What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-08 · 418 added, 322 removed, 773 unchanged (49% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS )

March 31, 2024

June 30 , 2024

December 31, 2023

49 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS )

Three Months Ended

March 31, 2024

March 31, 2023

For the Three Months Ended

June 30, 2024

June 30, 2023

Net patient revenue

23 unchanged sentences

Dividends declared per common share

accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

UNAUDITED CONSOLIDATED STATEMENTS

COMPREHENSIVE INCOME

(IN THOUSANDS)

Three Months Ended

March 31, 2024

March 31, 2023

Other comprehensive gain (loss):

Unrealized gain (loss) on cash flow hedge

For the Three Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Other comprehensive ( loss ) gain:

Unrealized (loss) gain on cash flow hedge

Tax effect at statutory rate (federal and state)

2 unchanged sentences

Comprehensive income attributable to USPH shareholders

accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

PHYSICAL THERAPY, INC.

2 unchanged sentences

(IN THOUSANDS)

Three Months Ended

March 31, 2024

March 31, 2023

For the Six Months Ended

June 30 , 2024

June 30 , 2023

OPERATING ACTIVITIES

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Increase in accounts receivable - other

(Decrease) increase in other current and long term assets

Decrease in accounts payable and accrued expenses

Increase (decrease) in other long-term liabilities

(Increase) decrease in other current and long term assets

(Decrease) increase in accounts payable and accrued expenses

Increase in other long-term liabilities

Net cash provided by operating activities

5 unchanged sentences

Proceeds on sale of non-controlling interest, permanent equity

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

Proceeds on sale of partnership interest - redeemable non-controlling interest

Distributions from unconsolidated affiliate

Proceeds on sale of fixed assets

Net cash used in investing activities

1 unchanged sentence

Proceeds from revolving facility

Proceeds from issuance of common stock pursuant to the secondary public offering, net of issuance costs

Distributions to non-controlling interest, permanent and temporary equity

Cash dividends paid to shareholders

Principal payments on notes payable

Payments on term loan

Payments on revolving facility

Net cash (used in) provided by financing activities

7 unchanged sentences

Purchase of interest in businesses - seller financing portion

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

Deferred payments related to purchase of interest in business

Fair market value of initial contingent consideration related to purchase of interest of businesses

Offset of notes receivable associated with purchase of redeemable non-controlling interest

Notes payable related to purchase of non-controlling interest, temporary equity

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

Notes receivable related to sale of redeemable non-controlling interest, temporary equity

Notes receivable related to the sale of non-controlling interest, permanent equity

Dividends payable to USPH shareholders

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

1 unchanged sentence

AND SUBSIDIARIES

UNAUDITED CONSOLIDATED

STATEMENTS OF CHANGES IN EQUITY

UNAUDITED CONSOLIDATED STATEMENTS OF

(IN THOUSANDS)

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Non-Controlling

For the three months ended June 30, 2024

Paid-In Capital

Comprehensive Gain

Balance December 31, 2023

Balance March 31, 2024

Net income attributable to USPH shareholders

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Purchase of partnership interests - non-controlling interest

Dividends payable to USPH shareholders

Dividends paid to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

1 unchanged sentence

Other comprehensive gain

Transfer of RNCI due to separation agreement

Balance June 30, 2024

U .S.Physical Therapy, Inc.

Accumulated Other

Treasury Stock

Total Shareholders’

Non-Controlling

For the six months ended June 30, 2024

Paid-In Capital

Comprehensive Loss

Balance December 31, 2023

Net income attributable to USPH shareholders

Net income attributable to non-controlling interest - permanent equity

Issuance of restricted stock, net of cancellations

Revaluation of redeemable non-controlling interest, net of tax

Compensation expense - equity-based awards

Sale of non-controlling interest

Purchase of partnership interests - non-controlling interest

Dividends paid to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

Deferred taxes related to redeemable non-controlling interest - temporary equity

Other comprehensive gain

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

Transfer of RNCI due to separation agreement

Balance June 30, 2024

U.S.Physical Therapy, Inc.

Accumulated Other

Treasury Stock

Total Shareholders’

Non-Controlling

For the three months ended June 30, 2023

Paid-In Capital

Comprehensive Gain

Balance March 31, 2023

Net income attributable to USPH shareholders

Net income attributable to non-controlling interest - permanent equity

Issuance of restricted stock, net of cancellations

Issuance of common stock, pursuant to the secondary public offering, net of issuance costs

Revaluation of redeemable non-controlling interest

Compensation expense - equity-based awards

Purchase of partnership interests - non-controlling interest

Dividends paid to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

Deferred taxes related to redeemable non-controlling interest - temporary equity

Other comprehensive gain

Balance June 30, 2023

U.S.Physical Therapy, Inc.

3 unchanged sentences

Non-Controlling

For the six months ended June 30, 2023

Paid-In Capital

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Issuance of restricted stock, net of cancellations

Issuance of common stock, pursuant to the secondary public offering, net of issuance costs

Revaluation of redeemable non-controlling interest, net of tax

Compensation expense - equity-based awards

Dividends payable to USPH shareholders

Purchase of partnership interests - non-controlling interest

Dividends paid to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

1 unchanged sentence

Other comprehensive gain

Balance March 31, 2023

Balance June 30, 2023

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

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Physical Therapy, Inc.

and its subsidiaries (the “Company”) operates its business through two reportable business segments.

Company’s reportable segments include the physical therapy operations segment and the industrial injury prevention services (“IIP”) segment.

The Company’s physical therapy operations consist of physical therapy and occupational therapy clinics

that provide pre-and post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries.

Services provided by the IIP segment include onsite

injury prevention and rehabilitation, performance optimization and ergonomic assessments.

As of March 31, 2024,

and its subsidiaries (the “Company”) operates its business through two reportable business segments which

include the physical therapy operations segment and the industrial injury prevention services (“IIP”) segment.

The Company’s physical therapy operations consist of physical therapy and occupational therapy clinics that provide pre-and

post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries.

Services provided by the IIP segment include onsite injury prevention and

rehabilitation, performance optimization and ergonomic assessments.

As of June 30, 2024,

the Company operated 681 clinics in 42

In addition to the 679 clinics, the Company also managed 41 physical therapy practices for unrelated physician groups and hospitals as of March 31, 2024.

