven client locations. After the acquisition, the business was then combined with Briotix Health increasing our ownership position in the partnership to approximately 76.0%. In addition to the above acquired interests in the industrial injury prevention businesses, during 2020, 2019 and 2018, we completed the following acquisitions in our physical therapy operations: Acquisition Date % Interest Acquired Number of Clinics November 2020 Acquisition November 30, 2020 75% 3 September 2020 Acquisition September 30, 2020 70% * February 2020 Acquisition February 27, 2020 65% ** 4 September 2019 Acquisition September 30, 2019 67% 11 August 2018 Acquisition August 31, 2018 70% 4 * The business includes six management and services contracts which had a remaining term of approximately five years as of the date acquired. ** The four clinics are in four separate partnerships. The Company's interest in the four partnerships range from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction. Also during 2019, we purchased the assets and business of one physical therapy clinic in a separate transaction. The clinic operates as a satellite clinic of one of our existing partnerships. Besides the multi-clinic acquisition in 2018 referenced in the table above, we acquired five separate clinic practices through several of our majority owned Clinic Partnerships. These practices operate as satellites of the respective existing Clinic Partnerships. We intend to continue to pursue additional acquisition opportunities, develop new clinics and open satellite clinics. Impact of COVID-19 As previously disclosed in a series of filings with the SEC and further described in detail in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 filed with the SEC on May 21, 2020, August 7, 2020, and November 6, 2020, respectively, our results have been negatively impacted by the effects of the COVID-19 pandemic. Management has taken a number of steps to reduce costs, make up for operating losses incurred in March and April, and increase profits. We continue to experience somewhat lower physical therapy patient volumes; however revenues improved significantly in the 2020 fourth quarter, compared to the 2020 second and third quarters. Our average physical therapy patient volumes per day per clinic were 26.2, 18.9, 25.8 and 27.7 respectively, in the first to fourth quarters of 2020. Our industrial injury prevention business has been less affected by the pandemic. 25 Table of Contents In March, with the onset of the COVID-19 pandemic, we began to furlough or terminate approximately 40% of our 5,500 full and part-time workforce. As of December 31, 2020 approximately 1,200 of the furloughed employees have returned to work at some point during the year. As of the filing of this annual report, we continue to experience lower physical therapy revenues. As stay at home orders and other restrictions have been lifted, we have seen our physical therapy volumes trending upwards. Should stay at home orders or other restrictions be reenacted, we could see our patient volume and revenues decline again. We have put preparedness plans in place at our facilities to maintain continuity of operations, while also taking steps to keep employees and patients safe. In line with recommendations to reduce large gatherings and increase social distancing, we have, where practical, transitioned a large number of office-based employees to a remote work environment. In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain payroll tax credits associated with the retention of employees. We have received a number of benefits under the CARES Act including, but not limited to: • The CARES Act allowed for qualified healthcare providers to receive advanced payments under the existing Medicare Accelerated and Advance Payments Program (“MAAPP funds”) during the COVID-19 pandemic. Under this program, healthcare providers could choose to receive advanced payments for future Medicare services provided. We applied for and received approval to receive MAAP funds from Centers for Medicare & Medicaid Services (“CMS”) in April 2020. We will record these payments as a liability until all performance obligations have been met as the payments were made on behalf of patients before services were provided. Currently, MAAPP funds received are required to be applied to future Medicare billings commencing in August 2021, with all such remaining amounts required to be repaid by January 2024. Beginning January 2024, any unpaid balance will begin accruing interest. We currently intend to repay funds prior to August 2021. Included in cash and cash equivalents and accrued liabilities at December 31, 2020 is $14.1 million of MAAPP funds. • We elected to defer depositing the employer’s share of Social Security taxes for payments due from March 27, 2020 through December 31, 2020, interest-free and penalty-free. As of December 31, 2020, $4.2 million related to these deferred payments is included in accrued liabilities and $4.1 million is included in long term liabilities. • The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care providers for lost revenues and health care related expenses that are attributable to COVID-19. Through December 31, 2020, our consolidated subsidiaries received approximately $13.5 million of payments under the CARES Act (“Relief Funds”). In accordance with GAAP, these payments have been recorded as Other income – Relief Funds. For the year ended December 31, 2020, we have recognized approximately $13.5 million, as Other income – Relief Funds on the accompanying consolidated statements of income. These funds are not required to be repaid upon attestation and provided that we comply with certain terms and conditions regarding the use of such funds, which could change materially based on evolving grant compliance provisions and guidance provided by the U.S. Department of Health and Human Services. Currently, we can attest to and comply with the terms and conditions. We will continue to monitor the evolving guidelines and may record adjustments as additional information is released. CRITICAL ACCOUNTING POLICIES Critical accounting policies are those that have a significant impact on our results of operations and financial position involving significant estimates requiring our judgment. Our critical accounting policies are: 26 Table of Contents Revenue Recognition. Revenues are