What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 196 added, 133 removed, 666 unchanged (33% of the section changed)

4 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE DATA)

March 31, 2021

June 30, 2021

December 31, 2020

13 unchanged sentences

Other identifiable intangible assets, net

LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTERESTS

LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS’ EQUITY

AND NON-CONTROLLING INTERESTS

Current liabilities:

Accounts payable - trade

Accounts payable - purchase of non-controlling interest

Accrued expenses

20 unchanged sentences

Total USPH shareholders’ equity and non-controlling interests - permanent equity

Total liabilities, redeemable non-controlling interests, USPH shareholders' equity and non-controlling interests - permanent equity

Total liabilities, redeemable non-controlling interests,

USPH shareholders’ equity and non-controlling interests - permanent equity

See notes to consolidated financial statements.

3 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE DATA)

For the Three Months Ended

March 31, 2021

March 31, 2020

Three Months Ended

For the Six Months Ended

June 30, 2021

June 30, 2020

Net patient revenues

10 unchanged sentences

Other income and expense:

Gain on sale of partnership interest and clinics

Interest and other income, net

15 unchanged sentences

(IN THOUSANDS)

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

OPERATING ACTIVITIES

Net income including non-controlling interests

Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities:

Adjustments to reconcile net income including non-controlling interests to net cash provided by

operating activities:

Depreciation and amortization

2 unchanged sentences

Deferred income taxes

Loss on sale of fixed assets

Gain on sale of partnership interest

2 unchanged sentences

(Increase) decrease in patient accounts receivable

Decrease (increase) in accounts receivable - other

Decrease in other assets

Increase in accounts payable and accrued expenses

Decrease in accounts receivable - other

(Increase) decrease in other assets

(Decrease) increase in accounts payable and accrued expenses

Increase in other long-term liabilities

4 unchanged sentences

Purchase of redeemable non-controlling interest, temporary equity

Proceeds on sales of partnership interest and clinics

Purchase of non-controlling interest, permanent equity

Proceeds on sale of redeemable non-controlling interest, temporary equity

Proceeds on sales of partnership interest, clinics and fixed assets

Net cash used in investing activities

1 unchanged sentence

Distributions to non-controlling interests, permanent and temporary equity

Cash dividends paid to shareholders

Proceeds from revolving line of credit

1 unchanged sentence

Principal payments on notes payable

Payment of Medicare Accelerated and Advance Funds

Net cash (used in) provided by financing activities

(Payment) receipt of Medicare Accelerated and Advance Funds

Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

5 unchanged sentences

Purchase of businesses - seller financing portion

Payable related to purchase of redeemable non-controlling interest, temporary equity

Notes receivable related to sale of partnership interest - redeemable non-controlling interest

Dividends payable to USPH shareholders

Purchase of businesses - payable

Purchase of redeemable non-controlling interest - notes payable

Notes payable due to purchase of non-controlling interest, permanent equity

Note receivables related to sale of partnership interest

See notes to consolidated financial statements.

4 unchanged sentences

U.S.Physical Therapy, Inc.

Treasury Stock

Total Shareholders’

Non-Controlling

For the three months ended June 30 , 2021

Paid-In Capital

Balance March 31, 2021

Issuance of restricted stock, net of cancellations

Revaluation of redeemable non-controlling interest, net of tax

Compensation expense - equity-based awards

Dividends paid to USPT shareholders

Distributions to non-controlling interest partners - permanent equity

Net income attributable to non-controlling interest - permanent equity

Net income attributable to USPH shareholders

Balance June 30 , 2021

U.S.Physical Therapy, Inc.

Treasury Stock

1 unchanged sentence

Non-Controlling

For the three months ended March 31, 2021

For the six months ended June 30 , 2021

Paid-In Capital

Balance December 31, 2020

2 unchanged sentences

Compensation expense - equity-based awards

Dividends payable to USPT shareholders

Dividends paid to USPT shareholders

Distributions to non-controlling interest partners - permanent equity

2 unchanged sentences

Net income attributable to USPH shareholders

Balance March 31, 2021

Balance June 30 , 2021

U.S.Physical Therapy, Inc.

