What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-10 · 278 added, 136 removed, 222 unchanged (65% of the section changed)

11 unchanged sentences

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

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

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

Business Update Related to 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 for the year ended December 31, 2020, our results were negatively impacted by the effects of the COVID-19 pandemic in the three months ended March 31, 2020 (“2020 First Quarter”), especially in March 2020.

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

Our 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 our Quarterly Reports on Form 10-Q for the first three quarters of 2020 and the 2020 Annual Report, our 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 volumes.

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.

In line with recommendations to reduce large gatherings and increase social distancing, we continue 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”).

The CARES Act was signed into law in March 2020.

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.

In 2020, we received benefits under the CARES Act including, but not limited to:

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

The CARES Act allowed for qualified healthcare providers to receive advanced payments under the Medicare Accelerated and Advance Payment Program (“MAAPP Funds”) during the COVID-19 pandemic.

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

As of June 30, 2021, included in each of accrued liabilities was $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.

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

There were no Relief Funds received in the 2021 First Quarter.

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

Selected Operating and Financial Data

At March 31, 2021, we operated 564 clinics in 39 states.

In addition to our ownership and operation of outpatient physical therapy clinics, we also manage physical therapy facilities for third parties, such as physicians and hospitals, with 40 such third-party facilities under management as of March 31, 2021.

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

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

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

Other clients include large insurers and their contractors.

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

At June 30, 2021, we operated 575 clinics in 39 states.

In addition to our ownership and operation of outpatient physical therapy clinics, we also manage physical therapy facilities for third parties, such as physicians and hospitals, with 39 such third-party facilities under management as of June 30, 2021.

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

9 unchanged sentences

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

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

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

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

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

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

During the three months ended March 31, 2020, we sold two clinics.

During the six months ended June 30, 2020, we sold two clinics.

The aggregate sales price was $0.1 million.

Our strategy to acquire physical therapy practices, develop outpatient physical therapy clinics as satellites within existing partnerships, acquire industrial injury prevention businesses, and to continue to support the growth of our existing businesses requires a talented workforce that can grow with us.

As of March 31, 2021, we employed approximately 4850 people nationwide, of which approximately 2,590 were full-time employees.

As of June 30, 2021, we employed approximately 5,178 people nationwide, of which approximately 2,755 were full-time employees.

It is crucial that we continue to attract and retain top talent.

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We expect to continue adding personnel in the future as we focus on potential acquisition targets and organic growth opportunities.

Beginning in March 2020, we have supported our employees and government efforts to curb the COVID-19 pandemic through a multifaceted communication, infrastructure, and behavior modification and enforcement effort:

Establishing clear COVID-19 policies, health and safety protocols, and routine updates to our employees and patients;

Increasing cleaning protocols and hand hygiene across all locations;

Providing additional personal protective equipment and cleaning supplies;

Implementing protocols to address actual and suspected COVID-19 cases and potential exposures;

Limiting non-essential travel for all employees;

Adjusting schedules and workload to permit remote working where possible;

Requiring masks to be worn by all individuals in all locations

Decreasing density, increasing social distancing and restricting visitors in our clinics and offices for employees working onsite;

Provided information regarding the COVID-19 vaccines to employees and strongly encouraged all employees to get vaccinated.

Additionally, due to the impact of COVID-19 on our operations, we have generated efficiencies in staffing, including limiting hiring to critical business roles, reducing scheduled hours, furloughs, and reductions-in-force.

Through our employees' commitment to following operational protocols and their continued efforts to provide quality services to our patients, we have seen much of the workforce, and our operations, return to pre-pandemic levels.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2021

For the 2021 First Quarter, our Operating Results were $8.2 million, or $0.64 per diluted share, as compared to $3.9 million, or $0.30 per diluted share, for the 2020 First Quarter.

Operating Results, a non-Generally Accepted Accounting Principles (“GAAP”) measure, equals net income attributable to our shareholders per the consolidated statements of income plus charges incurred for clinic closure costs and expenses related to our 2020 CFO transition, all net of taxes.

Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest.

For the 2021 First Quarter, our net income attributable to our shareholders was $8.2 million, as compared to $1.0 million in the 2020 First Quarter.

Inclusive of the charge for revaluation of non-controlling interest, net of taxes, used to compute diluted earnings per share in accordance with GAAP, the amount is $2.8 million, or $0.21 per share, for the 2021 First Quarter as compared to $2.6 million, or $0.20 per share, for the 2020 First Quarter.

Summary of 2021 Second Quarter and Six Months Results

For the three months ended June 30, 2021 (“2021 Second Quarter”), our net income attributable to diluted shareholders was $12.4 million, as compared to $10.2 million for the three months ended June 30, 2020 (“2020 Second Quarter”) and $14.6 million for the three months ended June 30, 2019 (“2019 Second Quarter”), which includes a $5.8 million gain on the sale of the Company’s interest in a physical therapy partnership on June 30, 2019.