recognized in the period in which services are rendered. Net patient revenues consists of revenues for physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. Net patient revenues (patient revenues less estimated contractual adjustments) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as we provide physical and occupational therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. We have agreements with third-party payors that provide for payments to us at amounts different from our established rates. The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience. Management contract revenues, which are included in other revenues in the consolidated statements of net income, are derived from contractual arrangements whereby we manage a clinic owned by a third party. We do not have any ownership interest in these clinics. Typically, revenues are determined based on the number of visits conducted at the clinic and recognized at the point in time when services are performed. Costs, typically salaries for our employees, are recorded when incurred. Revenues from the industrial injury prevention business, which are also included in other revenues in the consolidated statements of net income, are derived from onsite services we provide to clients’ employees including injury prevention, rehabilitation, ergonomic assessments and performance optimization. Revenue from the industrial injury prevention business is recognized when obligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration we expect to receive in exchange for providing injury prevention services to its clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period. Additionally, other revenues include services we provide on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gym membership fees. Contract terms and rates are agreed to in advance between us and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service. If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time when the services are performed. In May 2014, March 2016, April 2016, and December 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations, ASU 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing, ASU 2016-12, Revenue from Contracts with Customers, Narrow Scope Improvements and Practical Expedients, and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customer (collectively the “standards”), respectively, which supersede most of the current revenue recognition requirements (“ASC 606”). The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We implemented the new standards beginning January 1, 2018 using a modified retrospective transition method. The principal change relates to how the new standard requires healthcare providers to estimate the amount of variable consideration to be included in the transaction price up to an amount which is probable that a significant reversal will not occur. The most common forms of variable consideration we experience are amounts for services provided that are ultimately not realizable from a customer. There were no changes to revenues or other revenues upon implementation. Under the new standards, our estimate for unrealizable amounts will continue to be recognized as a reduction to revenue. The bad debt expense historically reported will not materially change. For ASC 606, there is an implied contract between us and the patient upon each patient visit. Separate contractual arrangements exist between us and third party payors (e.g. insurers, managed care programs, government programs, and workers' compensation programs which establish the amounts the third parties pay on behalf of the patients for covered services rendered. While these agreements are not considered contracts with the customer, they are used for determining the transaction price for services provided to the patients covered by the third party payors. The payor contracts do not indicate performance obligations for us, but indicate reimbursement rates for patients who are covered by those payors when the services are provided. At that time, we are obligated to provide services for the reimbursement rates stipulated in the payor contracts. The execution of the contract alone does not indicate a performance obligation. For self-paying customers, the performance obligation exists when we provide the services at established rates. The difference between our established rate and the anticipated reimbursement rate is accounted for as an offset to revenue – contractual allowance. 27 Table of Contents We determine allowances for credit losses based on the specific agings and payor classifications at each clinic. The provision for credit losses is included in clinic operating costs in the statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for credit losses, includes only those amounts we estimate to be collectible. The following table details the revenue related to the various categories (in thousands). Year Ended December 31, 2020 December 31, 2019 December 31, 2018 Net patient revenues $ 373,340 $ 433,345 $ 417,703 Management contract revenues 8,410 8,676 8,339 Other revenues 2,020 2,486 2,403 Physical therapy operations $ 383,770 $ 444,507 $ 428,445 Industrial injury prevention services revenues 39,199 37,462 25,466 $ 422,969 $ 481,969 $ 453,911 Contractual Allowances. Contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third party payors and managed care contracts are often complex and may include multiple reimbursement mechanisms payable for the services provided in our clinics. We estimate contractual allowances based on our interpretation of the applicable regulations, payor contracts and historical calculations. Each month we estimate our contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and apply an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic. Based on our historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow us to provide the necessary detail and accuracy with our collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from our estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. Our billing systems may not capture the exact change in our contractual allowance reserve estimate from period to period. Therefore, in order to assess the accuracy of our revenues and hence our contractual allowance reserves, our management regularly compares our cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, the historical