D uring the three months ended March 31, 2024, and for the year-ended December

In addition to the 681 clinics, the Company also managed 41 physical therapy practices for unrelated physician groups and hospitals as of June 30, 2024.

D uring the six months ended June 30, 2024, and for the year-ended December 31,

2023, the Company completed the acquisitions of the following clinic practices and IIP businesses:

April 2024 Acquisition

April 30, 2024

March 2024 Acquisition

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IIP business.

On October 31, 2023, the Company concurrently acquired 100 % of an IIP business and a 55 % equity

interest in an ergonomics software business.

On April 30, 2024, one

of the Company’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an IIP business.

On October 31, 2023, the Company concurrently acquired 100 % of an IIP business and a 55 %

equity interest in an ergonomics software business.

Basis of Presentation

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impact an impairment assessment, necessitating an impairment charge.

The Company evaluates indefinite-lived tradenames in conjunction with its annual goodwill impairment test.

The Company operates its business through two

segments consisting of physical therapy operations and IIP.

The reporting units within the Company’s physical therapy business are comprised of six regions primarily based on each clinic’s location.

evaluates indefinite-lived tradenames in conjunction with its annual goodwill impairment test.

The reporting units within the Company’s physical

therapy business are comprised of six regions primarily based on each clinic’s location.

The IIP business consists of two reporting units.

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reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit.

For the three months ended March 31, 2024, no triggering events or indicators were identified that would require impairment assessments for such period.

During the three and twelve months ended December 31, 2023, the Company recorded a

charge of $ 15.8 million for goodwill impairment and a charge of $ 1.7 million for impairment of a tradename.

For the three and six months ended June 30, 2024, no triggering events or indicators were identified that would require impairment assessments for such period.

During the three and twelve months ended December 31, 2023, the Company

recorded a charge of $ 15.8 million for goodwill impairment and a charge of $ 1.7 million for impairment of a tradename.

The charges for impairment were related to one reporting unit in the IIP business.

The impairment is related to a change in the reporting unit’s

current and projected operating income as well as various market inputs based on current market conditions.

The impairment is related to a change in the

reporting unit’s current and projected operating income as well as various market inputs based on current market conditions.

The Company did no t

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Typically, revenue is determined based on the number of visits conducted at the clinic and recognized at a point in time when services are performed.

Costs, typically salaries for the Company’s employees, are recorded when incurred.

Management contract revenue was $ 2.4 million and $ 1.8 million for the three months ended March 31, 2024, and March 31, 2023, respectively.

Costs, typically consisting of salaries , are recorded when incurred.

Management contract revenue was $ 2.4 million and $ 2.2 million for the three months ended

June 30, 2024 and June 30, 2023, respectively, and was $ 4.8 million and $ 3.9 million for the six months ended June 30, 2024 and June 30, 2023, respectively.

Additionally, other revenue from physical therapy

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The Company’s billing system does not capture the exact change in its contractual allowance reserve estimate from period

to period in order to assess the accuracy of its revenues and hence its contractual allowance reserves.

Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a

clinic-by-clinic basis.

In the aggregate, historically the difference between net revenues and corresponding cash collections for any fiscal year has generally reflected a difference within approximately 1.0 % to 1.5 % of net revenues.

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 % on each balance sheet date.

In order to assess the accuracy of its revenues.

Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis.

In the aggregate, historically the

difference between net revenues and corresponding cash collections for any fiscal year has generally reflected a difference between approximately 1.0 %

to 1.5 % of net revenues.

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 %

on each balance sheet date.

Allowance for Credit Losses

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settlement with the relevant tax authority.

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, 2024, and March 31, 2023.

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

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 and six months ended June 30, 2024, and June 30, 2023.

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

Fair Value of Financial Instruments

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The interest rate on the Credit Agreement is tied to the Secured Overnight Financing Rate (“SOFR”).

The put right associated with the potential

future purchase of the separate company in an IIP acquisition in 2027 is marked to fair value on a recurring basis using Level 3 inputs.

The put right associated with the potential future purchase of the separate company is determined using a

Monte Carlo simulation model utilizing unobservable inputs such as asset volatility and discount rates.

The unobservable inputs used in the valuation of the put right as of March 31, 2024, include asset volatility of 25.0 % and a discount rate of 11.6 %.

The value of this put right increased $ 80.0 thousand for the three months ended March 31, 2024.

The put right was valued at

approximately $ 1.0 million on March 31, 2024, and December 31, 2023.

The valuations of the Company’s interest rate derivative is measured as the present value of all expected future cash flows based on SOFR-based yield curves.

The put right expiring in 2027 is associated

with the potential future purchase of a separate company within the Company’s IIP business.

It is marked to fair value on a recurring basis using Level 3 inputs.

In determining the value of the put right as of June 30 , 2024 , the Company used a Monte Carlo simulation model utilizing unobservable inputs including asset volatility of 20.0 % and a discount rate of 11.69 %.

The value of this put

right increased $ 0.2 million for the three months ended June 30, 2024 , and increased $ 0.3

million for the six months ended June 30 , 2024 .

The put right

was valued at approximately $ 1.2 million on June 30, 2024, and approximately $ 1.0 million on December 31, 2023.

The valuation of the Company’s interest rate derivative is measured as the present value of all expected future cash flows based on SOFR-based yield curves.

The present value calculation uses discount rates that have been adjusted to

reflect the credit quality of the Company and its counterparty, which is a Level 2 fair value measurement.

The fair value of the interest rate swap on March 31, 2024, was $ 5.5 million, of which $ 3.0 million has been included within

Other current assets and $ 2.5 million has been included in Other assets in the accompanying unaudited Consolidated Balance Sheet.

impact of the interest rate swap on the accompanying unaudited Consolidated Statements of Comprehensive Income was an unrealized gain of $ 1.3

million, net of tax, for the three months ended March 31, 2024.

See Note 9 for more information on the Company’s interest rate derivative.

1 unchanged sentence

See Note 4 for the changes in the fair value of Redeemable non-controlling interest.

The consideration for some of the Company’s acquisitions includes future payments that are contingent upon the occurrence of future operational objectives being met.

The Company estimates the fair value of contingent consideration

obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates.

These fair value measurements are based on significant inputs not

observable in the market.