For the six months ended June 30, 2021 (“2021 Six Months”), our net income attributable to diluted shareholders was $20.6 million, as compared to $11.2 million for the six months ended June 30, 2020 (“2020 Six Months”) and $23.1 million for the six months ended June 30, 2019 (“2019 Six Months”).

Inclusive of the charge or credit for revaluation of non-controlling interest, net of taxes, used to compute diluted earnings per diluted share in accordance with GAAP, the amount is $10.5 million, or $0.82 per diluted share, for the 2021 Second Quarter as compared to $12.7 million, or $0.99 per diluted share, for the 2020 Second Quarter, and $10.8 million, or $0.85 per diluted share, for the 2019 Second Quarter.

Inclusive of the charge or credit for revaluation of redeemable non-controlling interest, net of taxes, used to compute diluted earnings per diluted share in accordance with GAAP, the amount is $13.3 million, or $1.03 per diluted share, for the 2021 Six Months as compared to $15.3 million, or $1.19 per diluted share, for the 2020 Six Months, and $15.8 million, or $1.24 per diluted share, for the 2019 Six Months.

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

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

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

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

Operating Results, a non-GAAP measure, equals net income attributable to our shareholders per the consolidated statement of net income plus charges incurred for closure costs and expenses related to our 2020 CFO transition, all net of tax.

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

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

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

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

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

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

Three Months Ended March 31,

See the table below for the computation of diluted earnings per diluted share.

In 2020, the valuation of redeemable non-controlling interests decreased due to the results associated with the pandemic, therefore resulting in a credit to retained earnings.

In 2021 and 2019, the valuations increased therefore there was a charge to retained earnings.

For the 2021 Second Quarter, our Operating Results was $12.4 million, or $0.96 per diluted diluted share, as compared to $9.5 million (inclusive of Relief Funds), or $0.74 per diluted diluted share, for the 2020 Second Quarter, and $10.3 million, or $0.81 per diluted share for the 2019 Second Quarter.

For the 2021 Six Months, our Operating Results was $20.6 million, or $1.60 per diluted diluted share, as compared to $13.4 million, or $1.04 per diluted diluted share, for the 2020 Six Months, and $18.8 million, or $1.47 per diluted share, for the 2019 Six Months.

Operating Results, a non-Generally Accepted Accounting Principles (“GAAP”) measure, equals net income attributable to our diluted shareholders per the consolidated statements of income less gain on sale of partnership interests and clinics plus charges incurred for clinic closure costs and expenses related to CFO transition, all net of taxes.

Earnings per diluted share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest and the associated tax impact.

The table below provides a calculation of diluted earnings per share and Operating Results (in thousands, except per share data):

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

EARNINGS PER SHARES AND OPERATING RESULTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended June 30,

Computation of earnings per share - USPH shareholders:

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Earnings per share (basic and diluted)

Closure costs

Expenses related to CFO transition

Gain on sale of partnership interest and clinics

Allocation to non-controlling interest

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Operating Results (excluding Relief Funds)

Allocation to non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Operating Results (including Relief Funds)

Basic and diluted Operating Results (without Relief Funds) per share

Basic and diluted Operating Results (including Relief Funds) per share

Shares used in computation - basic and diluted

Six Months Ended June 30,

Computation of earnings per share - USPH shareholders:

Net income attributable to USPH shareholders

Credit (charges) to retained earnings:

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Earnings per share (basic and diluted)

Closure costs

Expenses related to CFO transition

Gain on sale of partnership interest and clinics

Allocation to non-controlling interest

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Operating Results

Basic and diluted Operating Results per share

Operating Results (excluding Relief Funds)

Allocation to non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Operating Results (including Relief Funds)

Basic and diluted Operating Results (without Relief Funds) per share

Basic and diluted Operating Results (including Relief Funds) per share

Shares used in computation - basic and diluted

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

Three Months Ended March 31,

(in thousands)

Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

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

Three Months Ended June 30,

Net operating revenues:

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Physical therapy operations - closure costs

Reported net revenues for the 2021 First Quarter was $112.4 million as compared to $112.7 million for the 2020 First Quarter.

See table below for a detail of reported net revenues (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Net patient revenues

Management contract revenue

Other patient revenues

Total Assets:

Physical therapy operations

Industrial injury prevention services

Net patient revenues from physical therapy operations decreased $0.9 million, or 0.9%, to $99.2 million in 2021 First Quarter from $100.1 million in the 2020 First Quarter as a result of having 24 fewer clinics open on average in the 2021 First Quarter as compared to the 2020 First Quarter.

Included in net patient revenues are revenues related to clinics sold or closed in 2021 and 2020 of $0.1 million in the First Quarter 2021 and $3.5 million in the First Quarter 2020.

During 2021 First Quarter, we sold our interest in 2 clinics and closed 1 clinic.

During 2020, we sold our interest in 14 clinics and closed 34 clinics.