difference between net revenues and corresponding cash collections in any given fiscal year has generally reflected a difference within approximately 1.0% to 1.5% of net revenues. Additionally, analysis of subsequent period’s contractual write-offs on a payor basis reflects a difference within approximately 1.0% to 1.5% between the actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated with the same period end balance. As a result, we believe that a reasonable likely change in the contractual allowance reserve estimate would not be more than 1% to 1.5% of gross billings in accounts receivable at December 31, 2020. For purposes of demonstrating the sensitivity of this estimate on our Company’s financial condition, a 1% to 1.5% increase or decrease in our aggregate contractual allowance reserve percentage would decrease or increase, respectively, net patient revenue by approximately $1.2 million to $1.8 million for the year ended December 31, 2020. Management believes the changes in the estimate of the contractual allowance reserve for the periods ended December 31, 2020, 2019 and 2018 have not been material to the statement of income. The following table sets forth information regarding our patient accounts receivable as of the dates indicated (in thousands): December 31, 2020 2019 Gross patient accounts receivable $ 119,180 $ 124,035 Less contractual allowances 75,266 75,109 Subtotal - accounts receivable 43,914 48,926 Less allowance for credit losses 2,008 2,698 Net patient accounts receivable $ 41,906 $ 46,228 28 Table of Contents The following table presents our patient accounts receivable aging by payor class as of the dates indicated (in thousands): December 31, 2020 December 31, 2019 Payor Current to 120 Days 120+ Days Total Current to 120 Days 120+ Days Total Managed Care/ Commercial Plans $ 13,053 $ 1,774 $ 14,827 $ 14,159 $ 1,783 $ 15,942 Medicare/Medicaid 10,707 1,196 11,903 11,408 1,491 12,899 Workers Compensation* 6,576 926 7,502 6,593 1,121 7,714 Self-pay 4,086 3,146 7,232 4,365 3,040 7,405 Other** 1,108 1,342 2,450 808 1,460 2,268 Totals $ 35,530 $ 8,384 $ 43,914 $ 37,333 $ 8,895 $ 46,228 * Workers compensation is paid by state administrators or their designated agents. ** Other includes primarily litigation claims and, to a lesser extent, vehicular insurance claims. Reimbursement for Medicare beneficiaries is based upon a fee schedule published by HHS. For a more complete description of our third party revenue sources, see “Business—Sources of Revenue” in Item 1. Goodwill. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions, and are written down to fair value if considered impaired. These events or conditions include, but are not limited to: a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. We evaluate indefinite-lived tradenames using the relief from royalty method in conjunction with its annual goodwill impairment test. We operate a two segment business which is made up of various clinics within partnerships, and the other is industrial injury prevention services business. The partnerships are components of regions and are aggregated to the operating segment level for the purpose of determining our reporting units when performing our annual goodwill impairment test. In 2020, 2019 and 2018, there were six regions. In addition to the six regions, in 2020 and 2019, the impairment analysis included a separate analysis for the industrial injury prevention business, as a separate reporting unit. As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, we are then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. The Company considers both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis. An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit. The evaluation of goodwill in 2020, 2019 and 2018 did not result in any goodwill amounts that were deemed impaired. Based on the economic conditions in 2020, and the decline in patient visits due to the pandemic, we evaluated whether events or circumstances indicated that it was more likely than not that the fair value of the reporting units were reduced below their carrying value as of December 31, 2020. As a result of the assessment, we determined that it was not more likely than not that goodwill and tradenames of the reporting units was impaired as of December 31, 2020. Due to the uncertainty of the current economic conditions resulting from the COVID-19 pandemic, we will continue to review the carrying amounts of goodwill and other intangibles. For the year ended December 31, 2020, we derecognized (wrote-off) goodwill in the amount of $1.9 million related to certain closed clinics due to COVID-19. Redeemable Non-Controlling Interests – The non-controlling interests that are reflected as redeemable non-controlling interests in our consolidated financial statements consist of those owners, including us, that have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that we purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met and the owners request the purchase (“Put Right”). We also have a call right (“Call Right”). The Put Right or Call Right may be triggered by the owner or us, respectively, at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to five years, as defined in the limited partnership agreement. The Put Rights and Call Rights are not automatic (even upon death) and require either the owner or us to exercise our rights when the conditions triggering the Put or Call Rights have been satisfied. The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements. 