The consideration for some of the Company’s acquisitions includes future payments that are contingent upon the occurrence of future operational or financial objectives being met.

The Company estimates the fair value of contingent

consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates.

These fair value measurements are based on significant

inputs not observable in the market.

The unobservable inputs used in the valuation of the contingencies as of June 30 , 2024 , include asset

volatility of 15.0 % and a discount rate of 7.1 %.

Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.

Accordingly, changes in assumptions could have a material impact on the

amount of contingent consideration expense the Company records in any given period.

The Company determined the fair value of its contingent consideration obligations to be $ 10.8 million on March 31, 2024, and $ 12.5 million on December

Accordingly, changes in assumptions

could have a material impact on the Company ’s financial position or

results of operations in any given period.

The Company determined the fair value of its contingent consideration obligations to be $ 17.2

million on June 30, 2024, and $ 12.5 million on December 31, 2023.

Restricted Stock

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quarterly installments during the first year after the date of grant.

For those granted to officers, the restriction will lapse in

equal quarterly installments during the four years following the date of grant.

Compensation expense for grants of restricted stock is

recognized based on the fair value per share on the date of grant amortized over the vesting period.

For those granted to officers and certain other key employees,

the restriction will lapse in equal quarterly installments during the four years following the date of grant.

Compensation expense for

grants of restricted stock is recognized based on the fair value per share on the date of grant amortized over the vesting period.

The Company recognizes any forfeitures as they occur.

The restricted stock issued is included in basic and diluted shares for the earnings per

share computation.

The restricted stock issued is included in basic and diluted

shares for the earnings per share computation.

New Accounting Pronouncements

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Common Control Arrangements, which requires companies to amortize leasehold improvements associated with related party leases under common control over the useful life of the leasehold improvement to the common control group.

effective for annual reporting periods beginning on or after December 15, 2023;

effective for annual reporting periods beginning on or after D ecember 15, 2023;

however, early adoption is permitted.

The ASU can either be applied prospectively or retrospectively.

The adoption of ASU 2023-01 did not have a material effect on the

Company’s financial statements.

In November 2023, the FASB issued ASU 2023-07 Segment

Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which requires disclosure on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker and included within

the reported measure of segment profit or loss.

In addition, the ASU requires disclosure of other segment expenses by reportable segment and a description of their composition to permit the reconciliation between segment revenue, significant

segment expenses and the reported segment measure of profit or loss.

The ASU also requires disclosure of the name and title of the chief operating decision maker.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and

interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted.

The adoption of ASU 2023-01 did not have a material effect on the Company’s financial statements.

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which

requires disclosure on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker and included within the reported measure of segment profit or loss.

In addition, the ASU

requires disclosure of other segment expenses by reportable segment and a description of their composition to permit the reconciliation between segment revenue, significant segment expenses and the reported segment measure of profit or loss.

ASU also requires disclosure of the name and title of the chief operating decision maker.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and

early adoption is permitted.

The Company is currently evaluating the impact of this accounting standard on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires disclosure on an annual basis, a tabular reconciliation, including both amount and percentage of specific

categories of the effective tax rate reconciliation, including state and local income taxes (net of Federal taxes), foreign taxes, effects of changes in tax laws and regulations, effects of cross-border tax laws, tax credits, changes in valuation

allowances, nontaxable and nondeductible items and changes in unrecognized tax benefits.

Additional disclosures are required for certain items exceeding five percent of income from continuing operations multiplied by the statutory income tax

The standard also requires disclosure of income taxes paid between Federal, state and foreign jurisdictions, including further disaggregation of those payments exceeding five percent of the total income taxes paid.

ASU 2023-09 is effective

for fiscal years beginning after December 15, 2024, and early adoption is permitted.

In December 2023, the FASB issued ASU 2023-09 Income Taxes

Improvements to Income Tax Disclosures, which requires disclosure on an annual basis, a tabular reconciliation, including both amount and percentage of specific categories of the effective tax rate reconciliation, including state and

local income taxes (net of Federal taxes), foreign taxes, effects of changes in tax laws and regulations, effects of cross-border tax laws, tax credits, changes in valuation allowances, nontaxable and nondeductible items and changes in unrecognized

tax benefits.

Additional disclosures are required for certain items exceeding five percent of income from continuing operations multiplied by the statutory income tax rate.

The standard also requires disclosure of income taxes paid between Federal,

state and foreign jurisdictions, including further disaggregation of those payments exceeding five percent of the total income taxes paid.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted.

The Company is currently evaluating the impact of this accounting standard on its consolidated financial statements.

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The restricted stock the Company grants are participating securities containing non-forfeitable rights to receive dividends.

Accordingly, any unvested restricted stock is included in the basic and diluted earnings per

share computation.

Additionally, in accordance with current accounting guidance, the revaluation of redeemable non-controlling interest (see Note 4 Redeemable Non-Controlling Interest), net of tax, charged directly to retained earnings is included in

the earnings per basic and diluted share calculation.

The computation of basic and diluted earnings per share are as follows.

Three Months Ended

March 31, 2024

March 31, 2023

Accordingly, any unvested shares of restricted stock is included in the basic and diluted

earnings per share computation.

is included in the earnings per basic and diluted share calculation.

The computation of basic

and diluted earnings per share are as follows.

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

(In thousands, except per share data)

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Acquisitions of Businesses

The Company’s strategy is to continue acquiring multi-clinic outpatient physical therapy practices, to develop outpatient physical therapy clinics as satellites in existing

partnerships and to continue acquiring companies that provide and serve the IIP sector.

The consideration paid for each acquisition is derived through arm’s length negotiations and funded through working capital, borrowings under the Company’s

revolving credit facility or proceeds from completed secondary equity offerings.

The purchase price plus the fair value of the non-controlling interest for the acquisitions after March 31, 2023, were allocated to the fair value of the assets acquired, inclusive of

The Company’s strategy is to continue acquiring outpatient physical therapy practices, to develop outpatient physical therapy clinics as satellites in existing partnerships and to

continue acquiring companies that provide and serve the IIP sector.

The consideration paid for each acquisition is derived through arm’s length negotiations and funded through working capital, borrowings under the Revolving Facility (as defined in

Borrowings) or proceeds from the secondary equity offering completed in May 2023.