For comparison purposes, adjusted for revenue from the clinics sold or closed, net patient revenues from physical therapy operations was approximately $99.1 million in the First Quarter 2021, inclusive of $5.3 million related to clinics opened or acquired in the 2021 First Quarter (“2021 Clinic Additions”) and 2020 year (“2020 Clinic Additions”), together referred to as Clinic Additions, and $96.6 million in First Quarter 2020.

Net patient revenues related to clinics opened or acquired prior to 2020 and still in operations at March 31, 2021 (“Mature Clinics) decreased $1.8 million in the 2021 First Quarter compared to the 2020 First Quarter.

See table below for a detail of net patient revenues from physical therapy operations (in thousands):

Total Company

Reported net revenues for the 2021 Second Quarter was $126.9 million, an increase of 51.4% as compared to $83.9 million for the 2020 Second Quarter.See table below for a detail of reported net revenues (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

Revenue related to Mature Clinics

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Revenue from clinics sold or closed in 2020

The average net patient revenue per visit was $104.72 for the 2021 First Quarter as compared to $103.11 for the 2020 First Quarter, including all clinics operational during such periods.

Total patient visits were 947,788 in the 2021 First Quarter and 971,023 for the 2020 First Quarter.

Net patient revenue from physical therapy operations.

Other revenue

Physical therapy operations

Management contract revenue

Industrial injury prevention services

Total Revenue

Net patient revenues from physical therapy operations increased $41.0 million, or 56.7%, to $113.2 million for the 2021 Second Quarter from $72.3 million for the 2020 Second Quarter.

Included in net patient revenues are revenues related to clinics sold or closed in 2021 and 2020 of $26,000 for 2021 Second Quarter and $0.8 million for the 2020 Second Quarter.

During the full year of 2020, the Company sold its interest in 14 clinics and closed 34 clinics.

For comparison purposes, adjusted for revenue from the clinics sold or closed, net patient revenues from physical therapy operations was approximately $113.2 million for Second Quarter 2021, inclusive of $8.0 million related to clinics opened or acquired in the 2021 Second Quarter (“2021 Clinic Additions”) and 2020 year (“2020 Clinic Additions”), together referred to as (“Clinic Additions”), and $71.5 million for the Second Quarter 2020, inclusive of $2.0 million for 2020 Clinic Additions.

Net patient revenues related to clinics opened or acquired prior to 2020 and still in operations at June 30, 2021 (“Mature Clinics”) increased $35.7 million for the 2021 Second Quarter compared to the 2020 Second Quarter.

The average net patient revenue per visit was $104.46 for the 2021 Second Quarter as compared to $106.97 for the 2020 Second Quarter, including all clinics operational during such periods.

Total patient visits increased 60.4% to 1,084,070 for the 2021 Second Quarter from 675,701 for the 2020 Second Quarter.

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

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

Also included in physical therapy operationsNet patient was revenue from physical therapy management contracts which was $2.6 million for the 2021 First Quarter and $2.1 million in the 2020 First Quarter.

Other miscellaneous revenue was $0.5 million in the 2021 First Quarter and $0.6 million in the 2020 First Quarter.

Revenue from physical therapy management contracts increased 72.0% to $2.7 million for the 2021 Second Quarter as compared to $1.6 million for the 2020 Second Quarter.

Other miscellaneous revenue was $0.9 million in the 2021 Second Quarter and $0.3 million in the 2020 Second Quarter.

Other miscellaneous revenue includes a variety of services, including athletic trainers provided for schools and athletic events.

Revenue from the industrial injury prevention business was $10.0 million in the 2021 First Quarter, as compared to $9.9 million in the 2020 First Quarter.

Revenue from the industrial injury prevention business increased 3.9% to $10.0 million for the 2021 Second Quarter as compared to $9.7 million for the 2020 Second Quarter.

Operating Costs

Total operating costs, excluding closure costs, were $86.4 million in the 2021 First Quarter, or 76.9% of net revenues, a reduction of 590 basis points as compared to $93.3 million in the 2020 First Quarter, or 82.8% of net revenues.

Included in operating costs for the 2021 First Quarter was $4.8 million related to Clinic Additions, of which $4.6 million is associated with 2020 Clinic Additions.

Operating costs for Mature Clinics decreased by $6.9 million in the 2021 First Quarter compared to the 2020 First Quarter.

In addition, operating costs related to the industrial injury prevention business decreased by $0.9 million.

Total operating costs, excluding closure costs, were $92.6 million for the 2021 Second Quarter, or 73.0% of net revenues, an improvement of 390 basis points as compared to $64.5 million for the 2020 Second Quarter, or 76.9% of net revenues.

Included in operating costs for the 2021 Second Quarter was $7.0 million related to Clinic Additions.

Operating costs for Mature Clinics increased by $22.2 million for the 2021 Second Quarter compared to the 2020 Second Quarter.

In addition, operating costs related to the industrial injury prevention business increased by $1.0 million.