29 Table of Contents On the date we acquire a controlling interest in a partnership and the limited partnership agreement for such partnerships contains redemption rights not under our control, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption – Redeemable non-controlling interests . Then, in each reporting period thereafter until it is purchased by us, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial value, based on the predetermined formula defined in the respective limited partnership agreement. As a result, the value of the non-controlling interest is not adjusted below its initial value. We record any adjustment in the redemption value, net of tax, directly to retained earnings and not in the consolidated statements of income. Although the adjustments are not reflected in the consolidated statements of income, current accounting rules require that we reflect the adjustments, net of tax, in the earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated income statement. We believe the redemption value (i.e. the carrying amount) and fair value are the same. Effective December 31, 2017, we entered into amendments to our limited partnership agreements for our acquired partnerships replacing the mandatory redemption feature. No monetary consideration was paid to the partners to amend the agreements. The amended limited partnership agreements 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. We accounted for the amendment of the limited partnership agreements as an extinguishment of the outstanding mandatorily redeemable non-controlling interests, which were classified as liabilities, through the issuance of new redeemable non-controlling interests classified in temporary equity. Pursuant to Accounting Standards Codification (“ASC”) 470-50-40-2, we removed the outstanding liabilities at their carrying amounts, recognized the new temporary equities at their fair value, and recorded no gain or loss on extinguishment as management believes the redemption value (i.e. the carrying amount) and fair value are the same. In summary, the redemption values of the mandatorily redeemable non-controlling interest (previously classified as liabilities) were reclassified as redeemable non-controlling interest (temporary equity) at fair value on the December 31, 2017 consolidated balance sheet. Non-Controlling Interests – We recognize non-controlling interests, in which we have no obligation but the right to purchase the non-controlling interests, as equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the consolidated statements of income. Operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner. When we purchase a non-controlling interest and the purchase differs from the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. SELECTED OPERATING AND FINANCIAL DATA The following table and discussion relates to continuing operations unless otherwise noted. The defined terms with their respective description used in the following discussion are listed below: 2020 Year ended December 31, 2020 2019 Year ended December 31, 2019 New Clinics Clinics opened or acquired during the year ended December 31, 2020 Mature Clinics Clinics opened or acquired prior to January 1, 2020 and are still operating 30 Table of Contents The following table presents selected operating and financial data, used by management as key indicators of our operating performance: For the Years Ended December 31, 2020 2019 Number of clinics, at the end of period 554 583 Working Days 256 255 Average visits per day per clinic 24.6 27.6 Total patient visits 3,533,371 4,091,967 Net patient revenue per visit $ 105.66 $ 105.90 RESULTS OF OPERATIONS FISCAL YEAR 2020 COMPARED TO FISCAL 2019 • Reported net revenues for 2020 was $423.0 million as compared to $482.0 million for 2019. See table below for a detail of reported net revenues (in thousands): For the Year Ended December 31, 2020 December 31, 2019 Revenues: Net patient revenues $ 373,340 $ 433,345 Management contract revenue 8,410 8,676 Other patient revenues 2,020 2,486 Physical therapy operations $ 383,770 $ 444,507 Industrial injury prevention services 39,199 37,462 $ 422,969 $ 481,969 • For 2020, our net income attributable to shareholders, in accordance with GAAP, was $35.2 million as compared to $40.0 million for the comparable period of 2019. Inclusive of the charge for revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share in accordance with GAAP, earnings per share was $2.48 per share for 2020 and $2.45 per share for 2019. For both 2020 and 2019, in accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but rather charged directly to retained earnings; however, the charge for this change is included in the earnings per basic and diluted share calculation. See table below (in thousands, except per share data). Year Ended December 31, 2020 2019 Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $ 35,194 $ 40,039 Credit (charges) to retained earnings: Revaluation of redeemable non-controlling interest (4,632 ) (11,893 ) Tax effect at statutory rate (federal and state) of 26.25% 1,216 3,121 $ 31,778 $ 31,267 Earnings per share (basic and diluted) $ 2.48 $ 2.45 • For 2020, our Operating Results (as defined below), including Relief Funds (defined below), was $38.4 million, or $2.99 per diluted share, as compared to $36.0 million, or $2.82 per diluted share in 2019. For 2020, our Operating Results, excluding Relief Funds, was $30.6 million, or $2.39 per diluted share, as compared to $36.0 million, or $2.82 per diluted share in 2019. Operating Results, a non-Generally Accepted Accounting Principle (“GAAP”) measure, equals net income attributable to our shareholders per the consolidated statements of net income plus charges incurred for closure costs, less gain on the sale of partnership interests and clinics, less allocated non-controlling interests, excludes expenses incurred for the transition to our new Chief Financial Officer, all net of tax. The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest. See table below for a detailed computation (in thousands, except per share data): 31 Table of Contents Year Ended December 31, 2020 2019 Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $ 35,194 $ 40,039 Credit (charges) to retained earnings: Revaluation of redeemable non-controlling interest (4,632 ) (11,893 ) Tax effect at statutory rate (federal and state) of 26.25% 1,216 3,121 $ 31,778 $ 31,267 Earnings per share (basic and diluted) $ 2.48 $ 2.45 Adjustments: Expenses related to CFO transition 1,331 - Closure costs 3,931 - Gain on sale of partnership interest and clinics (1,091 ) (5,514 ) Relief Funds (13,500 ) - Allocation to non-controlling interest 3,116 - Revaluation of redeemable non-controlling interest 4,632 11,893 Tax effect at statutory rate (federal and state) of 26.25% 415 (1,674 ) Operating Results (without Relief Funds) $ 30,612 $ 35,972 Relief Funds 13,500 - Allocation to non-controlling interest (2,893 ) - Tax effect at statutory rate (federal and state) of 26.25% (2,784 ) - Operating Results (including Relief Funds) $ 38,435 $ 35,972 Basic and diluted Operating Results (without Relief Funds) per share $ 2.39 $ 2.82 Basic and diluted Operating Results (including Relief Funds) per share $ 2.99 $ 2.82 Shares used in computation - basic and diluted 12,835 12,756 • For 2020, the Company's Adjusted EBITDA was $70.0 million compared to $72.8 million in 2019. For 2020, the Company's Adjusted EBITDA, excluding Relief Funds, was $56.5 million. Adjusted EBITDA is defined as earnings before interest income, interest expense – debt and other, taxes, depreciation, amortization, derecognition of goodwill and equity-based awards compensation expense. See reconciliation of Adjusted EBITDA to net income attributable to our shareholders in the following table (in thousands): 32 Table of Contents Year Ended December 31, 2020 2019 Net income attributable to USPH shareholders $ 35,194 $ 40,039 Adjustments: Depreciation and amortization 10,533 10,095 Closure costs - derecognition of goodwill 1,859 - Relief Funds (13,500 ) - Interest income (142 ) (46 ) Interest expense - debt and other 1,634 2,079 Provision for income taxes 13,022 13,647 Equity-based awards compensation expense 7,917 6,985 Adjusted EBITDA (without Relief Funds) $ 56,517 $ 72,799 Relief Funds 13,500 - Adjusted EBITDA $ 70,017 $ 72,799 The above tables reconcile net income attributable to our shareholders calculated in accordance with GAAP to Adjusted EBITDA and Operating Results, non-GAAP measures defined above. We believe that Operating Results, which eliminates certain items described above that can be subject to volatility and unusual costs, is one of the principal measures to evaluate and monitor financial performance period over period. We also believe that Operating Results is useful information for investors to use in comparing the Company's period-to-period results as well as for comparing with other similar businesses. We believe Adjusted EBITDA is useful information for investors in comparing the Company’s period-to-period results as well as comparing with similar businesses which report adjusted EBITDA as defined by their company. Operating Results and Adjusted EBITDA are not measures of financial performance under GAAP. Operating Results and Adjusted EBITDA 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. Net Patient Revenues • Net patient revenues from physical therapy operations decreased approximately 13.8% or $60.0 million to $373.3 million in 2020 from $433.3 million in 2019. Included in net patient revenues above are revenues related to clinics sold or closed in 2020 and 2019 of $4.4 million in 2020 and $28.6 million in 2019. During 2020, the Company sold its interest in 14 clinics and closed 34 clinics. During 2019, the Company sold its interest in a partnership which include 30 clinics and closed 11 clinics. For comparison purposes, adjusted for revenue from the clinics sold or closed, net patient revenues from physical therapy operations was approximately $369.0 million in 2020, inclusive of $9.7 million related to New Clinics and $404.8 million in 2019. Net patient revenues related to Mature Clinics decreased by $45.5 million in 2020 compared to 2019. The reduction is largely attributable to the adverse effects of the COVID-19 pandemic. See table below for a detail of net patient revenues from physical therapy operations (in thousands): For the Year Ended December 31, 2020 December 31, 2019 Related to Mature Clinics $ 359,294 $ 404,784 Related to New Clinics 9,664 - From 2020 sold and closed clinics 4,382 15,542 From 2019 sold and closed clinics - 13,019 $ 373,340 $ 433,345 • Including all clinics operational during 2020 and 2019, the average net patient revenue per visit was $105.66 and $105.90 respectively. Total patient visits were 3,533,371 in 2020 and 4,091,967 in 2019. The reduction is largely attributable to the adverse effects of the COVID-19 pandemic. 33 Table of Contents • Net patient revenues are based on established billing rates less allowances and discounts for patients covered by contractual programs and workers’ compensation. Net patient revenues reflect contractual and other adjustments, which we evaluate monthly, relating to patient discounts from certain payors. Payments received under these contractual programs and workers’ compensation are based on predetermined rates and are generally less than the established billing rates of the clinics. Other Revenues Other revenues, consisting primarily of revenues from our industrial injury prevention business and management fees revenue, increased by $1.0 million, from $48.6 million in 2019 to $49.6 million in 2020. Revenues from management contracts were $8.4 million for 2020 as compared to $8.7 million for 2019. Revenue from our industrial injury prevention business increased 4.6% to $39.2 million in 2020 compared to $37.5 million in 2019. Other revenues were $2.0 million in 2020 and $2.4 million in 2019. See table below for a detail of reported net revenues (in thousands): For the Year Ended December 31, 2020 December 31, 2019 Revenues: Net patient revenues $ 373,340 $ 433,345 Management contract revenue 8,410 8,676 Other patient revenues 2,020 2,486 Physical therapy operations $ 383,770 $ 444,507 Industrial injury prevention services 39,199 37,462 $ 422,969 $ 481,969 Operating Costs Total operating costs, excluding closure costs, were $324.6 million in 2020, as compared to $369.5 million in 2019. Operating costs were 76.7% as a percentage of net revenues in both 2020 and 2019. Included in operating costs for 2020 was $8.4 million related to New Clinics. Operating costs for Mature Clinics decreased by $31.3 million in 2020 compared to 2019. Operating costs related to management contracts decreased by $0.7 million. Operating costs related to the industrial injury prevention business were $29.1 million in both 2020 and 2019. See table below for a detail of operating costs, excluding closure costs (in thousands): For the Year Ended December 31, 2020 December 31, 2019 Physical Therapy Operations Related to Mature Clinics $ 274,781 $ 306,128 Related to New Clinics 8,416 - Related to 2020 closed and sold clinics 5,583 14,588 Related to 2019 closed and sold clinics 40 12,283 Physical therapy management contracts 6,654 7,389 Total Physical Therapy Operations $ 295,474 $ 340,388 Industrial injury prevention services 29,114 29,082 Total operating costs, excluding closure costs $ 324,588 $ 369,470 Closure costs in the current period of $3.9 million include estimates of remaining lease obligations, derecognition of goodwill and other costs related to closed and sold