Treasury Stock

Total Shareholders’

Non-Controlling

For the three months ended June 30 , 2020

Paid-In Capital

Balance March 31, 2020

Issuance of restricted stock, net of cancellations

Revaluation of redeemable non-controlling interest, net of tax

Compensation expense - equity-based awards

Distributions to non-controlling interest partners - permanent equity

Net income attributable to non-controlling interest - permanent equity

Net income attributable to USPH shareholders

Balance June 30 , 2020

U.S.Physical Therapy, Inc.

Treasury Stock

1 unchanged sentence

Non-Controlling

For the three months ended March 31, 2020

For the six months ended June 30 , 2020

Paid-In Capital

Balance December 31, 2019

3 unchanged sentences

Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans

Dividends payable to USPT shareholders

Dividends paid to USPT shareholders

Distributions to non-controlling interest partners - permanent equity

1 unchanged sentence

Net income attributable to USPH shareholders

Balance March 31, 2020

Balance June 30 , 2020

See notes to consolidated financial statements.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

17 unchanged sentences

In addition, the Company has developed satellite clinic facilities as part of existing Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operate more than one clinic location.

On March 31, 2021 , the Company acquired a 70 % interest in a five -clinic physical therapy practice in the first quarter of 2021 , with the practice founder retaining 30 % .

The practice is in the process of developing a sixth clinic.

On June 30, 2021, the Company acquired a 65 % interest in an eight -clinic physical therapy practice with the practice founder retaining 35 % .

The purchase price was approximately $ 10.3 million, of which $ 9.0 million was paid in cash, $ 1.0 million is payable based on the achievement of certain business criteria and $ 0.3 million is in the form of a note payable.

The note accrues interest at 3.25 % per annum and the principal and interest is payable on June 30, 2023.

On March 31, 2021 , the Company acquired a 70 % interest in a five -clinic physical therapy practice with the practice founder retaining 30 % .

When acquired, the practice was developing a sixth clinic which has been completed.

The purchase price for the 70 % interest was approximately $ 12.0 million, of which $ 11.7 million was paid in cash and $ 0.3 million in the form of a note payable.

5 unchanged sentences

On September 30, 2020 , the Company acquired a 70 % interest in an entity which holds six -management contracts that have been in place for a number of years.

Currently, these contracts have a five year term.

The purchase price for the 70 % interest was approximately $ 4.2 million, with $ 3.7 million payable in cash and $ 0.5 million in two 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 .

The purchase price for the 70 % interest was approximately $ 4.2 million, of which $ 3.7 million was paid in cash and $ 0.5 million in the form of two notes payable.

One of the notes payable of $ 0.3 million was paid in November 2020.

The remaining note of $ 0.2 million is payable, with any accrued interest at 5 % per annum, on September 30, 2021 .

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

2 unchanged sentences

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 note payable.

The note accrues interest at 4.75 % per annum and the principal and interest is payable on February 2022 .

During the three months ended March 31, 2021 , the Company sold two clinics.

The note accrues interest at 4.75 % per annum and the principal and interest is payable in February 2022 .

During the six months ended June 30, 2021 , the Company sold two clinics.

The aggregate sales price of $ 0.1 million was paid in cash.

As of March 31, 2021 , the Company operated 564 clinics in 39 states.

The Company also manages physical therapy facilities for third parties, primarily hospital and physicians, with 40 third -party facilities under management as of March 31, 2021 .

As of June 30, 2021 , the Company operated 575 clinics in 39 states.

The Company also manages physical therapy facilities for third parties, primarily hospital and physicians, with 39 third -party facilities under management as of June 30, 2021 .

Clinic Partnerships

25 unchanged sentences

The Company believes, and the Chief Executive Officer, Chief Financial Officer and Corporate Controller have certified, that the financial statements included in this report present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results the Company expects for the entire year.