See table below for a detail of operating costs, excluding closure costs (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Physical Therapy Operations

June 30, 2021

June 30, 2020

Operating costs related to Mature Clinics

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Operating costs related to clinics sold or closed in 2020

Physical therapy operations

Physical therapy management contracts

Total Physical therapy operations

Industrial injury prevention services

Total operating costs, excluding closure costs

Each component of operating costs is discussed below:

Operating Costs—Salaries and Related Costs

Salaries and related costs, including physical therapy operations and the industrial injury prevention services business, were 56.8% of net revenues in the 2021 First Quarter versus 61.2% in the 2020 First Quarter.

Salaries and related costs for the physical therapy operations were $57.5 million in the 2021 First Quarter, or 57.7% of physical therapy operations revenues, as compared to $62.0 million in the 2020 First Quarter, or 61.6% of physical therapy operations revenues.

Included in salaries and related costs for the physical therapy operations for the 2021 First Quarter was $3.3 million related to 2020 Clinic Additions.

Adjusted for the salaries and related costs for clinics closed or sold in 2021 and 2020 of $0.1 million and $2.4 million, in the 2021 and 2020 First Quarter, respectively, salaries and related costs for Mature Clinics decreased by $5.5 million in the First Quarter 2021 compared to the First Quarter 2020.

Salaries and related costs related to management contracts, which are included in physical therapy operations increased by $0.4 million for the 2021 First Quarter.

Salaries and related costs for the industrial injury prevention services business were $6.2 million in the 2021 First Quarter, or 62.5% of industrial injury prevention services revenues, as compared to $6.9 million in the 2020 First Quarter, or 70.3% of net industrial injury prevention services revenues.

Salaries and related costs, including physical therapy operations and the industrial injury prevention business, were 54.3% of net revenues for the 2021 Second Quarter versus 51.8% for the 2020 Second Quarter.

Salaries and related costs for the physical therapy operations were $60.6 million in the 2021 Second Quarter, or 53.1% of physical therapy operations revenues, as compared to $36.9 million in the 2020 Second Quarter, or 50.9% of physical therapy operations revenues.

Included in salaries and related costs for the physical therapy operations for the 2021 Second Quarter was $4.9 million related to 2021 and 2020 Clinic Additions.

Adjusted for the salaries and related costs for clinics closed or sold in 2021 and 2020, salaries and related costs for Mature Clinics increased by $20.1 million in the 2021 Second Quarter compared to the 2020 Second Quarter.

Salaries and related costs related to management contracts increased by $0.9 million for the 2021 Second Quarter.

Salaries and related costs for the industrial injury prevention services business were $6.2 million in the 2021 Second Quarter, or 62.2% of industrial injury prevention services revenues, as compared to $5.5 million in the 2020 Second Quarter, or 56.9% of net industrial injury prevention services revenues.

Operating Costs—Rent, Supplies, Contract Labor and Other

Rent, supplies, contract labor and other costs, including physical therapy operations and the industrial injury prevention services business, were 19.1% of net revenues in the 2021 First Quarter versus 20.3% in the 2020 First Quarter.

Rent, supplies, contract labor and other costs for the physical therapy operations were $20.4 million in the 2021 First Quarter, or 20.4% of physical therapy operations revenues, as compared to $21.6 million in the 2020 First Quarter, or 21.5% of physical therapy operations revenues.

Included in rent, supplies, contract labor and other costs related to physical therapy operations for the 2021 First Quarter was $1.4 million related to 2020 Clinic Additions.

Adjusted for the rent, supplies, contract labor and other costs for clinics related to the partnership interests closed or sold in 2021 and 2020 of $0.1 million in the 2021 First Quarter and $1.2 million in the 2020 First Quarter, rent, supplies, contract labor and other for Mature Clinics decreased by $1.2 million in the First Quarter 2021 compared to the First Quarter 2020.

Rent, supplies, contract labor and other costs, related to management contracts, which are included in physical therapy operations, decreased $0.1 million in the 2021 First Quarter.

Rent, supplies, contract labor and other costs for the industrial injury prevention services business were $1.0 million in the 2021 First Quarter, or 10.3% of industrial injury prevention services revenues, as compared to $1.3 million in the 2020 First Quarter, or 12.9% of net industrial injury prevention services revenues.

Rent, supplies, contract labor and other costs, including physical therapy operations and the industrial injury prevention services business, were 17.7% of net revenues in the 2021 Second Quarter versus 24.2% in the 2020 Second Quarter.

Rent, supplies, contract labor and other costs for the physical therapy operations were $20.9 million in the 2021 Second Quarter, or 16.8% of physical therapy operations revenues, as compared to $19.2 million in the 2020 Second Quarter, or 26.4% of physical therapy operations revenues.

Included in rent, supplies, contract labor and other costs related to physical therapy operations for the 2021 Second Quarter was $2.0 million related to 2021 and 2020 Clinic Additions.

Adjusted for the rent, supplies, contract labor and other costs for clinics related to the clinics closed or sold in 2021 and 2020 of $0.1 million in the 2021 Second Quarter and $1.0 million in the 2020 Second Quarter, rent, supplies, contract labor and other costs for Mature Clinics increased by $1.3 million in the 2021 Second Quarter compared to the 2020 Second Quarter.