clinics. Each component of clinic operating costs is discussed below: 34 Table of Contents Operating Costs—Salaries and Related Costs Salaries and related costs decreased to $235.6 million for 2020 from $274.2 million in 2019, a decrease of $38.6 million, or 14.1%. Included in salaries and related costs for 2020 was $5.5 million related to New Clinics. Salaries and related costs for clinics sold or closed in 2020 and 2019 were $3.0 million and $16.7 million in 2020 and 2019, respectively. Salaries and related costs for Mature Clinics decreased $31.2 million in 2020 compared to 2019. Salaries and related costs for management contracts decreased $0.4 million. Salaries and related costs for the industrial injury prevention business increased $1.1 million. Salaries and related costs as a percentage of net revenues was 55.7% for 2020 and 56.9% for 2019. See table below for a detail of salaries and related costs (in thousands): For the Year Ended December 31, 2020 December 31, 2019 Physical Therapy Operations Related to Mature Clinics $ 196,686 $ 227,859 Related to New Clinics 5,495 - Related to 2020 closed and sold clinics 3,089 9,494 Related to 2019 closed and sold clinics - 7,248 Related to Physical therapy management contracts 5,921 6,337 Total Physical Therapy Operations $ 211,191 $ 250,938 Related to Industrial injury prevention services 24,437 23,295 Total Salaries and related costs $ 235,628 $ 274,233 Operating Costs—Rent, Supplies, Contract Labor and Other Rent, supplies, contract labor and other costs decreased to $84.3 million for 2020 from $90.4 million for 2019, a decrease of $6.0 million, or 6.7%. Included in rent, supplies, contract labor and other costs for 2020 was $2.8 million related to New Clinics. Rent, supplies, contract labor and other costs for clinics related to partnership interests closed or sold in 2020 and 2019 were $2.4 million and $9.8 million in 2020 and 2019, respectively, rent, supplies, contract labor and other costs related to Mature Clinics were the same for both periods 2020 and 2019. Rent, supplies, contract labor and other costs as a percent of net revenues was 18.8% for 2019 and 19.9% for 2020. See table below for a detail of rent, supplies, contract labor and other costs (in thousands): For the Year Ended December 31, 2020 December 31, 2019 Physical Therapy Operations Related to Mature Clinics $ 73,726 $ 73,766 Related to New Clinics 2,846 - Related to 2020 closed and sold clinics 2,437 4,896 Related to 2019 closed and sold clinics 41 4,908 Related to Physical therapy management contracts 734 1,052 Total Physical Therapy Operations $ 79,784 $ 84,622 Related to Industrial injury prevention services 4,552 5,757 Total Rent and other costs $ 84,336 $ 90,379 Operating Costs—Provision for Credit Losses The provision for credit losses for net patient receivables was $4.6 million for 2020 and $4.9 million for 2019. As a percentage of net patient revenues, the provision for credit losses was 1.1% for 2020 and 1.0% for 2019. Our provision for credit losses as a percentage of total patient accounts receivable was 4.5% at December 31, 2020 and 5.5% at December 31, 2019. The provision for credit losses at the end of each period is based on a detailed, clinic-by-clinic review of overdue accounts and is regularly reviewed in the aggregate in light of historical experience. 35 Table of Contents The average accounts receivable days outstanding were 32 days at December 31, 2020 and 33 days at December 31, 2019. Net patient receivables in the amount of $4.5 million and $4.8 million were written-off in 2020 and 2019, respectively. Gross Profit Gross profit, excluding closure costs, for 2020 was $98.4 million, as compared to $112.5 million in 2019. Gross profit excluding closure costs as a percentage of net revenue for the Company’s physical therapy clinics was 23.1% in 2020 compared to 23.6% in 2019. The gross profit percentage on management contracts increased to 20.9% in 2020 as compared to 14.8% in the 2019. The gross profit for the industrial injury prevention business was $10.1 million, or 25.7% as a percentage of industrial injury prevention revenues, in 2020 as compared to $8.4 million, or 22.4% as a percentage of industrial injury prevention revenues, in the comparable 2019 period. The table below details the gross profit, excluding closure costs (in thousands): For the Year Ended December 31, 2020 December 31, 2019 Gross profit, excluding closure costs: Physical therapy clinics $ 86,540 $ 102,833 Management contracts 1,755 1,287 Industrial injury prevention services 10,086 8,379 Gross profit, excluding closure costs $ 98,381 $ 112,499 Corporate Office Costs Corporate office costs, consisting primarily of salaries, benefits and equity based compensation of corporate office personnel and directors, rent, insurance costs, depreciation and amortization, travel, legal, compliance, professional, marketing and recruiting fees, were $42.0 million for 2020 and $45.0 million for 2019. Corporate office costs as a percentage of net revenues were 9.9% for 2020 and 9.3% in 2019. Operating Income Operating income for 2020 was $52.4 million as compared to $67.4 million for 2019. Operating income as a percentage of net revenue decreased from 14.0% in 2019 to 12.4% in 2020. Other Income - Gain on Sale of Partnership Interest Included in other income was the gain of $1.1 million in 2020 resulting from the sale of 14 previously closed clinics and, in 2019, a gain of $5.5 million resulting from the sale of a partnership interest with 30 clinics. Other Income - Relief Funds Included in other income in 2020 was $13.5 million of Relief Funds. See discussion of Relief Funds on page 26. Interest Expense – Debt and Other Interest expense – debt and other was $1.6 million for 2020 and $2.1 million for 2019. At December 31, 2020, $16.0 million was outstanding under our Amended Credit Agreement (as defined below under “—Liquidity and Capital Resources”). 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 $13.0 million for 2020 and $13.6 million for 2019. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 27.0% for 2020 and 25.4% for 2019. See table below ($ in thousands): 36 Table of Contents Year Ended December 31, 2020 December 31, 2019 Income before taxes $ 65,513 $ 70,906 Less: net income attributable to non-controlling interests: Non-controlling interests - permanent equity (6,122 ) (6,561 ) Redeemable non-controlling interests - temporary equity (11,175 ) (10,659 ) $ (17,297 ) $ (17,220 ) Income before taxes less net income attributable to non-controlling interests $ 48,216 $ 53,686 Provision for income taxes $ 13,022 $ 13,647 Effective tax rate 27.0 % 25.4 % Net Income Attributable to Non-controlling Interests Net income attributable to non-controlling interests (permanent equity) was $6.1 million in 2020 and $6.6 million in 2019. Net income attributable to redeemable non-controlling interests (temporary equity) was $11.2 million in 2020 and $10.6 million in 2019. LIQUIDITY AND CAPITAL RESOURCES We believe that our business is generating sufficient cash flow from operating activities to allow us to meet our short-term and long-term cash requirements, other than those with respect to future significant acquisitions. At December 31, 2020, we had $32.9 million in cash and cash equivalents compared to $23.5 million at December 31, 2019. Although the start-up costs associated with opening new clinics and our planned capital expenditures are significant, we believe that our cash and cash equivalents and availability under our Amended Credit Agreement are sufficient to fund the working capital needs of our operating subsidiaries, future clinic development and acquisitions and investments through at least December 2021. Significant acquisitions would likely require financing under our Amended Credit Agreement. Effective December 5, 2013, we entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility. This agreement was amended in August 2015, January 2016, March 2017 and November 2017 (hereafter referred to as “Amended Credit Agreement”). The Amended Credit Agreement is unsecured and has loan covenants, including requirements that we comply with a consolidated fixed charge coverage ratio and consolidated leverage ratio. Proceeds from the Amended Credit Agreement may be used for working capital, acquisitions, purchases of our common stock, dividend payments to our common stockholders, capital expenditures and other corporate purposes. The pricing grid is based on our consolidated leverage ratio with the applicable spread over LIBOR ranging from 1.25% to 2.0% or the applicable spread over the Base Rate ranging from 0.1% to 1%. Fees under the Amended Credit Agreement include an unused commitment fee ranging from 0.25% to 0.3% depending on our consolidated leverage ratio and the amount of funds outstanding under the Amended Credit Agreement. The January 2016 amendment to the Amended Credit Agreement increased the cash and noncash consideration that we could pay with respect to acquisitions permitted under the Amended Credit Agreement to $50,000,000 for any fiscal year, and increased the amount we may pay in cash dividends to our shareholders in an aggregate amount not to exceed $10,000,000 in any fiscal year. The March 2017 amendment, among other items, increased the amount we may pay in cash dividends to our shareholders in an aggregate amount not to exceed $15,000,000 in any fiscal year. 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 $20,000,000 to our shareholders and extended the maturity date to November 30, 2021. On December 31, 2020, $16.0 million was outstanding on the Amended Credit Agreement resulting in $109.0 million of availability. As of the date of this report, we were in compliance with all of the covenants thereunder. 37 Table of Contents Cash provided by operations was $99.9 million and net proceeds from our Amended Credit Agreement amounted to $30.0 million. The major uses of cash for investing and financing activities included: purchase of interests in businesses ($23.9 million), purchases of redeemable non-controlling interest, temporary equity ($20.4 million), purchases of fixed assets ($7.6 million), proceeds on sale of partnership interest ($0.8 million), distributions to non-controlling interests ($18.3 million), payments of cash dividends to our shareholders ($4.1 million), and payments on notes payable ($1.0 million) On November 30, 2020, we acquired a 75% interest in a three-clinic physical therapy practice. The purchase price for the 75% interest was $8.9 million (net of cash acquired), of which $8.6 million was paid in cash and $0.3 million in the form of a seller note that is payable in two principal installments totaling $162,500 each. The first principal payment plus accrued interest will be paid on November 2021 with the second installment to be paid in November 2022. The note accrues interest at 3.25% per annum. On September 30, 2020, we acquired a 70% interest in an entity which holds six management contracts that have been in place for a number of years and had five years remaining on their term as of the acquisition date. The purchase price for the 70% interest was approximately $4.2 million, with $3.7 million payable in cash and $0.5 million in notes payable. One of the notes payable of $0.2 million is payable, with any accrued interest at 5% per annum, on September 30, 2021. The remaining note of $0.3 million was paid in November 2020. On February 27, 2020, we acquired interests in a four-clinic physical therapy practice. The four clinics are operated in four separate partnerships. The Company’s interests in the four partnerships range from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction. The aggregate purchase price was $11.9 million, of which $11.6 million was paid in cash and $0.3 million in the form of a seller note. The note accrues interest at 4.75% per annum and the principal and interest is payable in February 2022. On September 30, 2019, we acquired a 67% interest in an eleven-clinic physical therapy practice. The purchase price for the 67% interest was $12.4 million, of which $12.1 million was paid in cash and $0.3 million in the form of a seller note that is payable in two principal installments totaling $150,000 each. The first principal payment plus accrued interest was paid in September 2020 with the second installment to be paid in September 2021. The note accrues interest at 5.0% per annum. On April 11, 2019, we acquired a company that is a provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offer employment testing, functional capacity evaluations and return-to-work services. It performs these services across a network of 45 states including onsite at eleven client locations. The business was then combined with Briotix Health, the