The purchase price plus the fair value of the non-controlling interest for the acquisitions after June 30, 2023, were allocated to the fair value of the assets acquired, inclusive of

identifiable intangible assets (i.e.

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Thus, the final

allocation of the purchase price may differ from the preliminary estimates used on March 31, 2024, based on additional information obtained and completion of the valuation of the identifiable intangible assets.

allocation of the purchase price may differ from the preliminary estimates used on June 30, 2024, based on additional information obtained and completion of the valuation of the identifiable intangible assets.

Changes in the estimated valuation of

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Unaudited proforma consolidated financial information for the

acquisitions have not been included, as the results, individually and in the aggregate, were not material to current operations.

During the three months ended March 31, 2024, the Company acquired a majority interest in the following businesses:

acquisitions has not been included, as the results, individually and in the aggregate, were not material to current operations.

2024 Acquisitions

April 2024 Acquisition

April 30, 2024

March 2024 Acquisition

March 29, 2024

IIP business.

On April 30 , 2024, one of the Company ’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an

IIP business.

On April 30, 2024 , the Company acquired 100 % of an IIP business through one of its primary IIP businesses, Briotix Health Limited Partnership, for a purchase price of approximately $ 24.0 million, of which $ 0.5 million was in the form of a note

The note accrues interest at 5.0 % per annum and the principal and the interest are payable on May 1, 2025.

As part of the

transaction, the Company agreed to additional contingent consideration if future operational objectives are met by the business.

There is no maximum payout.

The contingent consideration was valued at $ 2.1 million as of June 30, 2024.

On March 29, 2024, the Company acquired a 50 % equity interest in a nine -clinic

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As part of the transaction, the Company agreed to additional

contingent consideration if future operational objectives are met.

contingent consideration if future operational and financial objectives are met.

There is no maximum payout.

The contingent consideration is valued at $ 0.5

million as of March 31, 2024.

Besides the multi-clinic acquisition referenced above, the Company purchased the assets and business of two physical therapy clinics, which were tucked into larger partnerships in separate transactions.

The contingent consideration was valued at $ 0.5

million on June 30, 2024.

Besides the multi-clinic acquisition referenced above, the Company purchased the assets and business of three physical therapy clinics, which were tucked into larger partnerships in separate transactions.

The following table provides details on the preliminary purchase price

allocation for the acquisitions described above.

Physical Therapy

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September 29, 2023, the Company acquired a 70 % equity interest in a four -clinic physical therapy practice.

The original owner of the practice retained 30 %

of the equity interests.

The purchase price for the 70 % equity interest was approximately $ 6.0 million, of which $ 5.4 million was paid in cash, and $ 0.6 million was in the form of a note payable.

The note accrues interest at 5.0 % per annum and the principal and interest are payable in two

installments.

The first payment of principal and interest of $ 0.3 million was paid in January 2024 and the second installment of $ 0.3 million is due on September 30, 2025.

The original owner of the practice retained 30 % of the equity interests.

The purchase price for the 70 % equity interest was approximately $ 6.0 million, of which $ 5.4 million

was paid in cash, and $ 0.6 million was in the form of a note payable.

The note accrues interest at 5.0 % per annum and the principal and interest are payable in two installments.

The first payment of principal and interest of $ 0.3 million was paid in January

2024 and the second installment of $ 0.3 million is due on September 30, 2025.

In a separate transaction, on September 29, 2023, the Company acquired a 70 %

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On July 31, 2023, the Company acquired a 70 % equity interest in a five -clinic practice.

The practice’s owners retained

a 30 % equity interest.

The practice’s

owners retained a 30 % equity interest.

The purchase price for the 70 % equity interest was approximately $ 2.1 million, of which $ 1.8 million was paid in cash and $ 0.3

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The purchase price for the 75 % equity interest was approximately $ 3.1 million, of which $ 1.7 million was paid in cash by the

Company, $ 1.1 million was paid in cash by the local partner, and $ 0.3 million was in the form of a note payable, (of which $ 0.2 million will be

paid by the Company and $ 0.1 million will be paid by the local partner).

The note will be paid on July 1, 2024.

The Company guaranteed

full payment of $ 0.3 million on its due date.

Company, $ 1.1 million was paid in cash by the local partner, and $ 0.3 million was in the form of a note payable.

The note was paid in full on July 1, 2024 ($ 0.2 million was paid by the Company and $ 0.1 million was paid by the local partner).

On February 28, 2023, the Company acquired an 80 % interest in a one -clinic physical therapy practice.

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The consideration for the Acquisition is primarily payable in the form of cash at closing and a two-year note in lieu of an escrow (the “Purchase Price”).

The Purchase Agreement does not contain any future earn-out or other contingent consideration that is payable to the Seller

Entity or the Selling Shareholders.

The Purchase Agreement does not contain any future earn-out or other contingent consideration that is payable

to the Seller Entity or the Selling Shareholders.

The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the

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of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“Seller Entity Interest”).

In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that

ranges from three to five years

(the “Employment Term”), with automatic one-year renewals, unless employment is terminated prior to the end of the Employment

In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial

term that ranges from three to five years (the “Employment Term”), with automatic one-year renewals, unless employment is terminated prior to the

end of the Employment Term.

As a result, a Selling Shareholder becomes an employee (“Employed Selling Shareholder”) of NewCo.

The employment of an Employed Selling Shareholder can be terminated by the Employed Selling Shareholder or NewCo, with or without cause,

The employment of an Employed Selling Shareholder can be terminated by the Employed Selling Shareholder or NewCo,

with or without cause, at any time.

In a few situations, a Selling Shareholder does not become employed by NewCo and is not involved with NewCo following the closing;

in those situations, such Selling Shareholders sell their entire ownership interest in the Seller

Entity as of the closing of the Acquisition.

in those situations, such Selling Shareholders sell their entire ownership

interest in the Seller Entity as of the closing of the Acquisition.

The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities

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The Non-Compete Agreement applies to a restricted region which is a defined mileage radius from the Therapy Practice.

That is, an Employed Selling Shareholder is

permitted to engage in competing Therapy Practices or activities outside the designated geography (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is

permitted to engage in the competing Therapy Practice or activities outside the designated geography.