Rent, supplies, contract labor and other costs, related to management contracts decreased $0.9 million in the 2021 Second Quarter.

Rent, supplies, contract labor and other costs for the industrial injury prevention services business were $1.2 million in the 2021 Second Quarter, or 12.5% of industrial injury prevention services revenues, as compared to $0.9 million in the 2020 Second Quarter, or 10.2% of net industrial injury prevention services revenues.

Operating Costs—Provision for Credit Losses

The provision for credit losses as a percentage of net revenue was 1.1% in the 2021 First Quarter and 1.2% for the comparable period in 2020.

Our provision for credit losses for patient accounts receivable as a percentage of total patient accounts receivable was 4.3% at March 31, 2021, as compared to 4.5% at December 31, 2020.

Our days’ sales outstanding were 34 days at March 31, 2021 and 32 days at December 31, 2020.

Gross profit for the 2021 First Quarter, excluding closure costs, was $25.9 million, an increase of $6.5 million, or approximately 33.4%, as compared to $19.4 million in the 2020 First Quarter.

The gross profit percentage, excluding closure costs, was 23.1% of net revenue in the 2021 First Quarter, an increase of 590 basis points as compared to 17.2% in the 2020 First Quarter.

The gross profit percentage for the our physical therapy clinics, excluding closure costs, was 22.9% in the 2021 First Quarter, an improvement of 560 basis points as compared to 17.3% in the 2020 First Quarter.

The gross profit percentage on physical therapy management contracts was 12.3% in the 2021 First Quarter, a decrease of 340 basis points as compared to 15.7% in the 2020 First Quarter.

During the 2021 First Quarter, the physical therapy management contracts business had a charge to provision for credit losses of $0.1 million.

The gross profit percentage for the industrial injury prevention business was 27.2% in the 2021 First Quarter, an improvement of 1040 basis points as compared to 16.8% in the 2020 First Quarter.

The provision for credit losses as a percentage of net revenue was 1.1% in the 2021 Second Quarter and 0.9% for the comparable period in 2020.

Our provision for credit losses for patient accounts receivable as a percentage of total patient accounts receivable was 5.1% at June 30, 2021, as compared to 4.5% at December 31, 2020.

Our days’ sales outstanding were 32 days at both June 30, 2021 and December 31, 2020.

Gross profit for the 2021 Second Quarter, excluding closure costs, was $34.3 million, an increase of $14.9 million, or approximately 76.9%, as compared to $19.4 million for the 2020 Second Quarter.

The gross profit percentage, excluding closure costs, was 27.0% of net revenue for the 2021 Second Quarter, an increase of 390 basis points as compared to 23.1% for the 2020 Second Quarter.

The gross profit percentage for the Company’s physical therapy clinics, excluding closure costs, was 27.3% for the 2021 Second Quarter, an improvement of 560 basis points as compared to 21.7% for the 2020 Second Quarter.

The gross profit percentage on physical therapy management contracts was 19.6% for the 2021 Second Quarter, a decrease of 730 basis points as compared to 26.9% for the 2020 Second Quarter.

The gross profit percentage for the industrial injury prevention business was 25.3% for the 2021 Second Quarter, a decrease of 760 basis points as compared to 32.9% for the 2020 Second Quarter.

The table below details the gross profit, excluding closure costs (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

Gross profit, excluding closure costs:

Physical therapy clinics

Physical therapy operations

Management contracts

3 unchanged sentences

Corporate Office Costs

Corporate office costs were $10.9 million in the 2021 First Quarter compared to $11.7 million in the 2020 First Quarter.

Corporate office costs were 9.7% of net revenues for the 2021 First Quarter as compared to 10.4% for the 2020 First Quarter.

Corporate office costs were $12.1 million for the 2021 Second Quarter compared to $9.0 million for the 2020 Second Quarter.

Corporate office costs were 9.5% of net revenues for the 2021 Second Quarter as compared to 10.8% for the 2020 Second Quarter.

The increase in costs was primarily due to higher salaries and benefits for the 2021 Second Quarter compared to the 2020 Second Quarter.

The 2020 Second Quarter included salary reductions and furloughs related to the pandemic.

Operating Income

Operating income for the 2021 First Quarter was $15.0 million, an increase of $11.0 million, or 274.2% as compared to $4.0 million for the 2020 First Quarter.

Operating income as a percentage of net revenue increased by 980 basis points from 3.6% in the 2020 period to 13.4% in 2021.

The 2020 First Quarter included $3.8 million related to clinic closures.

Operating income for the 2021 Second Quarter was $22.2 million, an increase of $12.0 million, or 116.6%, as compared to $10.3 million for the 2020 Second Quarter.

Operating income as a percentage of net revenue increased by 530 basis points from 12.2% for the 2020 period to 17.5% for the 2021 period.

Interest Expense

Interest expense was $0.2 million in the 2021 First Quarter and $0.4 million in the 2020 First Quarter due to lower average borrowings under our Amended Credit Agreement.