Company’s industrial injury prevention operation, increasing the Company’s ownership position in the Briotix Health partnership to approximately 76.0%. The purchase price for the acquired company was $22.9 million ($23.6 million less cash acquired of $0.7 million), which consisted of $18.9 million in cash, (of which $0.5 million will be paid to certain shareholders), and a $4.0 million seller note. The note accrues interest at 5.5% and the principal and accrued interest is payable on April 9, 2021. On March 4, 2019, in conjunction with the purchase of a redeemable non-controlling interest, we entered into a note payable in the amount of $228,120 that was payable in two equal installments of $114,080 each, plus accrued interest. The first installment was paid in March 2020 and the second installment remains payable in March 2021. On August 31, 2018 we acquired a 70% interest in a four-clinic physical therapy practice. The purchase price for the 70% interest was $7.3 million in cash and $400,000 in a seller note that is payable in two principal installments totaling $200,000 each, plus accrued interest. The first installment was paid in August 2019 and the second installment was paid in August 2020. On February 28, 2018, through one of our majority owned partnerships, we acquired the assets and business of two physical therapy clinics, for an aggregate purchase price of $760,000 in cash and $150,000 in a seller note which was paid along with accrued interest on August 31, 2019. In addition to the multi-clinic acquisitions above in 2020, we acquired five separate clinic practices through several of our majority-owned Clinic Partnerships. These practices will operate as satellites of the respective existing clinic partnership. 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 Clinic 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 a combination of cash and financing. Any large acquisition would likely require financing. 38 Table of Contents 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. We have future obligations for debt repayments, employment agreements and future minimum rentals under operating leases. The obligations as of December 31, 2020 are summarized as follows (in thousands): Total 2021 2022 2023 2024 2025 Thereafter Credit Agreement $ 16,000 $ 16,000 $ - $ - $ - $ - $ - Notes Payable 5,495 4,899 596 - - - - Interest Payable 114 107 7 - - - - Employee Agreements 47,884 39,402 7,145 1,332 5 - - Operating Leases 119,834 37,427 29,655 22,233 14,379 7,909 8,231 $ 189,327 $ 97,835 $ 37,403 $ 23,565 $ 14,384 $ 7,909 $ 8,231 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 businesses. At December 31, 2020, our remaining outstanding balance on these notes aggregated $5.5 million. The notes payable for the acquisition of businesses of $5.5 million are payable in 2021 and 2022. Notes are generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest. See above table for a detail of future principal payments. Interest accrues at various interest rates ranging from 3.25% to 5.50% per annum, subject to adjustment. In conjunction with acquisitions, we entered into amendments to our limited partnership agreements for our acquired partnerships. The 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 interest at December 31, 2020 was $132.3 million. As of December 31, 2020, we have accrued $5.7 million related to credit balances and overpayments due to patients and payors. This amount is expected to be paid in 2021. From September 2001 through December 31, 2008, our Board of Directors (“Board”) authorized us to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of our common stock. In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of our common stock (“March 2009 Authorization”). Our Amended Credit Agreement permits share repurchases of up to $15,000,000 in the aggregate, subject to compliance with covenants. We are required to retire shares purchased under the March 2009 Authorization. There is no expiration date for the share repurchase program. As of December 31, 2020, there are currently an additional estimated 124,740 shares (based on the closing price of $120.25 on December 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 year ended December 31, 2020 and 2019. Off Balance Sheet Arrangements We have no off-balance sheet debt or other off-balance sheet financing arrangements. FACTORS AFFECTING FUTURE RESULTS The risks related to our business and operations include: • the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19 (coronavirus) which the financial magnitude cannot be currently estimated; • changes as the result of government enacted national healthcare reform; 39 Table of Contents • changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status, including the Medicare reimbursement reductions • revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction; • business and regulatory conditions including federal and state regulations; • governmental and other third-party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs; • compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for failure to comply; • changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients; • revenue and earnings expectations; • legal actions, which could subject us to increased operating costs and uninsured liabilities; • general economic conditions; • availability and cost of qualified physical therapists; • personnel productivity and retaining key personnel; • competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs including the possible write-down or write-off of goodwill and other intangible assets; • competitive environment in the industrial injury prevention business, which could result in the termination or non-renewal of contractual service arrangements and other adverse financial consequences for that service line; • acquisitions, purchase of non-controlling interests (minority interests) and the successful integration of the operations of the acquired businesses; • maintaining our information technology systems with adequate safeguards to protect against cyber-attacks; • a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act; • maintaining adequate internal controls; • maintaining necessary insurance coverage; • availability, terms, and use of capital; and • weather and other seasonal factors. See also Risk Factors in Item 1A of this Annual Report on Form 10-K.