Operating results for the three months and six months ended June 30, 2021 are not necessarily indicative of the results the Company expects for the entire year.

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 first three quarters of 2020 and our Annual Report on Form 10 -K, the Company’s results were negatively impacted by the effects of the COVID -19 pandemic in the 2020 First Quarter, especially in March 2020 .

Physical therapy patient volumes per day per clinic for the three months ended March 31, 2021 , were 27.1 , which is at or near pre-pandemic levels, compared to 26.2 in the three months ended March 31, 2020 .

The Company’s industrial injury prevention business has been less affected by the pandemic in 2020 .

As previously disclosed in a series of filings with the SEC and further described in detail in the Company’s Quarterly Reports on Form 10 -Q for the first three quarters of 2020 and our Annual Report on Form 10 -K for the year ended December 31, 2020, the Company’s results were negatively impacted by the effects of the COVID -19 pandemic in 2020.

For 2021 periods as compared to 2020 periods, the increase in revenues and expenses are primarily due to the Company returning to pre-pandemic results.

The Company has 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 line with recommendations to reduce large gatherings and increase social distancing, the Company has continued to allow a large number of office-based employees to work remotely.

The Company is monitoring the situation and will adjust work environments accordingly.

In response to the COVID -19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

1 unchanged sentence

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.

The Company has received, or expects to receive, a number of benefits under the CARES Act including, but not limited to :

In 2020, the Company 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 Payment Program (“MAAPP Funds”) during the COVID -19 pandemic.

4 unchanged sentences

The Company 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 March 31, 2021 , $ 4.2 million is included in each of accrued liabilities and other long-term liabilities related to these deferred payments .

As of June 30, 2021 included in accrued liabilities is $ 4.1 million and in other long-term liabilities is $ 4.2 million related to these deferred payments.

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 .

5 unchanged sentences

The Company will continue to monitor the evolving guidelines and may record adjustments as additional information is released.

There were no Relief Funds received in the three months ended March 31, 2021.

There were no Relief Funds received in the six months ended June 30, 2021.

Significant Accounting Policies

9 unchanged sentences

Leasehold improvements are amortized over the shorter of the lease term or estimated useful lives of the assets, which is generally three to five years .

The Company did no t note an impairment to long-lived assets during the three months ended March 31, 2021 .

The Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances which indicate that the amounts may be impaired.

Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

The Company did no t note an impairment to long-lived assets during the three months ended March 31, 2021 .

The Company did no t note an impairment to long-lived assets during the six months ended June 30, 2021 .

Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over the fair value of the acquired business assets, which include certain identifiable intangible assets.

10 unchanged sentences

The Company operates a two segment business which is made up of various clinics within partnerships, and the other is industrial injury prevention services business.

There were six regions in both 2020 and 2019 in the physical therapy operations segment.

The partnerships are components of regions and are aggregated to the operating segment level for the purpose of determining the Company’s reporting units when performing its annual goodwill impairment test (there were six regions in both 2020 and 2019 in the physical therapy operations segment).

In addition to the six regions mentioned prior, the impairment analysis included a separate analysis for the industrial injury prevention business, as a separate reporting unit.

5 unchanged sentences

The evaluation of goodwill in 2020 and 2019 did not result in any goodwill amounts that were deemed impaired.

Based on the economic conditions and the decline in patient visits due to the COVID -19 pandemic, the Company 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 March 31, 2021 .

As a result of the assessment, the Company determined that it was not more likely than not that goodwill and tradenames of the reporting units were impaired as of March 31, 2021 .

As a result of the assessment, the Company determined that it was not more likely than not that goodwill and tradenames of the reporting units were impaired as of June 30, 2021 .

The Company will continue to monitor for any triggering events or other indicators of impairment.

Due to the uncertainty of the current economic conditions resulting from the COVID -19 pandemic, the Company will continue to review its carrying amounts of goodwill and other intangibles quarterly.

During the three months ended March 31, 2020 , the Company derecognized (wrote-off) goodwill in the amount of $ 1.9 million related to closed clinics due to COVID-19.

During the six months ended June 30, 2020 , the Company derecognized (wrote-off) goodwill in the amount of $ 1.9 million related to closed clinics due to COVID-19.

Redeemable Non-Controlling Interests

36 unchanged sentences

ASC 740 , Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted.

The legislation had no effect on the Company’s deferred income taxes and current income taxes payable during the three months ended March 31, 2021 .

The Company did no t have any accrued interest or penalties associated with any unrecognized tax benefits no r was any interest expense recognized during the three months ended March 31, 2021.

The legislation had no effect on the Company’s deferred income taxes and current income taxes payable during the six months ended June 30, 2021 .

The Company did no t have any accrued interest or penalties associated with any unrecognized tax benefits no r was any interest expense recognized during the six months ended June 30, 2021.

The Company records any interest or penalties, if required, in interest and other expense, as appropriate.

3 unchanged sentences

The fair value of the Company’s redeemable non-controlling interests is determined based on “Level 3 ” inputs.

The interest rate on the Amended Credit Agreement, which is tied to the London Interbank Offered Rate (“LIBOR”).

The interest rate on the Amended Credit Agreement, is tied to the London Interbank Offered Rate (“LIBOR”).

Provisions within the agreement currently provide the Company with the ability to replace LIBOR with a different reference rate in the event LIBOR ceases to exist .

10 unchanged sentences

Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims.

Management believes that the current accrued amounts are sufficient to pay claims arising from self-insurance claims incurred through March 31, 2021.

Management believes that the current accrued amounts are sufficient to pay claims arising from self-insurance claims incurred through June 30, 2021.

Restricted Stock

36 unchanged sentences

ACQUISITIONS OF BUSINESSES

On March 31, 2021, the Company acquired a 70 % interest in a five -clinic physical therapy practice, with a sixth clinic in the process of development, in the first quarter of 2021, with the practice founder retaining 30 % .

The purchase price for the 70% interest was approximately $ 12.0 million, of which $ 11.7 million was paid in cash and $ 0.3 million in a note payable.

On June 30, 2021, the Company acquired a 65 % interest in an eight -clinic physical therapy practice with the practice founder retaining 35 %.

The note accrues interest at 3.25 % per annum and the principal and interest is payable on June 30, 2023.

On March 31, 2021, the Company acquired a 70 % interest in a five -clinic physical therapy practice with the practice founder retaining 30 % .

When acquired, the practice was developing a sixth clinic which has been completed.

The purchase price for the 70% interest was approximately $ 12.0 million, of which $ 11.7 million was paid in cash and $ 0.3 million in the form of a note payable.

The note accrues interest at 3.25 % per annum and the principal and interest is payable on March 31, 2023.

2 unchanged sentences

The Company is in the process of completing its formal valuation analysis of the acquisitions, to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed.

Thus, the final allocation of the purchase price may differ from the preliminary estimates used at March 31, 2021 based on additional information obtained and completion of the valuation of the identifiable intangible assets.

Thus, the final allocation of the purchase price may differ from the preliminary estimates used at June 30, 2021 based on additional information obtained and completion of the valuation of the identifiable intangible assets.

Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill.

The Company does not expect the adjustments to be material.

For the acquisition in 2021, the estimated values assigned to the referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives.

For the acquisitions in 2021, the estimated values assigned to the referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives.

For referral relationships, the amortization period is 12.0 years.

16 unchanged sentences

On September 30, 2020, the Company acquired a 70 % interest in an entity which holds six -management contracts that have been in place for a number of years.

Currently, these contracts have a five year remaining term.

The purchase price for the 70 % interest was approximately $ 4.2 million, with $ 3.7 million payable in cash and $ 0.5 million in two notes payable.

The purchase price for the 70 % interest was approximately $ 4.2 million, of which $ 3.7 million was paid in cash and $ 0.5 million in the form of two 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.