At March 31, 2021, $16.0 million was outstanding under our Amended Credit Agreement (as defined below).

Interest expense was $237,000 for the 2021 Second Quarter and $653,000 for the 2020 Second Quarter due to reduced borrowings under the Company’s revolving credit line.

At June 30, 2021, $38.0 million was outstanding under our Amended Credit Agreement (as defined below).

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

Provision for Income Taxes

The provision for income taxes was $2.9 million for the 2021 First Quarter and $0.3 million for the 2020 First Quarter.

The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 26.5% for the 2021 First Quarter and 22.3% for the 2020 First Quarter.

The provision for income tax was $4.6 million for the 2021 Second Quarter and $3.9 million for the 2020 Second Quarter.

The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 26.9% for the 2021 Second Quarter and 27.5% for the 2020 Second Quarter.

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

Three Months Ended

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

Income before taxes

net income attributable to non-controlling interests:

Redeemable non-controlling interests - temporary equity

Non-controlling interests - permanent equity

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

Provision for income taxes

Effective tax rate

Net Income Attributable to Non-controlling Interests

Net income attributable to redeemable non-controlling interests (temporary equity) was $3.6 million for the 2021 Second Quarter and $3.0 million for the 2020 Second Quarter.

Net income attributable to non-controlling interests (permanent equity) was $1.4 million for the 2021 Second Quarter and $1.5 million for the 2020 Second Quarter.

Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

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

Six Months Ended June 30,

Net operating revenues:

Physical therapy operations

Industrial injury prevention services

Total Company

Gross profit:

Physical therapy operations (excluding closure costs)

Industrial injury prevention services

Physical therapy operations - closure costs

Total Assets:

Physical therapy operations

Industrial injury prevention services

Total Company

Reported net revenues for the 2021 Six Months increased $42.7 million or 21.7% to $239.3 million as compared to $196.6 million for the 2020 Six Months.

See table below for a detail of reported net revenues (in thousands):

For the Six Months Ended

June 30, 2021

June 30, 2020

Revenue related to Mature Clinics

Revenue related to 2021 Clinic Additions

Revenue related to 2020 Clinic Additions

Revenue from clinics sold or closed in 2021

Revenue from clinics sold or closed in 2020

Net patient revenue from physical therapy operations.

Other revenue

Physical therapy operations

Management contract revenue

Industrial injury prevention services

Total Revenue

Net patient revenues from physical therapy operations increased $40.1 million, or 23.3%, to $212.5 million for the 2021 Six Months from $172.4 million for the 2020 Six Months.

Included in net patient revenues are revenues related to clinics sold or closed in 2021 and 2020 of $13.3 million for the 2021 Six Months and $2.9 million for the 2020 Six Months.

During the 2021 Six Months, the Company sold its interest in 2 clinics and closed 1 clinic.

During the full year of 2020, the Company sold its interest in 14 clinics and closed 34 clinics.

For comparison purposes, adjusted for revenue from the clinics sold or closed, net patient revenues from physical therapy operations was approximately $212.3 million for the Six Months 2021, inclusive of $13.3 million related Clinic Additions and $168.2 million for the 2021 Six Months, inclusive of $3.0 million for 2020 Clinic Additions.

Net patient revenues related to Mature Clinics increased $33.8 million for the 2021 Six Months compared to the 2020 Six Months.

The average net patient revenue per visit was $104.58 for the 2021 Six Months as compared to $104.70 for the 2020 Six Months, including all clinics operational during such periods.

Total patient visits were 2,031,858 for the 2021 Six Months and 1,646,724 for the 2020 Six Months, an increase of 23.4%.

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

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

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

Revenue from physical therapy management contracts was $5.3 million for the 2021 Six Months, an increase of 41.6%, as compared to $3.7 million for the 2020 Six Months.

Revenue from the industrial injury prevention business increased 2.6% to $20.0 million for the 2021 Six Months as compared to $19.5 million for the 2020 Six Months.

Other miscellaneous revenue was $1.5 million for the 2021 Six Months and $0.9 million for the 2020 Six Months.

Other miscellaneous revenue includes a variety of services, including athletic trainers provided for schools and athletic events.

Operating Costs

Total operating costs, excluding closure costs, were $179.1 million for the 2021 Six Months, or 74.8% of net revenues, an improvement of 550 basis points as compared to $157.8 million for the 2020 Six Months, or 80.3% of net revenues.

Included in operating costs for the 2021 Six Months was $11.7 million related to Clinic Additions, of which $9.6 million is associated with 2020 Clinic Additions.

Operating costs for Mature Clinics decreased by $15.4 million for the 2021 Six Months compared to the 2020 Six Months.

In addition, operating costs related to the industrial injury prevention business decreased by $0.1 million.