That is, an Employed Selling Shareholder is permitted to engage in

competing Therapy Practices or activities outside the designated geography (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in

the competing Therapy Practice or activities outside the designated geography.

The Partnership Agreement contains provisions for the redemption of the Seller Entity Interest, either at the option of the Company (the “Call Right”) or at the option

of the Seller Entity (the “Put Right”) as follows:

In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to the fifth anniversary of the Closing Date, the Seller

Entity thereafter may have an irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

In the event that any Selling Shareholder is not employed by NewCo as of the fifth anniversary of the Closing Date and the Company has not exercised its Call

Right with respect to the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter shall have the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling

Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Seller

Entity has the Put Right, and upon the exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

If any Selling Shareholder’s employment by NewCo is terminated prior to the fifth anniversary of the Closing Date, the Company thereafter has an irrevocable

right to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below.

In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Company

has the Call Right, and upon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings

before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”).

NewCo’s earnings are distributed monthly based on

available cash within NewCo;

In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified anniversary of the Closing Date, the Seller Entity thereafter may

have an irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

In the event that any Selling Shareholder is not employed by NewCo as of a specified anniversary of the Closing Date and the Company has not exercised its Call Right with respect to the

Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter shall have the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable

Percentage of Seller Entity’s Interest at the purchase price described in “3” below.

In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after a specified of the Closing Date, the Seller Entity has the Put Right, and upon

the exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

If any Selling Shareholder’s employment by NewCo is terminated prior to a specified anniversary of the Closing Date, the Company thereafter has an irrevocable right to purchase from

Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below.

In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after a specified anniversary of the Closing Date, the Company has the Call Right, and

upon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below.

For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes,

depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”).

NewCo’s earnings are distributed monthly based on available cash within

therefore, the undistributed earnings amount is small, if any.

The Purchase Price for the initial equity interest purchased by the Company , also based on

the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and the Call Right noted above.

The Put Right and the Call Right do not have an expiration date, and the Seller Entity Interest is not required to be purchased by the Company or sold by the

Seller Entity unless either the Put Right or the Call Right is exercised.

The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling

Shareholders sell their entire ownership interest in the Seller Entity at the closing of the Acquisition.

ProgressiveHealth Acquisition

On November 30, 2021, the Company acquired a majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest

in certain subsidiaries (“Progressive Subsidiaries”) that operate in the IIP businesses.

The Progressive transaction was completed in a series of steps which are described below.

Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual

owners (the “ Progressive Selling Shareholders”), who work in and manage the Progressive business.

In conjunction with the acquisition, the Progressive Selling Shareholders caused the Progressive Parent to transfer its ownership of the

Progressive Subsidiaries into a newly-formed limited liability company (“Progressive NewCo”), in exchange for one hundred percent ( 100 %)

of the membership interests in Progressive NewCo.

The Purchase Price for the initial equity interest purchased by the Company, also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right

and the Call Right noted above.

The Put Right and the Call Right do not have an expiration date, and the Seller Entity Interest is not required to be purchased by the Company or sold by the Seller Entity unless either

the Put Right or the Call Right is exercised.

The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire

ownership interest in the Seller Entity at the closing of the Acquisition.

ProgressiveHealth

On November 30, 2021,

the Company acquired a majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest in certain subsidiaries (“Progressive Subsidiaries”) that operate in the IIP business.

The Progressive transaction was

completed in a series of steps which are described below.

Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual owners (the “Progressive Selling Shareholders”),

who work in and manage the Progressive business.

In conjunction with the acquisition, the Progressive Selling Shareholders caused the Progressive Parent to transfer its ownership of the Progressive Subsidiaries into a newly-formed

limited liability company (“Progressive NewCo”), in exchange for one hundred percent ( 100 %) of the membership interests in

Progressive NewCo.

Therefore, in this step, Progressive NewCo became wholly-owned by the Progressive Selling Shareholders.

The Company entered into an agreement (the “Progressive Purchase Agreement”) to acquire from the Progressive Selling Shareholders a

majority of the membership interest in Progressive NewCo.

The consideration for the acquisition is primarily payable in the form of cash at closing, a relatively small portion paid in cash after the closing contingent on certain

performance criteria, and a small note in lieu of an escrow (the “Progressive Purchase Price”).

The Company and the Progressive Selling Shareholders also executed an operating agreement (the “Progressive Operating Agreement”)

for Progressive NewCo that sets forth the rights and obligations of the members of Progressive NewCo.

As noted above, the Company did not purchase 100 % of the membership interests in Progressive NewCo and the Progressive Selling Shareholders retained a portion of the membership interest in Progressive NewCo (“Progressive Selling Shareholders’

The Company and the Progressive Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”)

which restricts the Progressive Selling Shareholders from competing for a specified period of time (the “Progressive Non-Compete Term”).

The Company entered into an agreement (the “Progressive Purchase Agreement”) to acquire from the Progressive Selling Shareholders a majority of the membership interest in Progressive

The consideration for the acquisition is primarily payable in the form of cash at closing, a relatively small portion paid in cash after the closing contingent on certain performance criteria, and a small note in lieu of an escrow

(the “Progressive Purchase Price”).

The Company and the Progressive Selling Shareholders also executed an operating agreement (the “Progressive Operating Agreement”) for Progressive NewCo that sets forth the rights and

obligations of the members of Progressive NewCo.

As noted above, the Company did not purchase 100 % of the membership

interests in Progressive NewCo and the Progressive Selling Shareholders retained a portion of the membership interest in Progressive NewCo (“Progressive Selling Shareholders’ Interest”).

The Company and the Progressive Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”) which restricts the Progressive Selling Shareholders from

competing for a specified period of time (the “Progressive Non-Compete Term”).

The Progressive Non-Compete Term commences as of the date of the Progressive acquisition and expires on the later of:

Two years after the date

a Progressive Selling Shareholder no longer is involved in the management of Progressive NewCo or

Seven years from the

date of the acquisition.

Two years after the date a Progressive Selling Shareholder no longer is

involved in the management of Progressive NewCo or

Seven years from the date of the acquisition.

The Progressive Non-Compete Agreement applies to the entire United States.

The Progressive Put Right (as defined below) and the Progressive Call Right (as defined below) do not have an expiration

The Progressive Operating Agreement contains provisions for the redemption of the Progressive Selling Shareholder’s Interest, either at the option of the Company (the “Progressive Call Right”) or at the option of the

Progressive Selling Shareholder (the “Progressive Put Right”) as follows:

The Progressive Put Right (as defined below) and the Progressive Call Right (as defined below) do not have an expiration date.

The Progressive Operating Agreement contains provisions

for the redemption of the Progressive Selling Shareholder’s Interest, either at the option of the Company (the “Progressive Call Right”) or at the option of the Progressive Selling Shareholder (the “Progressive Put Right”) as follows:

Progressive Put Right

Each of the Progressive Selling Shareholders has the right to sell 30 % of their respective residual interests on each of the 4th and 5th anniversaries of the acquisition closing, and then 10 % on each of the 6th and 7th anniversaries.

In the event that any Progressive Selling Shareholder terminates his management relationship with Progressive NewCo for any

reason on or after the seventh anniversary of the Closing Date, the Progressive Selling Shareholder has the Put Right, and upon the exercise of the Progressive Put Right, the Progressive Selling Shareholder’s Interest shall be

redeemed by the Company at the purchase price described in “3” below.

Each of the Progressive Selling Shareholders has the right to sell 30 %

of their respective residual interests on each of the 4th and 5th anniversaries of the acquisition closing, and then 10 % on

each of the 6th and 7th anniversaries.

In the event that any Progressive Selling Shareholder terminates his management relationship with Progressive NewCo for any reason on or after the seventh anniversary of

the Closing Date, the Progressive Selling Shareholder has the Progressive Put Right, and upon the exercise of the Progressive Put Right, the Progressive Selling Shareholder’s Interest shall be redeemed by the Company at the purchase

price described in “3” below.

Progressive Call Rights

If any Progressive Selling Shareholder’s ceases to perform management services on behalf of Progressive NewCo, the Company

thereafter shall have an irrevocable right to purchase from such Progressive Selling Shareholder his Interest, in each case at the purchase price described in “3” below.

For the Progressive Put Right and the Progressive Call Right, the purchase price is derived from a formula based on a specified

multiple of Progressive NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of

Progressive NewCo.

Progressive NewCo’s earnings are distributed monthly based on available cash within Progressive NewCo; therefore, the undistributed earnings amount is small, if any.

The Progressive Purchase Price for the initial equity interest purchased by the Company is also based on the same specified

multiple of the trailing twelve-month earnings that is used in the Progressive Put Right and the Progressive Call Right noted above.

If any Progressive Selling Shareholder’s ceases to perform management services on behalf of Progressive NewCo, the Company thereafter shall have an irrevocable right to

purchase from such Progressive Selling Shareholder his Interest, in each case at the purchase price described in “3” below.

For the Progressive Put Right and the Progressive Call Right, the purchase price is derived from a formula based on a specified multiple of Progressive NewCo’s

trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of Progressive NewCo.

Progressive NewCo’s

earnings are distributed monthly based on available cash within Progressive NewCo; therefore, the undistributed earnings amount is small, if any.

The Progressive Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month

earnings that is used in the Progressive Put Right and the Progressive Call Right noted above.

The Progressive Put Right and the Progressive Call Right do not have an expiration date.

Neither the Progressive Operating Agreement nor the Progressive Non-Compete Agreement contain any provision to escrow or “claw back” the equity

interest in Progressive NewCo held by the Progressive Selling Shareholders, in the event of a breach of the operating agreement or non-compete terms, or the management services agreement pursuant to which the Progressive Selling Shareholders

perform services on behalf of Progressive NewCo.

Neither the Progressive Operating Agreement nor the Progressive Non-Compete Agreement contain any provision to escrow or “claw back” the equity interest in Progressive

NewCo held by the Progressive Selling Shareholders, in the event of a breach of the operating agreement or non-compete terms, or the management services agreement pursuant to which the Progressive Selling Shareholders perform services on behalf of

Progressive NewCo.

The Company’s only recourse against the Progressive Selling Shareholder for breach of any of these agreements is to seek damages and other legal remedies under such agreements.

conditions in any of the arrangements with a Progressive Selling Shareholder that would result in a forfeiture of the equity interest in Progressive NewCo held by a Progressive Selling Shareholder.

There are no conditions in any of the arrangements

with a Progressive Selling Shareholder that would result in a forfeiture of the equity interest in Progressive NewCo held by a Progressive Selling Shareholder.

For both scenarios described above, an Employed Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the

Company’s purchase of its partnership interest in NewCo.

The Employment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling Shareholder,

nor the Seller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms.

More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, such Employed Selling Shareholder does not

forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest.

The Company’s only recourse against the Employed Selling Shareholder for

breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies under such agreements.

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.

The Employment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling

Shareholder, nor the Seller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms.

More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, such Employed Selling Shareholder

does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest.

The Company’s only recourse against the Employed Selling

Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies under such agreements.

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.

Carrying Amounts of Redeemable Non-Controlling Interests

The following table details the changes in the carrying amount (fair value) of the Company’s redeemable non-controlling interests:

Three Months Ended

March 31, 2024

December 31, 2023

The following table

details the changes in the carrying amount (fair value) of the Company’s redeemable non-controlling interests:

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

(In thousands)

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Changes in notes receivable related to redeemable non-controlling interest

Reduction due to separation agreement

Ending balance

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

March 31, 2024

December 31, 2023

June 30, 2024

June 30, 2023

(In thousands)

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The changes in the carrying amount of goodwill consisted of the following:

Three Months Ended

March 31, 2024

Six Months Ended

June 30, 2024

December 31, 2023

4 unchanged sentences

Ending balance

three months ended March 31, 2024 and 2023, no triggering events or indicators were identified that would require impairment assessments as of such periods.

During the year ended December 31, 2023, the Company recorded a charge for goodwill

impairment of $ 15.8 million related to an IIP acquisition.

three and six months ended June 30, 2024, and 2023, no triggering events or indicators were identified that would require impairment assessments as of such periods.

During the year ended December 31, 2023, the Company recorded goodwill impairment

of $ 15.8 million related to a reporting unit in the Company’s IIP business.