18 unchanged sentences

Fair value of non-controlling interest (classified as redeemable non-controlling interests)

The Company is in the process of completing its formal valuation analysis of the September 2020 and November 2020 acquisitions, to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed.

The Company does not expect the adjustments to be material.

The purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2020 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, i.e.

trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill.

The Company has completed its formal valuation analyses for the acquisitions in the three months ended March 31, 2020.

For the acquisitions in 2020, the values assigned to the referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives.

8 unchanged sentences

Revenues are recognized in the period in which services are rendered.

N et 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 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.

16 unchanged sentences

The Company determines allowances for doubtful accounts based on the specific agings and payor classifications at each clinic.

The provision for doubtful accounts 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 doubtful accounts, includes only those amounts the Company estimates to be collectibl e.

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 provision for credit losses, includes only those amounts the Company estimates to be collectible .

The following table details the revenue related to the various categories (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Net patient revenues

4 unchanged sentences

Medicare Reimbursement

T he Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”).

The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”).

For services provided in 2017 through 2019, a 0.5 % increase was applied to the fee schedule payment rates before applying the mandatory budget neutrality adjustment.

For services provided in 2020 through 2025, a 0.0 % percent update is expected to be applied each year to the fee schedule payment rates, before applying the mandatory budget neutrality adjustment.

For services provided in 2020 through 2025 no adjustment is expected to be applied each year to the fee schedule payment rates, before applying the mandatory budget neutrality adjustment.

In the 2020 MPFS Final Rule, CMS revised coding, documentation guidelines, and increased the code values for office/outpatient evaluation and management (E/M) codes and cuts to other codes to maintain budget neutrality of the MPFS beginning in 2021.

Under the 2021 MPFS Final Rule, CMS increased the values for the E/M office visit codes and cuts to other specialty codes to maintain budget neutrality.

As a result, reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics will receive an estimated 3.5 % decrease in the aggregate in payment from Medicare in calendar year 2021.

As a result, reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics received an estimated 3.5 % decrease in the aggregate in payment from Medicare in calendar year 2021 as compared to 2020 .

The Budget Control Act of 2011 increased the federal debt ceiling in connection with deficit reductions over the next ten years , and requires automatic reductions in federal spending by approximately $ 1.2 trillion.

3 unchanged sentences

The Bipartisan Budget Act of 2018, enacted on February 9, 2018, extends the 2 % reductions to Medicare payments through fiscal year 2027.

T he Act suspended the 2 % payment reduction Medicare payments for dates of service from May 1, 2020 through December 31, 2020.

The CARES Act suspended the 2 % payment reduction to Medicare payments for dates of service from May 1, 2020 through December 31, 2020.

The Consolidated Appropriations Act, 2021 further suspended the 2 % payment reduction until March 31, 2021.

On April 14, 2021, additional legislation was enacted that waived the 2 % payment reduction for calendar 2021 .

On April 14, 2021, additional legislation was enacted that waived the 2 % payment reduction for the remainder of calendar 2021 .

Beginning in 2021, payments to individual therapists (Physical/Occupational Therapist in Private Practice) paid under the fee schedule may be subject to adjustment based on performance in the Merit Based Incentive Payment System (“MIPS”), which measures performance based on certain quality metrics, resource use, and meaningful use of electronic health records.

6 unchanged sentences

The bonus payment for APM participation is intended to encourage participation and testing of new APMs and to promote the alignment of incentives across payors .

Under the Middle Class Tax Relief and Job Creation Act of 2012 (“MCTRA”), since October 1, 2012, patients who met or exceede d $ 3,700 in therapy expenditures during a calendar year have been subject to a manual medical review to determine whether applicable payment criteria are satisfied.

Under the Middle Class Tax Relief and Job Creation Act of 2012 (‘‘MCTRA’’), since October 1, 2012, patients who met or exceeded $3,700 in therapy expenditures during a calendar year have been subject to a manual medical review to determine whether applicable payment criteria are satisfied.

The $ 3,700 threshold is applied to Physical Therapy and Speech Language Pathology Services;

a separate $ 3,700 threshold is applied to the Occupational Therapy.

The MACRA directed CMS to modify the manual medical review process such that those reviews will no longer apply to all claims exceeding the $ 3,700 threshold and instead will be determined on a targeted basis based on a variety of factors that CMS considers appropriate The Bipartisan Budget Act of 2018 extends the targeted medical review indefinitely, but reduces the threshold to $ 3,000 through December 31, 2027.

The Bipartisan Budget Act of 2018 extends the targeted medical review indefinitely, but reduces the threshold to $ 3,000 through December 31, 2027.

For 2028, the threshold amount will be increased by the percentage increase in the Medicare Economic Index (“MEI”) for 2028 and in subsequent years the threshold amount will increase based on the corresponding percentage increase in the MEI for such subsequent year.

2 unchanged sentences

Under the policy, the Medicare program pays 100 % of the practice expense component of the Relative Value Unit (‘‘RVU’’) for the therapy procedure with the highest practice expense RVU, then reduces the payment for the practice expense component for the second and subsequent therapy procedures or units of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate sessions.

Since 2013, the practice expense component for the second and subsequent therapy service furnished during the same day for the same patient was reduced by 50 %.

In addition, the MCTRA directed CMS to implement a claims-based data collection program to gather additional data on patient function during the course of therapy in order to better understand patient conditions and outcomes.

All practice settings that provide outpatient therapy services are required to include this data on the claim form.

Since 2013, therapists have been required to report new codes and modifiers on the claim form that reflect a patient’s functional limitations and goals at initial evaluation, periodically throughout care, and at discharge.

Reporting of these functional limitation codes and modifiers are required on the claim for payment.

In 2013, the practice expense component for the second and subsequent therapy service furnished during the same day for the same patient was reduced by 50 %.

Medicare claims for outpatient therapy services furnished by therapy assistants on or after January 1, 2020 must include a modifier indicating the service was furnished by a therapy assistant.

1 unchanged sentence

Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation.

We believe that we are in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on the our financial statements as of March 31, 2021.

Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program.

For quarter ended March 31, 2021, net patient revenues from Medicare were approximately $ 26.6 million.

For the three months ended June 30, 2021 and 2020, respectively, net patient revenues from Medicare were approximately $ 35.6 million and $ 16.9 million, respectively.

For the six months ended June 30, 2021 and 2020, respectively, net patient revenues from Medicare were approximately $ 62.2 million and $ 44.4 million, respectively.

Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare that sufficiently compensate us for our services or, in some instances, cover our operating costs.

13 unchanged sentences

Additionally, analysis of subsequent periods’ 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, the Company believes that a change in the contractual allowance reserve estimate would not likely be more than 1.0 % to 1.5 % at March 31, 2021.

As a result, the Company believes that a change in the contractual allowance reserve estimate would not likely be more than 1.0 % to 1.5 % at June 30, 2021.

A contract’s transaction price is allocated to each distinct performance obligation and recognized when, or as, the performance obligation is satisfied.

9 unchanged sentences

the transaction price), the Company recognizes the revenue, net of contractual allowances, in the period in which the services are rendered.

The Company recognizes the full amount of revenue and reports the contractual allowances as a contra (or offset) revenue account to report a net revenue number based on the expected collection s.

The Company recognizes the full amount of revenue and reports the contractual allowances as a contra (or offset) revenue account to report a net revenue number based on the expected collections.

EARNINGS PER SHARE

2 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Computation of earnings per share - USPH shareholders:

Net income attributable to USPH shareholders

Credit (charges) to retained earnings:

(Charges) credit to retained earnings:

Revaluation of redeemable non-controlling interest

46 unchanged sentences

There are no conditions in any of the arrangements with an Employed Selling Shareholder that would result in a forfeiture of the equity interest held in the Seller Entity or of the Seller Entity Interest.

For the three months ended March 31, 2021, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests (in thousand s):

For the three and six months ended June 30, 2021 and 2020 , the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests (in thousands):

Three Months Ended

March 31, 2021

December 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Beginning balance

4 unchanged sentences

Acquired interest

Reduction of non-controlling interest due to sale of USPH partnership interest

Sales of redeemable non-controlling interest - temporary equity

3 unchanged sentences

The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests (in thousands):

March 31, 2021

December 31, 2020

June 30 , 2021

June 30 , 2020

Contractual time period has lapsed but holder's employment has not been terminated

3 unchanged sentences

The changes in the carrying amount of goodwill consisted of the following (in thousands):

Three Months Ended

March 31, 2021

Six Months Ended

June 30, 2021

December 31, 2020

6 unchanged sentences

INTANGIBLE ASSETS, NET

Intangible assets, net as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands):

March 31, 2021

Intangible assets, net as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

June 30, 2021

December 31, 2020

5 unchanged sentences

Non-compete agreements are amortized over the respective term of the agreements which range from five to six years .

The following table details the amount of amortization expense recorded for intangible assets for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended

The following table details the amount of amortization expense recorded for intangible assets for the three and six months ended June 30, 2021 and 2020 (in thousands) :

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Referral relationships

Non-compete agreements

Based on the balance of referral relationships and non-compete agreements as of March 31, 2021, the expected amount to be amortized in 2021 and thereafter by year is as follows (in thousand s):

Based on the balance of referral relationships and non-compete agreements as of June 30, 2021, the expected amount to be amortized in 2021 and thereafter by year is as follows (in thousands) :

Referral Relationships

4 unchanged sentences

Ending December 31,

2021 (excluding the three months ended March 31, 2021)

2021 (excluding the six months ended June 30 , 2021 )

2021 (excluding the six months ended June 30, 2021)

ACCRUED EXPENSES

Accrued expenses as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands):

March 31, 2021

Accrued expenses as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

June 30, 2021

December 31, 2020

6 unchanged sentences

Deferred employer payroll taxes - CARES ACT

Dividends payable

See Note – 1 Basis of Presentation and Significant Accounting Policies – Impact of COVID-19 for a discussion of CARES Act and MAAPP funds.

1 unchanged sentence

NOTES PAYABLE AND AMENDED CREDIT AGREEMENT

Amounts outstanding under the Amended Credit Agreement (as defined below) and notes payable as of March 31, 2021 and December 31, 2020 consisted of the following (in thousands):

March 31, 2021

Amounts outstanding under the Amended Credit Agreement (as defined below) and notes payable as of June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

June 30, 2021

December 31, 2020

Credit Agreement average effective interest rate of 3.0 % and 2.6 % in 2021 and 2020, respectively (inclusive of unused fee)

Credit Agreement average effective interest rate of 2.6 % for both June 30, 2021 and December 31, 2020, (inclusive of unused fee)

Various notes payable with $ 1,017 plus accrued interest due in the next year, interest accrues in the range of 3.25 % through 5.50 % per annum

10 unchanged sentences

The Amended Credit Agreement is unsecured and includes certain financial covenants which include a consolidated fixed charge coverage ratio and a consolidated leverage ratio, as defined in the agreement.

As of March 31, 2021, $ 16.0 million was outstanding on the Amended Credit Agreement, resulting in $ 109.0 million of availability.

As of March 31, 2021, the Company was in compliance with all of the covenants contained in the Amended Credit Agreement.

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

As of June 30 , 2021, $ 38.0 million was outstanding on the Amended Credit Agreement, resulting in $ 87.0 million of availability.

As of June 30 , 2021, the Company was in compliance with all of the covenants contained in the Amended Credit Agreement.

The Company generally enters into various notes payable as a means of financing a portion of its acquisitions and purchasing of non-controlling interests.

1 unchanged sentence

Interest accrues in the range of 3.25 % to 5.50 % per annum and is payable with each principal installment.

The balance of the various notes payable entered into prior to 2020 was $ 4.4 million which will be paid in 2021.

Subsequent aggregate annual payments of principal required pursuant to the Amended Credit Agreement and outstanding notes payable at March 31, 2021 are as follows (in thousands):

During the twelve months ended March 31, 2022

During the twelve months ended March 31, 2023

During the twelve months ended March 31, 2026

The outstanding amounts under the Amended Credit Agreement facility (balance at March 31, 2021 of $ 16.0 million) mature on November 30, 2025 .

The balance of the various notes payable entered into prior to 2020 was $ 0.2 million which will be paid in the last six months in 2021 .

Subsequent aggregate annual payments of principal required pursuant to the Amended Credit Agreement and outstanding notes payable at June 30, 2021 are as follows (in thousands):

During the twelve months ended June 30, 2022

During the twelve months ended June 30, 2023

During the twelve months ended June 30, 2026

The outstanding amounts under the Amended Credit Agreement facility (balance at June 30 , 2021 of $ 38.0 million) mature on November 30, 2025 .

The Company has operating leases for its corporate offices and operating facilities.

14 unchanged sentences

These are expensed as incurred and recorded as variable lease expense.

For the three months ended March 31, 2021, the components of lease expense were as follows (in thousands):

For the three months and six ended June 30, 2021, the components of lease expense were as follows (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30 , 2021

June 30 , 2020

June 30 , 2021

June 30 , 2020

Operating lease cost

6 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30 , 2021

June 30 , 2020

Cash paid for amounts included in the measurement of operating lease liabilities (in thousands)

Right-of-use assets obtained in exchange for new operating lease liabilities (in thousands)

The aggregate future lease payments for operating leases as of March 31, 2021 were as follows (in thousands):

2021 (excluding the three months ended March 31, 2021)

The aggregate future lease payments for operating leases as of June 30, 2021 were as follows (in thousands):

2021 (excluding the six months ended June 30 , 2021 )

2026 and therafter

4 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30 , 2021

June 30 , 2020

Weighted-average remaining lease term - Operating leases

7 unchanged sentences

Prior year results presented herein have been changed to conform to the current presentation.

Three Months Ended March 31,

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Net operating revenues:

13 unchanged sentences

In March 2021, the Company recorded approximately $ 12.8 thousand related to the short swing profit settlement remitted by a shareholder of our company under Section 16(b) of the Securities Exchange Act of 1934, as amended.

The Company recognized the proceeds as an increase to additional paid-in capital in the consolidated balance sheets as of March 31, 2021 and consolidated statements of stockholders’ equity, as well as in cash provided by financing activities included in Other, in the consolidated statements of cash flows, for the three months ended March 31, 2021.

The Company recognized the proceeds as an increase to additional paid-in capital in the consolidated balance sheets as of June 30, 2021 and consolidated statements of stockholders’ equity, as well as in cash provided by financing activities included in Other, in the consolidated statements of cash flows, for the six months ended June 30, 2021.

From September 2001 through December 31, 2008, the Board authorized the Company to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of the Company’s common stock.

4 unchanged sentences

There is no expiration date for the share repurchase program.

There are currently an additional estimated 144,092 shares (based on the closing price of $ 104.10 on March 31, 2021) that may be purchased from time to time in the open market or private transactions depending on price, availability and the Company’s cash position.

The Company did no t purchase any shares of its common stock during the three months ended March 31, 2021.

There are currently an additional estimated 129,455 shares (based on the closing price of $ 115.87 on June 30, 2021) that may be purchased from time to time in the open market or private transactions depending on price, availability and the Company’s cash position.

The Company did no t purchase any shares of its common stock during the six months ended June 30, 2021.

RECLASSIFICATION OF PRIOR PERIOD PRESENTATION

Certain prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on the reported results of operations.

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 1. Financial Statements