See table below for a detail of operating costs, excluding closure costs (in thousands):

For the Six Months Ended

June 30, 2021

June 30, 2020

Operating costs related to Mature Clinics

Operating costs related to 2021 Clinic Additions

Operating costs related to 2020 Clinic Additions

Operating costs related to clinics sold or closed in 2021

Operating costs related to clinics sold or closed in 2020

Physical therapy operations

Physical therapy management contracts

Industrial injury prevention services

Each component of operating costs is discussed below:

Operating Costs—Salaries and Related Costs

Salaries and related costs, including physical therapy operations and the industrial injury prevention business, were 55.4% of net revenues for the 2021 Six Months versus 57.2% for the 2020 Six Months.

Salaries and related costs for the physical therapy operations were $116.3 million in the 2021 Six Months, or 54.3% of physical therapy operations revenues, as compared to $97.5 million in the 2020 Six Months, or 56.3% of physical therapy operations revenues.

Included in salaries and related costs for the physical therapy operations for the 2021 Six Months was $8.2 million related to Clinic Additions.

Adjusted for the salaries and related costs for clinics closed or sold in 2021 and 2020, salaries and related costs for Mature Clinics increased by $14.6 million in the 2021 Six Months compared to the 2020 Six Months.

Salaries and related costs related to management contracts increased by $1.4 million for the 2021 Six Months.

Salaries and related costs for the industrial injury prevention services business were $12.5 million in the 2021 Six Months,or 62.3% of industrial injury prevention services revenues, as compared to $12.4 million in the 2020 Six Months, or 63.6% of net industrial injury prevention services revenues.

Operating Costs—Rent, Supplies, Contract Labor and Other

Rent, supplies, contract labor and other costs, including physical therapy operations and the industrial injury prevention services business, were 18.3% of net revenues in the 2021 Six Months versus 22.0% in the 2020 Six Months.

Rent, supplies, contract labor and other costs for the physical therapy operations were $41.0 million in the 2021 Six Months, or 19.2% of physical therapy operations revenues, as compared to $40.5 million in the 2020 Six Months, or 23.4% of physical therapy operations revenues.

Included in rent, supplies, contract labor and other costs related to physical therapy operations for the 2021 Six Months was $3.4 million related to Clinic Additions.

Adjusted for the rent, supplies, contract labor and other costs for clinics related to the clinics closed or sold in 2021 and 2020, rent, supplies, contract labor and other costs for Mature Clinics increased by $0.3 million in the 2021 Six Months compared to the 2020 Six Months.

Rent, supplies, contract labor and other costs, related to management contracts increased $48,000 in the 2021 Six Months.

Rent, supplies, contract labor and other costs for the industrial injury prevention services business were $2.3 million in the 2021 Six Months and the 2020 Six Months, or 11.4% and 11.6%, respectively, of industrial injury prevention services revenues.

Operating Costs—Provision for Credit Losses

The provision for credit losses as a percentage of net revenue was 1.1% in both the 2021 Six Months and 2020 Six Months.

Our provision for credit losses for patient accounts receivable as a percentage of total patient accounts receivable was 5.1% at June 30, 2021, as compared to 4.5% at December 31, 2020.

Our days’ sales outstanding were 32 days at June 30, 2021 and December 31, 2020.

Gross profit for the 2021 Six Months, excluding closure costs, was $60.2 million, an increase of $21.4 million, or approximately 55.1%, as compared to $38.8 million for the 2020 Six Months.

The gross profit percentage, excluding closure costs, was 25.2% of net revenue for the 2021 Six Months, an increase of 550 basis points as compared to 19.7% for the 2020 Six Months.

The gross profit percentage for the Company’s physical therapy clinics, excluding closure costs, was 25.3% for the 2021 Six Months, an improvement of 610 basis points as compared to 19.2% for the 2020 Six Months.

The gross profit percentage on physical therapy management contracts was 16.0% for the 2021 Six Months, a decrease of 450 basis points as compared to 20.5% for the 2020 Six Months.

The gross profit percentage for the industrial injury prevention business was 26.3% for the 2021 Six Months, an improvement of 150 basis points as compared to 24.8% for the 2020 Six Months.

The table below details the gross profit, excluding closure costs (in thousands):

For the Six Months Ended

June 30, 2021

June 30, 2020

Gross profit, excluding closure costs:

Physical therapy operations

Management contracts

Industrial injury prevention services

Gross profit, excluding closure costs

Physical therapy operations - closure costs

Corporate Office Costs

Corporate office costs were $22.9 million for the 2021 Six Months compared to $20.7 million for the 2020 Six Months.

Corporate office costs were 9.6% of net revenues for the 2021 Six Months as compared to 10.5% for the 2020 Six Months.

The increase in costs was primarily due to higher salaries and benefits for the 2021 Six Months compared to the 2020 Six Months.

The 2020 Six Months included salary reductions and furloughs related to the COVID-19 pandemic.

Operating Income

Operating income for the 2021 Six Months was $37.3 million, an increase of $23.0 million, or 160.9%, as compared to $14.3 million for the 2020 Six Months.

Operating income as a percentage of net revenue increased by 830 basis points from 7.3% for the 2020 period to 15.6% for the 2021 period.