Intangible Assets, Net

The Company’s intangible assets, net, consisted of the following:

March 31, 2024

December 31, 2023

As of June 30, 2024

As of December 31, 2023

Accumulated Amortization

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respective estimated useful lives which range from 7.0 to 14.0 years.

Non-compete agreements are amortized over the respective term of the agreements which range from 5.0

to 6.0 years.

For the three months ended March 31, 2024, the weighted average amortization period for customer and referral relationships

was 12.7 years and the weighted average amortization period for non-compete agreements was 5.5 years.

Non-compete agreements are amortized over the respective term of the agreements which range from 5.0 to 6.0 years.

For the six months ended June 30, 2024, the weighted average

amortization period for customer and referral relationships was 12.6 years and the weighted average amortization period for non-compete

agreements was 5.5 years.

During the year ended December 31, 2023, the Company recognized a charge of $ 1.7 million related to the impairment of a tradename related to an IIP acquisition.

The following table details the amount of amortization expense recorded for intangible assets for the periods presented:

Three Months Ended

March 31, 2024

March 31, 2023

The following table details the amount of amortization expense recorded for

intangible assets for the periods presented:

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

(In thousands)

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Non-compete agreements

Based on the balance of referral relationships and non-compete agreements as of

March 31, 2024, the expected amount to be amortized in 2024 and thereafter by year is as follows:

Based on the balance of referral relationships and non-compete agreements as of June 30, 2024, the expected

amount to be amortized in 2024 and thereafter by year is as follows:

For the Year Ended December 31,

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(In thousands)

(excluding the three months ended March 31, 2024)

(excluding the six months ended June 30, 2024)

Accrued Expenses

Accrued expenses consisted of the following:

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Credit balances due to patients and payors

Dividend payable

Group health insurance claims

2 unchanged sentences

Other property taxes payable

Purchase of redeemable non-controlling interests

Interest payable

2 unchanged sentences

consisted of the following:

March 31, 2024

December 31, 2023

As of June 30, 2024

As of December 31, 2023

debt issuance

50 unchanged sentences

owned material domestic subsidiaries (each, a “Guarantor”), and the obligations of the Company and any Guarantors are secured by a perfected first priority security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions.

As of March 31, 2024, $ 143.4 million was outstanding on the Term Facility while none was outstanding under the Revolving Facility

resulting in $ 175.0 million of credit availability.

As of March 31, 2024, the Company was in compliance with all of the covenants contained in the Credit Agreement.

The interest rate on the Company’s term loan was 4.7 % for the three months ended March 31, 2024, and 4.9 % for the three months ended March 31, 2023, with an all-in effective interest rate, including all associated costs, of 5.3 % and 5.5 % over the same periods,

As of June 30, 2024, $ 142.5 million was outstanding on the Term Facility while none was outstanding under the Revolving Facility resulting in $ 175.0 million of credit availability.

As of June 30, 2024, the Company was in compliance with all of the covenants contained in the Credit Agreement.

The interest rate on the Company’s Senior Credit Facilities was 4.7 % for the three months ended June 30, 2024, and 5.7 % for the three months ended June 30, 2023, with an all-in effective interest rate, including all associated costs, of 5.4 % and 6.0 % over the same periods,

respectively.

The all-in effective interest rate on the Company’s Senior Credit Facilities for the six months ended June 30, 2024, was 5.4 %

and 5.7 % for the six months ended June 30, 2023.

The Company generally enters into various notes payable as a means of financing a portion of its

acquisitions and purchasing of non-controlling interests.

In conjunction with acquisitions in the years ended December 31, 2022, 2023 and 2024, the Company entered into notes payable in the aggregate amount of $ 3.9 million, of which $ 3.1 million is

due in 2025 and $ 0.8 million is due in 2026.

Interest accrues in the range of 3.5 % to 8.5 % per annum and is payable with each principal

In conjunction with acquisitions in the years ended December 31, 2022, 2023 and 2024, the Company entered into notes payable in the aggregate amount of $ 4.1 million, of which $ 1.3 million

is due by December 31, 2024, $ 1.6 million is due in 2025 and $ 1.2 million is due in 2026.

Interest accrues in the range of 3.5 % to 8.5 % per annum and is payable with each principal installment.

Derivative Instruments

2 unchanged sentences

The exposure to interest rate risk primarily results from the Company’s variable-rate borrowing.

The Company may elect to use derivative

financial instruments to manage risks from fluctuations in interest rates.

The Company may elect to use

derivative financial instruments to manage risks from fluctuations in interest rates.

The Company does not purchase or hold derivatives for trading or speculative purposes.

Fluctuations in interest rates can be volatile and the Company’s risk management

activities do not eliminate these risks.

Fluctuations in interest rates can be volatile and the Company’s risk

management activities do not eliminate these risks.

Interest Rate Swap

In May 2022, the Company entered into an interest rate swap

agreement, effective on June 30, 2022, with Bank of America, N.A, which had a $ 150 million notional value, and a maturity date of June 30, 2027 .

In May 2022, the Company entered into an interest rate swap agreement,

effective on June 30, 2022, with Bank of America, N.A, which had a $ 150 million notional value, and a maturity date of June 30, 2027 .

Beginning in July 2022, the Company receives 1-month SOFR, and pays a fixed rate of interest of 2.815 % on 1-month SOFR on a quarterly basis.

The total interest rate in any period will also include an applicable margin based on the Company’s consolidated

leverage ratio.

The total interest rate in any period will also include an applicable margin based on the Company’s consolidated leverage ratio.

In connection with the swap, no cash was exchanged between the Company and the counterparty.

2 unchanged sentences

Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax.

The impact of the Company’s derivative instruments on the accompanying

Consolidated Statements of Comprehensive Income are presented in the table below.

Three Months Ended

March 31, 2024

March 31, 2023

The impact of the Company’s

derivative instruments on the accompanying Consolidated Statements of Comprehensive Income are presented in the table below.

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

(In thousands)

Other comprehensive gain (loss):

Unrealized gain (loss) on cash flow hedge

Other comprehensive (loss) gain:

Unrealized (loss) gain on cash flow hedge

Tax effect at statutory rate (federal and state)

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present value of all expected future cash flows based on SOFR-based yield curves.

The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2 fair

value measurement.

The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2

fair value measurement.

The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as follows.

Interest rate swap:

(In thousands)

2 unchanged sentences

The Company determines if an arrangement is a lease at the inception of a contract.

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease.

assets and operating lease liabilities are recognized at commencement date based on the net present value of the fixed lease payments over the lease term.

The Company’s operating lease terms are generally five years or less.

Right-of-use assets represent the Company’s right to use an underlying asset

during the lease term and operating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease.

Right-of-use assets and operating lease liabilities are recognized at commencement date

based on the net present value of the fixed lease payments over the lease term.

The Company’s operating lease terms are generally five years

The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised.

As most of the

Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Operating fixed lease expense is

recognized on a straight-line basis over the lease term.

Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage are not included in the

right-of-use assets or operating lease liabilities.

As most of the Company’s operating leases do not provide an implicit rate, the Company uses its

incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Operating fixed lease expense is recognized on a straight-line basis over the lease term.

Variable lease payment amounts that cannot be determined at the commencement of the lease such as

increases in lease payments based on changes in index rates or usage are not included in the right-of-use assets or operating lease liabilities.

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

The components of lease expense were as follows.

Three Months Ended

March 31, 2024

March 31, 2023

For the Three Months Ended

For the Six Months Ended

June 30 , 2024

June 30 , 2023

June 30 , 2024

June 30 , 2023

(In thousands)

5 unchanged sentences

Lease costs are reflected in the consolidated statement of net income in the line item – rent, supplies, contract labor and other.

The supplemental cash flow information related to leases was as follows.

Three Months Ended

March 31, 2024

March 31, 2023

The supplemental cash flow informa tion

related to leases was as follows.

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

(In thousands)

1 unchanged sentence

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

The aggregate future lease payments for operating leases as of March 31, 2024, were as follows.

The aggregate future lease payments for operating leases as of June 30, 2024, were

(In thousands)

2024 (excluding the three months ended March 31, 2024)

2024 (excluding the six months ended June 30, 2024)

2028 and thereafter

3 unchanged sentences

Average lease terms and discount rates were as follows.

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

Weighted-average remaining lease term - Operating leases

9 unchanged sentences

The Company’s limited partnership interests generally range from 65 % to 75 % (the range is 10 % - 99 %) in the Clinic Partnerships.

The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most of

the clinics (hereinafter referred to as “Clinic Partnerships”).

The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most

of the clinics (hereinafter referred to as “Clinic Partnerships”).

To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries, under profit sharing arrangements with therapists (hereinafter referred to as “Wholly-Owned

3 unchanged sentences

For multi-site clinic

practices in which a controlling interest is acquired by the Company, the prior owners typically continue on as employees to manage the clinic operations, retain a non-controlling ownership interest in the clinics and receive a competitive salary for

managing the clinic operations.

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.

Besides the multi-clinic acquisitions referenced in the table above, during the three months ended March 31, 2024 and the year ended December 31, 2023, the Company

purchased the assets and businesses of two and eight physical therapy clinics, respectively, in separate transactions.

for managing the clinic operations.

Wholly-Owned Facilities operate more than one clinic location.

Clinic Partnerships

For non-acquired Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interests, typically owned by the managing therapist, directly or

indirectly, are recorded within the balance sheets and income statements as non-controlling interest—permanent equity.

For acquired Clinic Partnerships with redeemable non-controlling interests, the earnings attributable to the redeemable

non-controlling interests are recorded within the consolidated balance sheets and income statements as redeemable non-controlling interest—temporary equity.

For non-acquired Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interests, typically owned by the managing therapist, directly

or indirectly, are recorded within the balance sheets and income statements as non-controlling interest—permanent equity .

For acquired Clinic Partnerships with redeemable non-controlling interests, the

earnings attributable to the redeemable non-controlling interests are recorded within the consolidated balance sheets and income statements as redeemable non-controlling interest—temporary equity .

Wholly-Owned Facilities

For Wholly-Owned Facilities with profit sharing arrangements, an appropriate accrual is recorded for the amount of profit sharing due the clinic partners/directors.

amount is expensed as compensation and included in clinic operating costs—salaries and related costs.

The respective liability is included in current liabilities—accrued expenses on the consolidated balance sheets.

For Wholly-Owned Facilities with profit sharing arrangements, an appropriate accrual is recorded for the amount of profit sharing due to the clinic partners/directors.

The amount is expensed as compensation and included in clinic operating costs—salaries and related costs.

The respective liability is included in current liabilities— accrued expenses on the consolidated

balance sheets.

Industrial Injury Prevention Services

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Other clients include large insurers and their contractors.

performs these services through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers (“ATCs”).

performs these services through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers.

Segment Financials

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The following table summarizes selected financial data for the Company’s reportable segments:

Three Months Ended

March 31, 2024

March 31, 2023

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

(In thousands)

Physical therapy operations

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Total Company

June 30, 2024

June 30, 2023

Total Assets:

3 unchanged sentences

Investment in Unconsolidated

Through one of its subsidiaries, the Company has a 49 % joint venture

interest in a company which provides physical therapy services for patients at hospitals.

Since the Company is deemed to not have a controlling interest in the company, the Company’s investment is accounted for using the equity method of

The investment balance of this joint venture as of March 31, 2024, is $ 12.2 million and the earnings amounted to

approximately $ 0.3 million.

Through one of its subsidiaries, the Company has a 49 % joint venture interest in a company

which provides physical therapy services for patients at hospitals.

Since the Company is deemed to not have a controlling interest in the company, the Company’s investment is accounted for using the equity method of accounting.

The investment

balance of this joint venture as of June 30, 2024, is $ 12.2 million and the earnings amounted to approximately $ 0.2 million and $ 0.5 million for the

three and six months ended June 30, 2024, respectively.

Earnings in the comparable prior periods were $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2023, respectively.

Subsequent Events

On May 7, 2024, the Company’s Board of Directors declared a quarterly dividend of $ 0.44 per share payable on June 14, 2024 , to shareholders of record on May 23, 2024 .

2024, one of the Company’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an IIP business for a closing

purchase price of $ 24.0 million, with provision for additional purchase price based on the financial performance of the acquired

business during the 12-month period after closing.

On August 12, 2024, the Company’s Board of Directors declared a quarterly dividend of $ 0.44 per share payable on September 13, 2024 , to shareholders of

record on August 23, 2024 .

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