Interest Expense

Interest expense was $483,000 for the 2021 Six Months and $1.1 million for the 2020 Six Months due to reduced borrowings under the Company’s revolving credit line.

At June 30, 2021, $38.0 million was outstanding under our Amended Credit Agreement (as defined below).

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

Provision for Income Taxes

The provision for income tax was $7.5 million for the 2021 Six Months and $4.2 million for the 2020 Six Months.

The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 26.7% for the 2021 Six Months and 27.1% for the 2020 Six Months.

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

Six Months Ended

June 30, 2021

June 30, 2020

Income before taxes

net income attributable to non-controlling interests:

Redeemable non-controlling interests - temporary equity

Non-controlling interests - permanent equity

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

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Net Income Attributable to Non-controlling Interests

Net income attributable to redeemable non-controlling interests (temporary equity) was $2.5 million in the 2021 First Quarter and $1.8 million in the 2020 First Quarter.

Net income attributable to non-controlling interests (permanent equity) was $1.3 million in the 2021 First Quarter and $0.5 million in the 2020 First Quarter.

Net income attributable to redeemable non-controlling interests (temporary equity) was $6.6 million for the 2021 Six Months and $4.8 million for the 2020 Six Months.

Net income attributable to non-controlling interests (permanent equity) was $2.7 million for the 2021 Six Months and $2.1 million for the 2020 Six Months.

LIQUIDITY AND CAPITAL RESOURCES

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

At March 31, 2021 and December 31, 2020, we had $17.9 million and $32.9 million, respectively, in cash.

We believe that our cash and cash equivalents and availability under our revolving credit facility are sufficient to fund the working capital needs of our operating subsidiaries through at least March 31, 2022.

Cash and cash equivalents decreased by $15.0 million from December 31, 2020 to March 31, 2021.

During the 2021 First Quarter, $17.7 million was provided by operations.

At June 30, 2021 and December 31, 2020, we had $20.4 million and $32.9 million, respectively, in cash.

Cash and cash equivalents decreased by $12.5 million from December 31, 2020 to June 30, 2021.

During the 2021 Six Months, $35.6 million was provided by operations and $22.0 million from proceeds on our Amended Credit Agreement (described below).

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

repayment of MAAPP funds ($14.0 million), distributions to non-controlling interests inclusive of those classified as redeemable non-controlling interests ($5.3 million), purchase of business ($11.7 million), and purchase of fixed assets ($1.6 million).

repayment of MAAPP funds ($14.1 million), distributions to non-controlling interests inclusive of those classified as redeemable non-controlling interests ($9.4 million), cash dividends to our shareholders ($9.0 million), purchase of business and non-controlling interests ($29.9 million), principal payments on notes payable ($4.2 million) and purchase of fixed assets ($3.3 million).

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

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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 the our common stockholders, capital expenditures and other corporate purposes.

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 of 0.3% of the amount of funds outstanding under the Amended Credit Agreement.

The 2021 amendment to the Amended Credit Agreement allows 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 the amount we may pay in cash dividends to its shareholders in an aggregate amount not to exceed $50,000,000 in any fiscal year.

The 2021 amendment to the Amended Credit Agreement allows for cash and noncash consideration for acquisitions permitted under the Amended Credit Agreement of up to $50,000,000 for any fiscal year, and allows for payments in cash dividends to shareholders in an aggregate amount not to exceed $50,000,000 in any fiscal year.

The commitment remains at $125 million, however the accordion feature in the agreement was expanded to provide for capacity up to $150 million, and has a maturity date of November 30, 2025.

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.

On 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, we were in compliance with all of the covenants thereunder.

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

The practice is in the process of developing a sixth.

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

As of June 30, 2021, we were in compliance with all of the covenants thereunder.

On June 30, 2021, we 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.

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Our 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 a $0.3 million note payable.

The aggregate purchase price was $11.9 million, of which $11.6 million was paid in cash and $0.3 million in a note payable.

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

8 unchanged sentences

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

Our outstanding notes payable as of March 31, 2021 relate to certain of the acquisitions of businesses and purchases of redeemable non-controlling interests that occurred in 2018 through March 2021.

Our outstanding notes payable as of June 30, 2021 relate to certain of the acquisitions of businesses and purchases of redeemable non-controlling interests that occurred in 2018 through June 2021.

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

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

At March 31, 2021, the balance on these notes payable was $5.7 million.

At June 30, 2021, the balance on these notes payable was $1.8 million.

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

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

As of March 31, 2021, we have accrued $5.8 million related to credit balances due to patients and payors.

As of June 30, 2021, we have accrued $5.6 million related to credit balances due to patients and payors.

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

4 unchanged sentences

There is no expiration date for the share repurchase program.

As of March 31, 2021, 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 our cash position.

We did not purchase any shares of our common stock during the three months ended March 31, 2021.

As of June 30, 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 our cash position.

We did not purchase any shares of our common stock during the three months ended June 30, 2021.

FACTORS AFFECTING FUTURE RESULTS

36 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis