Item 1. Financial Statements
ITEM 1.
FINANCIAL STATEMENTS
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE
SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS )
June 30 , 2025
December 31, 2024
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
34,086
$
41,362
Patient accounts receivable, less provision for credit
losses of $ 3,928 and $ 3,506 ,
respectively
65,956
59,040
Accounts receivable - other
27,429
26,626
Other current assets
13,061
10,555
Total current assets
140,532
137,583
Fixed assets:
Furniture and equipment
66,756
68,128
Leasehold improvements
55,218
51,105
Fixed assets, gross
121,974
119,233
Less accumulated depreciation and amortization
( 89,853
)
( 87,093
)
Fixed assets, net
32,121
32,140
Operating lease right-of-use assets
137,248
133,936
Investment in unconsolidated affiliate
12,320
12,190
Goodwill
677,595
667,152
Other identifiable intangible assets, net
175,627
179,311
Other assets
4,157
5,155
Total assets
$
1,179,600
$
1,167,467
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST
Current liabilities:
Accounts payable - trade
$
4,200
$
5,936
Accrued expenses
65,436
59,513
Current portion of operating lease liabilities
41,038
39,835
Current portion of term loan and notes payable
8,168
10,999
Total current liabilities
118,842
116,283
Notes payable, net of current portion
321
903
Revolving facility
24,500
11,000
Term loan, net of current portion and deferred financing costs
127,093
130,627
Deferred taxes
34,402
29,465
Operating lease liabilities, net of current portion
104,279
101,868
Other long-term liabilities
4,571
18,275
Total liabilities
414,008
408,421
Redeemable non-controlling interest - temporary equity
263,298
269,025
Commitments and Contingencies
U.S. Physical Therapy, Inc. (“USPH”) shareholders’ equity:
Preferred stock, $ 0.01
par value, 500,000 shares authorized, no shares issued and outstanding
-
-
Common stock, $ 0.01
par value, 20,000,000 shares authorized, 17,418,856 and 17,309,120 shares issued, respectively
172
172
Additional paid-in capital
294,636
290,321
Accumulated other comprehensive gain
1,214
2,799
Retained earnings
236,356
227,265
Treasury stock at cost, 2,214,737
shares
( 31,628
)
( 31,628
)
Total USPH shareholders’ equity
500,750
488,929
Non-controlling interest - permanent equity
1,544
1,092
Total USPH shareholders’ equity and non-controlling interest - permanent equity
502,294
490,021
Total liabilities, redeemable non-controlling interest, USPH shareholders’ equity and non-controlling interest - permanent
equity
$
1,179,600
$
1,167,467
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
3
Table of Contents
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF
NET
INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS )
Three Months Ended
Six
Months Ended
June 30, 2025
June 30, 2024
June 30,2025
June 30, 2024
Net patient revenue
$
164,183
$
140,271
$
316,730
$
271,346
Other revenue
33,161
26,919
64,402
51,519
Net revenue
197,344
167,190
381,132
322,865
Operating cost:
Salaries and related costs
113,788
96,334
225,037
190,065
Rent, supplies, contract labor and other
34,127
30,335
67,971
58,319
Depreciation and amortization
5,741
4,299
11,281
8,197
Provision for credit losses
1,995
1,717
3,843
3,344
Clinic closure costs - lease and other
69
643
311
677
Total operating cost
155,720
133,328
308,443
260,602
Gross profit
41,624
33,862
72,689
62,263
Corporate office costs
17,476
14,249
33,721
28,334
(Gain) loss on change in fair value of contingent earn-out consideration
( 790
)
4,046
( 5,612
)
3,434
Operating income
24,938
15,567
44,580
30,495
Other income (expense):
Interest expense, debt and other
( 2,422
)
( 1,980
)
( 4,701
)
( 3,948
)
Interest income from investments
28
1,074
52
2,617
Change in revaluation of put-right liability
( 339
)
( 223
)
( 743
)
( 303
)
Equity in earnings of unconsolidated affiliate
401
248
794
519
Loss on sale of a partnership
-
-
( 123
)
-
Other
47
109
122
171
Total other expense
( 2,285
)
( 772
)
( 4,599
)
( 944
)
Income before taxes
22,653
14,795
39,981
29,551
Provision for income taxes
4,933
3,083
8,793
6,222
Net income
17,720
11,712
31,188
23,329
Less: Net income attributable to non-controlling interest:
Redeemable non-controlling interest - temporary equity
( 3,914
)
( 3,314
)
( 5,926
)
( 5,541
)
Non-controlling interest - permanent equity
( 1,413
)
( 892
)
( 2,970
)
( 2,236
)
( 5,327
)
( 4,206
)
( 8,896
)
( 7,777
)
Net income attributable to USPH shareholders
$
12,393
$
7,506
$
22,292
$
15,552
Basic and diluted earnings per share attributable to USPH shareholders
$
0.58
$
0.47
$
1.38
$
0.93
Shares used in computation - basic and diluted
15,197
15,072
15,165
15,044
Dividends declared per common share
$
0.45
$
0.44
$
0.90
$
0.88
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
4
Table of Contents
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS
OF
COMPREHENSIVE INCOME
(IN THOUSANDS)
Three Months Ended
Six
Months Ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Net income
$
17,720
$
11,712
$
31,188
$
23,329
Other comprehensive ( loss ) gain:
Unrealized (loss) gain on cash flow hedge
( 798
)
( 31
)
( 2,129
)
1,750
Tax effect at statutory rate (federal and state)
204
8
544
( 447
)
Comprehensive income
$
17,126
$
11,689
$
29,603
$
24,632
Comprehensive income attributable to non-controlling interest
( 5,327
)
( 4,206
)
( 8,896
)
( 7,777
)
Comprehensive income attributable to USPH shareholders
$
11,799
$
7,483
$
20,707
$
16,855
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
5
Table of Contents
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS
OF
CASH FLOWS
(IN THOUSANDS)
Six Months Ended
June 30 , 2025
June 30 , 2024
OPERATING ACTIVITIES
Net income including non-controlling interest
$
31,188
$
23,329
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation and amortization
11,924
8,609
Provision for credit losses
3,843
3,344
Equity-based awards compensation expense
3,888
3,916
Amortization of debt issue costs
210
210
Change in deferred income taxes
7,279
770
Change in revaluation of put-right liability
743
303
Change in fair value of contingent earn-out consideration
( 5,612
)
3,434
Equity of earnings in unconsolidated affiliate
( 794
)
( 519
)
Loss on sale of fixed assets
438
51
Loss on sale of a partnership
123
-
Changes in operating assets and liabilities:
Patient accounts receivable,net
( 10,232
)
( 5,110
)
Accounts receivable - other
355
( 2,351
)
Other current and long term assets
( 4,426
)
( 1,642
)
Accounts payable and accrued expenses
( 7,914
)
( 1,481
)
Other long-term liabilities
( 827
)
548
Net cash provided by operating activities
30,186
33,411
INVESTING ACTIVITIES
Purchase of fixed assets
( 5,830
)
( 4,174
)
Purchase of majority interest in businesses, net of cash acquired
( 6,890
)
( 38,695
)
Purchase of redeemable non-controlling interest, temporary equity
( 8,427
)
( 6,230
)
Purchase of non controlling interest, permanent equity
( 149
)
( 527
)
Proceeds from the sale of non-controlling interest, permanent equity
9
26
Proceeds from the sale of partnership interest - redeemable non-controlling interest, temporary equity
15
69
Repayment of notes receivable related to redeemable non-controlling interest
346
375
Proceeds from the sale of partnership
700
-
Distributions from unconsolidated affiliate
664
532
Other
228
( 131
)
Net cash (used in) investing activities
( 19,334
)
( 48,755
)
FINANCING ACTIVITIES
Proceeds from revolving facility
73,500
-
Payments on revolving facility
( 60,000
)
-
Distributions to non-controlling interest, permanent and temporary equity
( 10,697
)
( 8,318
)
Cash dividends paid to shareholders
( 13,678
)
( 13,264
)
Payments on term loan
( 5,625
)
( 1,875
)
Principal payments on notes payable
( 1,628
)
( 1,113
)
Net cash (used in) financing activities
( 18,128
)
( 24,570
)
Net (decrease) in cash and cash equivalents
( 7,276
)
( 39,914
)
Cash and cash equivalents - beginning of period
41,362
152,825
Cash and cash equivalents - end of period
$
34,086
$
112,911
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes
$
9,833
$
4,932
Interest paid
4,683
3,708
Non-cash investing and financing transactions during the period:
Purchase of businesses - seller financing portion
-
955
Fair market value of initial contingent consideration related to purchase of businesses
3,059
2,800
Offset of notes receivable associated with purchase of redeemable non-controlling interest
254
75
Notes payable related to purchase of non-controlling interest, temporary equity
-
22
Notes payable related to purchase of redeemable non-controlling interest, temporary equity
89
-
Notes receivable related to sale of redeemable non-controlling
interest, temporary equity
660
402
Notes receivable related to the sale of non-controlling interest, permanent equity
29
243
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
6
Table of Contents
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF
CHANGES IN
EQUITY
(IN THOUSANDS)
Common Stock
Additional
Accumulated Other
Retained
Treasury Stock
Total Shareholders’
Non-Controlling
For the three months ended June 30, 2025
Shares
Amount
Paid-In Capital
Comprehensive Gain
Earnings
Shares
Amount
Equity
Interests
Total
Balance March 31, 2025
17,406
$
172
$
292,773
$
1,783
$
234,161
( 2,215
)
$
( 31,628
)
$
497,261
$
1,700
$
498,961
Net income attributable to USPH shareholders
-
-
-
-
12,393
-
-
12,393
-
12,393
Net income attributable to non-controlling interest - permanent equity
-
-
-
-
-
-
-
-
1,413
1,413
Issuance of restricted stock, net of cancellations
13
-
-
-
-
-
-
-
-
-
Revaluation of redeemable non-controlling interest
-
-
-
-
( 4,806
)
-
-
( 4,806
)
-
( 4,806
)
Compensation expense - equity-based awards
-
-
1,975
-
-
-
-
1,975
-
1,975
Sale of non-controlling interest
-
-
( 9
)
-
-
-
-
( 9
)
-
( 9
)
Purchase of
partnership interests - non-controlling interest
-
-
-
-
-
-
-
-
-
-
Dividends paid to USPH shareholders
-
-
-
-
( 6,842
)
-
-
( 6,842
)
-
( 6,842
)
Distributions to non-controlling interest partners - permanent equity
-
-
-
-
-
-
-
-
( 1,578
)
( 1,578
)
Deferred taxes related to redeemable non-controlling interest - temporary equity
-
-
-
-
1,439
-
-
1,439
-
1,439
Other comprehensive gain
-
-
-
( 594
)
-
-
-
( 594
)
-
( 594
)
Transfer of RNCI due
to separation agreement
-
-
-
-
-
-
-
-
-
-
Other
-
-
( 103
)
25
11
-
-
( 67
)
9
( 58
)
Balance June 30, 2025
17,419
172
294,636
1,214
236,356
( 2,215
)
( 31,628
)
500,750
1,544
502,294
Common Stock
Additional
Accumulated Other
Retained
Treasury Stock
Total Shareholders’
Non-Controlling
For the six months ended June 30, 2025
Shares
Amount
Paid-In Capital
Comprehensive Loss
Earnings
Shares
Amount
Equity
Interests
Total
Balance December 31, 2024
17,309
$
172
$
290,321
$
2,799
$
227,265
( 2,215
)
$
( 31,628
)
$
488,929
$
1,092
$
490,021
Net income attributable to USPH shareholders
-
-
-
-
22,292
-
-
22,292
-
22,292
Net income attributable to non-controlling interest - permanent equity
-
-
-
-
-
-
-
-
2,970
2,970
Issuance of restricted stock, net of cancellations
110
-
-
-
-
-
-
-
-
-
Revaluation of redeemable non-controlling interest, net of tax
-
-
-
-
( 1,903
)
-
-
( 1,903
)
-
( 1,903
)
Compensation expense - equity-based awards
-
-
3,706
-
-
-
-
3,706
-
3,706
Sale of non-controlling interest
-
-
( 9
)
-
-
-
-
( 9
)
-
( 9
)
Purchase of partnership interests - non-controlling interest
-
-
-
-
-
-
-
-
-
-
Dividends paid to USPH shareholders
-
-
-
-
( 13,678
)
-
-
( 13,678
)
-
( 13,678
)
Distributions to non-controlling interest partners - permanent equity
-
-
-
-
-
-
-
-
( 2,565
)
( 2,565
)
Deferred taxes related to redeemable non-controlling interest - temporary equity
-
-
-
-
2,375
-
-
2,375
-
2,375
Other comprehensive gain
-
-
-
( 1,585
)
-
-
-
( 1,585
)
-
( 1,585
)
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
-
-
721
-
-
-
-
721
-
721
Transfer of RNCI due to separation agreement
-
-
-
-
-
-
-
-
-
-
Other
-
-
( 103
)
-
5
-
-
( 98
)
47
( 51
)
Balance June 30, 2025
17,419
172
294,636
1,214
236,356
( 2,215
)
( 31,628
)
500,750
1,544
502,294
7
Table of Contents
U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(IN THOUSANDS)
Common Stock
Additional
Accumulated Other
Retained
Treasury Stock
Total Shareholders’
Non-Controlling
For the three months ended June 30, 2024
Shares
Amount
Paid-In Capital
Comprehensive Gain
Earnings
Shares
Amount
Equity
Interests
Total
Balance March 31, 2024
17,283
$
172
$
283,546
$
4,108
$
223,573
( 2,215
)
$
( 31,628
)
$
479,771
$
1,462
$
481,233
Net income attributable to USPH shareholders
-
-
-
-
7,506
-
-
7,506
-
7,506
Net income attributable to non-controlling interest - permanent equity
-
-
-
-
-
-
-
-
892
892
Issuance of restricted stock, net of
cancellations
8
-
-
-
-
-
-
-
-
-
Revaluation of redeemable non-controlling interest
-
-
-
-
( 622
)
-
-
( 622
)
-
( 622
)
Compensation expense - equity-based awards
-
-
1,919
-
-
-
-
1,919
-
1,919
Sale of non-controlling interest
-
-
2
-
-
-
-
2
-
2
Purchase of partnership interests - non-controlling interest
-
-
( 5
)
-
-
-
-
( 5
)
( 18
)
( 23
)
Dividends paid to USPH shareholders
-
-
-
-
( 6,634
)
-
-
( 6,634
)
-
( 6,634
)
Distributions to non-controlling interest partners - permanent equity
-
-
-
-
-
-
-
-
( 1,291
)
( 1,291
)
Deferred taxes related to redeemable non-controlling interest - temporary equity
-
-
-
-
( 375
)
-
-
( 375
)
-
( 375
)
Other comprehensive gain
-
-
-
( 23
)
-
-
-
( 23
)
-
( 23
)
Transfer of RNCI due to separation agreement
-
-
-
-
3,033
-
-
3,033
-
3,033
Other
-
-
-
( 1
)
1
-
-
-
( 2
)
( 2
)
Balance June 30, 2024
17,291
172
285,462
4,084
226,482
( 2,215
)
( 31,628
)
484,572
1,043
485,615
Common Stock
Additional
Accumulated Other
Retained
Treasury Stock
Total Shareholders’
Non-Controlling
For the six months ended June 30, 2024
Shares
Amount
Paid-In Capital
Comprehensive Loss
Earnings
Shares
Amount
Equity
Interests
Total
Balance December 31, 2023
17,202
$
172
$
281,096
$
2,782
$
223,772
( 2,215
)
$
( 31,628
)
$
476,194
$
1,216
$
447,410
Net income attributable to USPH shareholders
-
-
-
-
15,552
-
-
15,552
-
15,552
Net income attributable to non-controlling interest - permanent equity
-
-
-
-
-
-
-
-
2,236
2,236
Issuance of restricted stock, net of
cancellations
89
-
-
-
-
-
-
-
-
-
Revaluation of redeemable non-controlling interest, net of tax
-
-
-
-
( 2,061
)
-
-
( 2,061
)
-
( 2,061
)
Compensation expense - equity-based awards
-
-
3,916
-
-
-
-
3,916
-
3,916
Sale of non-controlling interest
-
-
200
-
-
-
200
-
200
Purchase of partnership interests - non-controlling interest
-
-
( 350
)
-
-
-
-
( 350
)
( 56
)
( 406
)
Dividends paid to USPH shareholders
-
-
-
-
( 13,264
)
-
-
( 13,264
)
-
( 13,264
)
Distributions to non-controlling interest partners - permanent equity
-
-
-
-
-
-
-
-
( 2,351
)
( 2,351
)
Deferred taxes related to redeemable non-controlling interest - temporary equity
-
-
-
-
( 550
)
-
-
( 550
)
-
( 550
)
Other comprehensive gain
-
-
-
1,303
-
-
-
1,303
-
1,303
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans
-
-
600
-
-
600
-
600
Transfer of RNCI due to separation agreement
-
-
-
-
3,033
3,033
-
3,033
Other
-
-
-
( 1
)
-
-
-
( 1
)
( 2
)
( 3
)
Balance June 30, 2024
17,291
172
285,462
4,084
226,482
( 2,215
)
( 31,628
)
484,572
1,043
485,615
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
8
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
Basis of Presentation and Significant Accounting Policies
Nature of Business
U.S.
Physical Therapy, Inc. and its subsidiaries (the “Company”) operates its business through two reportable business segments. Our physical therapy operations consist of physical therapy, speech therapy and occupational therapy clinics and home-care physical and speech therapy practices that provide pre- and
post-operative care and treatment for a variety of orthopedic-related disorders, sports-related injuries, and rehabilitation of injured workers. Services provided by the industrial injury prevention services (“IIP”) segment include onsite
services for clients’ employees including injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of IIP is contracted with and paid
for directly by employers, including a number of Fortune 500 companies. IIP services are performed through Industrial Sports Medicine Professionals with specialized training related to the musculoskeletal system.
The Company added six clinics and closed four clinics in
the 2025 Second Quarter bringing its total owned and/or managed clinics to 768 as of June 30, 2025, compared to 722 as of June 30, 2024.
D uring the six months ended June 30, 2025, and for the year ended December 31,
2024, the Company completed the acquisitions of the following clinic practices and IIP businesses:
Schedule of Percentage Interest Acquired in Business
% Interest
Number of
Acquisition
Date
Acquired
Clinics
April
2025 Acquisition
April 30, 2025
40 % *
**
February 2025 Acquisition
February 28, 2025
65 %
3
November
2024 Acquisition
November 30, 2024
75 %
8
October 2024 Acquisition
October 31, 2024
50 %
50
August 2024 Acquisition
August 31, 2024
70 %
8
April 2024 Acquisition
April 30, 2024
***
****
March 2024 Acquisition
March 29, 2024
50 %
9
*
On April 30,2025, the
Company acquired an outpatient home care practice that provides speech and occupational therapy through its 50 % owned
subsidiary MSO Metro LLC. (“Metro”). After the transaction, the Company’s ownership interest is 40 %, the local partners have an ownership
interest of 40 % and the practice’s preacquisition owners have a 20 % ownership interest.
**
Home-care business
***
On April 30, 2024, one of our primary IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an IIP business.
****
IIP business.
Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance
with the instructions for Form 10-Q. However, the statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Management
believes this report contains all necessary adjustments (consisting only of normal recurring adjustments) to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods
presented. These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31,
2024, filed with the Securities and Exchange Commission on March 3, 2025. Interim results are not necessarily indicative of the results the Company expects for the entire year. All significant intercompany transactions have been
eliminated in consolidation.
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of
operations.
9
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Segment Reporting
Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by chief operating decision
makers in determining the allocation of resources and in assessing performance. The Company currently operates through two
segments: physical therapy operations and IIP.
Use of Estimates
In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to,
goodwill impairment, tradenames and other intangible assets, allocations of purchase price, allowance for receivables, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and
related disclosures. Actual results may differ from these estimates.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over the fair value of the acquired business assets, which include
certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009, from the purchase of some or all of a particular local management’s equity interest in an existing clinic. Effective January 1,
2009, if the purchase price of a non-controlling interest, permanent equity by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and
other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain triggering events or conditions and are written down to fair value, if considered impaired. These events or
conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash flow, combined with a history of such losses or a projection of
continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these triggering events or conditions could result in an impairment assessment, necessitating an impairment charge. The Company 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.
As part of the impairment analysis, the Company is first required to assess qualitatively if it can
conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, it is then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In
evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. The
Company considers both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis. An impairment loss generally would be recognized when the carrying amount of the net assets of a
reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit.
For the three
and six months ended June 30, 2025, no triggering events or indicators were identified that would require impairments of assets for such period. During the three and twelve months ended
December 31, 2024, the Company recorded a non-cash impairment charge of $ 2.4 million related to assets held for sale (described in
Note 5 , Assets Held for Sale ), of which $ 1.6 million was attributed to referral relationships, $ 0.5 million was
attributed to tradename and $ 0.3 million was attributed to other assets.
The
Company will continue to monitor for any triggering events or other indicators of impairment.
10
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Variable interest entities
A variable interest entity (“VIE”) is a legal entity that does not have sufficient equity at risk to finance its activities without additional
subordinated financial support, or is structured such that its equity holders do not have power over the activities of the entity; have voting rights, as a group, that are not proportionate to their economic interests; or are not exposed to the
residual losses or benefits of the entity.
At the inception of a contractual agreement, the Company determines whether it holds a variable interest in a legal entity that is a VIE and whether it
is the primary beneficiary of the VIE. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive
benefits from the VIE that could potentially be significant to the VIE. If the Company concludes it is the primary beneficiary of a VIE, the Company consolidates the accounts of that VIE. The Company regularly reviews and reconsiders previous
conclusions regarding whether the Company holds a variable interest in a potential VIE, the status of an entity as a VIE, and whether it is the primary beneficiary of a VIE.
Investment in unconsolidated affiliate
Investments in unconsolidated
affiliates, in which the Company has less than a controlling interest, are accounted for under the equity method of accounting and, accordingly, are adjusted for capital contributions, distributions and the Company’s equity in net earnings or
loss of the respective joint venture.
Redeemable Non-Controlling Interest
The non-controlling interest that is reflected as redeemable non-controlling interest in the consolidated financial statements consists of those in which the owners and
the Company have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are
met. The purchase price is derived via a predetermined formula based on a multiple of earnings performance as defined in the respective limited partnership agreements. Most of these redemption rights can be triggered by the owner or the Company at
such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to six years , as defined in the
limited partnership agreement or limited liability company agreement, as applicable. Other redemption rights can be triggered by the owner after the passage of a certain period of time. The redemption rights are not automatic or mandatory (even upon
death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been satisfied.
On the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under
the control of the Company, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption—Redeemable non-controlling interest – temporary equity. Then, in each reporting period thereafter until it is
purchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined in the respective limited partnership agreement.
As a result, the value of the non-controlling interest is not adjusted below its initial carrying value. The Company records any adjustment in the redemption value, net of tax, directly to retained earnings and these adjustments are not reflected in
the consolidated statements of net income. Although the adjustments are not reflected in the consolidated statements of net income, current accounting rules require that the Company reflects the adjustments, net of tax, in the earnings per share
calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statements of net income. Management believes the redemption value (i.e. the
carrying amount) and fair value are the same.
11
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Non-Controlling Interest
The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent
equity in the unaudited consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interest is included in the consolidated net income on the face of the unaudited
consolidated statements of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The
Company recognizes a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.
When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally,
operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.
During the six months ending June 30, 2025, the Company sold interests in two partnerships, for an aggregate
price of $ 0.1 million. During the year ended December 31, 2024, the Company sold interests in six partnerships for an aggregate price of $ 0.3 million.
During the six months
ended, June 30, 2024, the Company acquired additional interests in partnerships which are included in non-controlling interests - permanent equity. The additional interests purchased in each of the partnerships ranged from 15 % to 35.0 % and the aggregated
purchase price for acquired non-controlling interests – permanent equity was $ 0.2 million. During the year ended, December 31, 2024,
the Company acquired additional interests in partnerships which are included in non-controlling interests - permanent equity. The additional interests purchased in each of the partnerships ranged from 1.5 % to 35.0 % and the aggregated purchase price for acquired
non-controlling interests – permanent equity was $ 0.8 million.
Revenue Recognition
The Company recognizes revenue in accordance with
Accounting Standards Codification (“ASC”) 606. For ASC 606, there is an implied contract between the Company and the patient upon each patient visit. Separate contractual arrangements exist between the Company and third-party payors (e.g. insurers,
managed care programs, government programs, workers’ compensation) which establish the amounts the third parties pay on behalf of the patients for covered services rendered. While these agreements are not considered contracts with the customer,
they are used for determining the transaction price for services provided to the patients covered by the third-party payors. The payor contracts do not indicate performance obligations for the Company but indicate reimbursement rates for patients
who are covered by those payors when the services are provided. At that time, the Company is obligated to provide services for the reimbursement rates stipulated in the payor contracts. The execution of the contract alone does not indicate a
performance obligation. For self-paying customers, the performance obligation exists when the Company provides the services at established rates. The difference between the Company’s established rate and the anticipated reimbursement rate is
accounted for as an offset to revenue—contractual allowance. Payments for services rendered are typically due 30 to 120 days after receipt of the invoice.
Patient Revenue
Net patient revenue consists of revenues for physical therapy
and occupational therapy clinics, and home-care physical and speech therapy practices, that provide pre- and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventative care, rehabilitation of injured
workers and neurological-related injuries. Net patient revenue (patient revenue less estimated contractual adjustments – as described below) is recognized at the estimated net realizable amounts from third-party payors, patients and others in
exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as the Company provides physical and occupational
therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that provide payments to the Company at amounts different from
its established rates.
12
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Other Revenue
Revenue from the IIP business, which is included in other
revenue in the consolidated statements of net income, is derived from onsite services the Company provides to clients’ employees including injury prevention, rehabilitation, ergonomic assessments, post-offer employment testing and performance
optimization. Revenue from the Company’s IIP business is recognized when obligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration the company expects to receive in exchange for
providing injury prevention services to its clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period.
Management contract revenue, which is also
included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for unrelated physician groups and hospitals . 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 consisting of salaries , are recorded when incurred. Management contract revenue was $ 2.3 million and $ 2.4 million for the three months ended June 30,
2025 and June 30, 2024 , respectively, and was $ 4.8 million for both the six months ended June 30, 2025 and June 30,
2024, respectively.
Additionally, other revenue from physical therapy
operations includes services the Company provides on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers for schools and gym membership fees. Contract terms and rates are
agreed to in advance between the Company and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service. If the services are paid in advance, revenue is recorded as a contract
liability over the period of the agreement and recognized at the point in time when the services are performed.
Contractual Allowances
The allowance for estimated contractual
adjustments is based on terms of payor contracts and historical collection and write-off experience. Contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both
insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third-party payors and managed care contracts are often complex and may include multiple reimbursement mechanisms
payable for the services provided in Company clinics. The Company estimates contractual allowances based on its interpretation of the applicable regulations, payor contracts and historical calculations. Each month the Company estimates its
contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and applies an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each
payor of the clinic. Based on the Company’s historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow the Company to provide the necessary detail and accuracy with its
collectability estimates. However, the services authorized, provided and related reimbursement are subject to interpretation that could result in payments that differ from the Company’s estimates. Payor terms are periodically revised
necessitating continual review and assessment of the estimates made by management. 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, 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 any balance sheet date.
Allowance for Credit Losses
The Company determines allowances for credit losses
based on the specific agings at each clinic. The provision for credit losses is included in operating costs in the consolidated statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of
contractual allowances, write-offs, and allowance for credit losses, includes only those amounts the Company estimates to be collectible.
13
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the
position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
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 either the three and six months ended June 30, 2025, or June 30, 2024. The Company records any interest or penalties, if required, in interest and other expense, as
appropriate.
On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes
to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the reinstatement of 100% bonus depreciation. These changes were not reflected in the income tax provision for the
period ended June 30, 2025, as enactment occurred after the balance sheet date. The Company is currently evaluating the impact on future periods.
Fair Value of Financial Instruments
Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based
upon the transparency of inputs to the valuation at the measurement date.
The three levels of the fair value hierarchy are as follows:
●
Level 1 – Quoted prices in active markets for identical assets or
liabilities.
●
Level 2 – Inputs, other than the quoted prices in active markets, that
are observable either directly or indirectly.
●
Level 3 – Unobservable inputs based on the Company’s own assumptions.
The carrying amounts
reported in the balance sheets for cash and cash equivalents, certain contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturity of these financial
instruments. The carrying amount of the debt under the Third Amended and Restated Credit Agreement (defined as “Credit Agreement” in Note 9) approximates the fair value due to the proximity of the debt issue date and the balance sheet date and
the variable component of interest on debt. The interest rate on the Credit Agreement is tied to the Secured Overnight Financing Rate (“SOFR ”) or the rate of interest in effect as publicly announced from time to time by Bank of America as
its prime rate .
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 , 2025 , the Company used
a Monte Carlo simulation model utilizing unobservable inputs including asset volatility of 20.0 % and a discount rate of 11.06 %. The value of this put right increased $ 0.7
million for the six months ended June 30 , 2025 . The put right was valued at approximately $ 1.8 million on June 30 , 2025, and approximately $ 1.0 million on December 31, 2024.
14
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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. 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 $ 14.8 million on June 30 , 2025, and $ 17.6 million on December 31, 2024.
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. See Note 10 for more information on the Company’s interest rate derivative.
The redemption value of redeemable
non-controlling interests approximates the fair value. See Note 4 for the changes in the fair value of Redeemable non-controlling interest.
Restricted Stock
Restricted stock issued to employees and
directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. 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 during the three and six months ended June 30, 2025.
Recently Adopted Accounting Guidance
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 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 has adopted this standard as of January 1, 2025, and
there was no significant impact on the Company’s consolidated financial statements.
Recent Accounting Guidance Not Yet Adopted
In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) , which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions. The ASU requires entities to disclose the amounts of purchases of
inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption; as well as a qualitative description of the amounts remaining in relevant expense captions that are not separately
disaggregated quantitatively. The amendment also requires disclosure of the total amount of selling expense and, in annual reporting periods, an entity’s definition of selling expenses.
15
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027; however
early adoption is permitted. The ASU can be applied either prospectively or retrospectively. The Company is currently reviewing the impact that ASU 2024-03 will have on the disclosures in our consolidated financial statements.
2. Earnings Per Share
Basic and diluted earnings per share is computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares
and participating securities. The restricted stock the Company grants are participating securities containing non-forfeitable rights to receive dividends. Accordingly, any unvested shares of 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
Six Months Ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Earnings per Share
(In thousands, except per share data)
(In thousands, except per share data)
Computation of earnings per share - USPH shareholders:
Net income attributable to USPH shareholders
$
12,393
$
7,506
$
22,292
$
15,552
Charges to retained earnings:
Revaluation of redeemable non-controlling interest
( 4,806
)
( 622
)
( 1,903
)
( 2,061
)
Tax effect at statutory rate (federal and state)
1,228
159
486
527
$
8,815
$
7,043
$
20,875
$
14,018
Earnings per share (basic and diluted)
$
0.58
$
0.47
$
1.38
$
0.93
Shares used in computation:
Basic and diluted earnings per share - weighted-average shares
15,197
15,072
15,165
15,044
3. Acquisitions of Businesses
The Company’s strategy is to continue acquiring multi-clinic outpatient physical therapy practices and home-care physical and speech therapy practices, to develop outpatient physical
therapy clinics as satellites in existing partnerships, and to continue acquiring companies that provide industrial injury prevention services. The consideration paid for each acquisition is derived through arm’s length negotiations and funded
through working capital or borrowings under the Company’s revolving facility.
The results of operations of the acquisitions below have been included in the Company’s unaudited consolidated financial statements from their respective date of acquisition.
Unaudited proforma consolidated financial information for the acquisitions has not been included, as the results, individually and in the aggregate, were not material to current operations.
During the six months ended June 30, 2025, the Company acquired a majority interest in the following businesses:
16
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2025 Acquisitions
% Interest
Number of
Acquisition
Date
Acquired
Clinics
April 2025 Acquisition
April 30, 2025
40
%
*
February 2025 Acquisition
February 28, 2025
65
%
3
*
Home-care business
The
purchase price plus the fair value of the non-controlling interest for the acquisitions after June 30, 2024 was allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets (i.e. tradenames, referral
relationships and non-compete agreements) and liabilities assumed based on the estimated fair values at the acquisition date, with the amount in excess of fair values being recorded as goodwill. The Company is in the process of completing its
formal valuation analysis of the above-mentioned acquisitions in order to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price
may differ from the preliminary estimates used on June 30, 2025, based on additional information obtained and completion of the valuation of the identifiable intangible assets. Changes in the estimated valuation of the tangible assets acquired,
the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated,
will likely result in adjustments to goodwill. The Company does not expect the adjustments to be material. The Company continues to evaluate the components for the purchase price allocations for subsequent acquisitions in 2024 and 2025.
On April
30, 2025, the Company acquired an outpatient home-care physical and speech therapy practice through its 50 %-owned subsidiary, MSO
Metro, LLC. (“Metro”). After the transaction, the Company’s ownership interest is 40 %, the local partners have an ownership interest
of 40 % and the practice’s preacquisition owners have a 20 % ownership interest. The purchase price for the 80 % equity interest was approximately $ 2.3 million which was paid in cash. As part of this transaction, the Company agreed to additional consideration if future operational objectives are
met. The maximum amount of additional contingent consideration due under this agreement is $ 1.8 million.
On February 28, 2025, the Company acquired 65 % interest in a physical therapy practice with three clinic
locations. The prior owner retained a 35 % ownership interest. The purchase price for the 65 % interest was approximately $ 3.8 million, which was paid in
cash. As part of this transaction, the Company agreed to additional consideration if future operational objectives are met by the business. The maximum amount of additional contingent consideration due under this agreement is $ 1.3 million. The contingent consideration was valued at $ 0.6
million as of June 30, 2025.
Besides the multi-clinic acquisitions referenced above, the
Company purchased the assets and business of four physical therapy clinics during 2025, which were tucked into larger partnerships in
separate transactions.
17
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table provides details on the preliminary purchase price allocation
for the acquisitions described above.
Physical Therapy
Operations
(In thousands)
Cash paid, net of cash acquired
$
6,890
Seller note
-
Deferred payments
-
Contingent payments
3,059
Total consideration
$
9,949
Estimated fair value of net tangible assets acquired:
Total current assets
$
544
Total non-current assets
140
Total liabilities
( 258
)
Net tangible assets acquired
426
Customer and referral relationships
2,857
Non-compete agreement
158
Tradenames
672
Goodwill
8,551
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
( 2,715
)
$
9,949
Total current assets primarily represent accounts receivable while total non-current assets consist of fixed
assets and equipment used in a physical therapy practice.
For the acquisitions completed in the three and six months ended June 30, 2025, the values assigned to the
customer and referral relationships and non-compete agreement are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.0 years. For the non-compete agreements, the weighted-average amortization period is 6.0 years. The values assigned to tradenames are tested annually for impairment.
2024 Acquisitions
% Interest
Number of
Acquisition
Date
Acquired
Clinics
November 2024 Acquisition
November 30, 2024
75
%
8
October 2024 Acquisition
October 31, 2024
50
%
50
August 2024 Acquisition
August 31, 2024
70
%
8
April 2024 Acquisition
April 30, 2024
**
*
March 2024 Acquisition
March 29, 2024
50
%
9
*
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 November 30, 2024, the Company acquired a 75 % equity interest in an eight -clinic physical therapy practice. The owner of
the practice retained 25 % of the equity interests. The purchase price for the 75 % equity interest was approximately $ 15.9 million, of which $ 15.7 million was paid in cash, and $ 0.2
million was in the form of a note payable. The note accrues interest at 5.0 % per annum and the principal and interest is payable on
December 1, 2026.
On October 31, 2024, the Company acquired a 50 %
interest in Metro pursuant to an Equity Interest Purchase Agreement (the “Purchase Agreement”) dated October 7, 2024 among U.S. Physical Therapy, Ltd. (a subsidiary of the Company), Metro, the members of Metro, and Michael G. Mayrsohn, as Sellers ’ Representative. The Company also became the managing member of Metro.
The Company paid a purchase price of approximately $ 76.5 million, $ 75.0 million of which was
funded by our cash on hand and the remaining $ 1.5 million through the issuance of 18,358 shares of the Company’s common stock based on a trailing five-day
average as of the day immediately prior to closing. The shares of the Company’s common stock were issued in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act. The Purchase Agreement also included an
earnout where the sellers can earn up to $ 20.0 million of additional consideration if certain performance criteria relating to the Metro
business are achieved. The contingent consideration is valued at $ 8.7 million on June 30, 2025.
18
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
On August 31, 2024, the
Company acquired a 70 % equity interest in an eight -clinic
practice physical therapy and the original practice owners retained a 30 % equity interest. The purchase price for the 70 % equity interest was approximately $ 2.0
million. As part of the transaction, the Company agreed to additional contingent consideration if future operational and financial objectives are met. The maximum amount of additional contingent consideration due under this agreement is $ 3.6 million. The contingent consideration was valued at $ 0.7
million on June 30, 2025.
On April 30, 2024 the Company acquired 100 % of an IIP business (“April 2024 Acquisition”), 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 payable. The note accrues interest at 5.0 % per annum and the principal and the interest is to be paid in May 2025.
As part of the transaction, the Company agreed to additional contingent consideration if future operational objectives are met by the business. The maximum amount of additional contingent consideration due under this agreement is $ 10.0 million. The contingent consideration was valued at $ 1.8
million as of June 30, 2025.
On March 29, 2024, the Company acquired a 50 % equity interest in a nine -clinic
physical therapy and hand therapy practice ( “March 2024 Acquisition” ). The original owners of the practice retained the remaining 50 %. The purchase price for the
50 % equity interest was approximately $ 16.4
million, of which $ 0.5 million was in the form of a note payable. The note accrues interest at 4.5 % per annum and the principal and the interest are payable on March 29, 2026. As part of the transaction, the Company agreed to additional
contingent consideration if future operational and financial objectives are met. There is no maximum payout. The contingent consideration was valued at $ 1.2
million on June 30, 2025.
For the year ended December 31, 2024, besides the
multi-clinic acquisition referenced above, the Company purchased the assets and business of seven physical therapy clinics, which were
tucked into larger partnerships in separate transactions.
The following table provides details on
the purchase price allocations for the March 2024 Acquisition, the April 2024 Acquisition and preliminary purchase price allocations for the other acquisitions described above.
Physical Therapy
IIP
Operations
Total
(In thousands)
Cash paid, net of cash acquired
$
23,106
$
110,009
$
133,115
Seller note
455
1,220
1,675
Deferred payments
-
1,500
1,500
Contingent payments
2,100
15,571
17,671
Total consideration
$
25,661
$
128,300
$
153,961
Estimated fair value of net tangible assets acquired:
Total current assets
$
1,132
$
9,978
$
11,110
Total non-current assets
563
30,382
30,945
Total liabilities
( 463
)
( 29,152
)
( 29,615
)
Net tangible assets acquired
1,232
11,208
12,440
Customer and referral relationships
6,500
53,097
59,597
Non-compete agreement
210
3,306
3,516
Tradenames
1,400
12,113
13,513
Goodwill
16,319
148,719
165,038
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
-
( 100,143
)
( 100,143
)
$
25,661
$
128,300
$
153,961
Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment used in the practice.
19
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the acquisitions in 2024, the values assigned to the customer and referral relationships and non-compete agreements are being amortized on a
straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.6
years. For the non-compete agreements, the weighted-average amortization period is 5.8 years. The values assigned to tradenames are
tested annually for impairment.
Variable Interest Entities
Certain states prohibit the “corporate
practice of medicine,” which restricts the Company from owning physical therapy practices which directly employ therapists and from exercising control over medical decisions by therapists. In these states, the Company enters into long-term
management agreements with medical practices that are owned by licensed therapists, which, in turn, employ or contract with therapists who provide professional services.
Based on the provisions of the management agreements, the Company determined that these entities are
variable interest entities. The Company’s ownership percentages in these entities is 50% as of June 30, 2025. The Company consolidates the VIEs since it controls the management and operating activities that are most significant to the VIEs’
economic performance and its ownership interests expose the Company to the risks and benefits that could potentially be significant to each VIE.
The assets of the VIEs recognized in consolidation may only be used to settle obligations of each
respective VIE and may not be used to satisfy claims of the Company, and the creditors of each VIE do not have recourse to the Company’s general credit. As of June 30, 2025, and December 31, 2024, the total assets of the Company’s variable
interest entities were $ 242.1 million and $ 231.3 million, respectively. As of June 30, 2025, and December 31, 2024, the total liabilities of the Company’s VIEs were $ 38.1 million and $ 31.9 million respectively.
The table below presents the operating results of the VIEs.
Three Months Ended
Six Months Ended
June 30, 2025
June 30, 2025
(In thousands)
Net revenue
$
23,117
$
42,923
Operating cost:
Salaries and related costs
13,175
26,080
Rent, supplies, contract labor and other
4,461
8,578
Depreciation and amortization
1,727
2,914
Provision for credit losses
230
427
Total operating cost
19,593
37,999
Gross profit
3,524
4,924
Other expense
3
6
Provision for income taxes
182
182
Net income
$
3,339
$
4,736
4. Redeemable Non-Controlling Interest
In most of the Company’s acquired partnerships, the former practice owner retains an equity interest in our subsidiary which the Company is required to purchase upon the exercise of
either the put right or the call right. The applicable purchase price is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The terms
and conditions regarding repurchase rights and obligations for most of the redeemable con-controlling interests, are summarized below under “Physical Therapy Practice Acquisitions”. However, the Company has an agreement that provides for different
rights and obligations regarding the particular redeemable non-controlling interests involved in that agreement – described below under “ProgressiveHealth Acquisition”.
Physical Therapy Practice Acquisitions
When the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic (referred to as “Therapy Practice”), these Therapy Practice transactions
typically occur in a series of steps which are described below.
20
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals
(the “Selling Shareholders”) most of whom are physical therapists that work in the Acquired Therapy Practice and provide physical therapy services to patients.
2.
In conjunction with the Acquisition, the Seller Entity contributes the acquired Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange
for one hundred percent ( 100 %) of the limited and general partnership interests in NewCo. Therefore, in this step, NewCo becomes a
wholly-owned subsidiary of the Seller Entity.
3.
The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from 50 % to 90 %) of the limited
partnership interest and in all cases 100 % of the general partnership interest in NewCo. The Company does not purchase 100 % of the limited partnership interest because the Selling Shareholders, through the Seller Entity, want to maintain an ownership percentage. 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”). In some of the acquired therapy
practice transactions, the Purchase Agreement contains an earn-out or other contingent consideration that is payable to the Seller Entity or the Selling Shareholders.
4.
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
limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo.
5.
As noted above, the Company does not purchase 100 %
of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“Seller Entity Interest”).
6.
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 six 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,
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.
7.
The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities
based on other employees in similar capacities within NewCo, the Company and the industry.
8.
The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete
agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing Therapy Practice activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the
Selling Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing Therapy Practice during the Non-Compete Term.
9.
The Non-Compete Term commences as of the date of the Acquisition and typically expires on the later
of :
a.
Two years after the date an Employed Selling
Shareholders’ employment is terminated (if the Selling Shareholder becomes an Employed Selling Shareholder) or
b.
Five to six years from the date of the Acquisition, as defined in the Non-Compete Agreement, regardless of whether the Selling Shareholder is employed by NewCo.
21
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
10.
The Non-Compete Agreement applies to a restricted region which is defined as a mileage radius from the Acquired 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.
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:
1.
Put Right
a.
In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified number of years following 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.
b.
In the event that any Selling Shareholder is not employed by NewCo as of the specified 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 has 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.
c.
In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the specified 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.
2.
Call Right
a.
If any Selling Shareholder’s employment by NewCo is terminated prior to the specified date after 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.
b.
In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the specified 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.
3.
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 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;
therefore, the undistributed earnings amount is small, if any.
4.
The Purchase Price for the initial equity interest purchased by the Company typically is 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.
5.
The Put Right and the Call Right do not have an expiration date.
22
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 business. The Progressive transaction was
completed in a series of steps which are described below.
1.
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.
2.
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.
3.
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”).
4.
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.
5.
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”).
6.
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”).
7.
The Progressive Non-Compete Term commences as of the date of the Progressive acquisition and expires on the later of:
a.
Two years after the date a Progressive Selling Shareholder no longer is
involved in the management of Progressive NewCo or
b.
Seven years from the date of the acquisition.
8.
The Progressive Non-Compete Agreement applies to the entire United States.
9.
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:
23
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
Progressive Put Right
a.
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.
b.
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.
2.
Progressive Call Rights
a.
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.
3.
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.
4.
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.
5.
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. 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. 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.
24
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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:
Six Months Ended
Year Ended
June 30, 2025
December 31, 2024
(In thousands)
Beginning balance
$
269,025
$
174,828
Net income allocated to redeemable non-controlling interest partners
5,926
10,044
Distributions to redeemable non-controlling interest partners
( 8,132
)
( 10,579
)
Changes in the fair value of redeemable non-controlling interest
1,903
4,964
Purchases of redeemable non-controlling interest
( 8,771
)
( 8,122
)
Acquired interest
2,715
100,336
Sales of redeemable non-controlling interest
675
1,969
Changes in notes receivable related to redeemable non-controlling interest
( 43
)
( 1,016
)
Reduction due to separation agreement
-
( 3,033
)
Adjustments in notes receivables related to the sales of redeemable non-controlling interest
-
( 366
)
Ending balance
$
263,298
$
269,025
The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests:
Six Months Ended
Year Ended
June 30, 2025
December 31, 2024
(In thousands)
Contractual time period has lapsed but holder’s employment has not terminated
$
71,396
$
74,668
Contractual time period has not lapsed and holder’s employment has not terminated
191,902
194,357
Holder’s employment has terminated and contractual time period has expired
-
-
Holder’s employment has terminated and contractual time period has not expired
-
-
$
263,298
$
269,025
5. Assets Held for Sale
In December 2024, the Company signed a non-binding Letter of Intent to sell an underperforming business unit within the physical therapy operations
segment. The decision to divest was based on performance considerations and strategic realignment.
As of December 31, 2024, the business unit met the criteria for classification as held for sale under ASC 360. A $ 2.4 million impairment charge was recorded to write down the business unit’s carrying value to fair value, less estimated costs to sell. The impairment
was included in impairment of assets held for sale on the consolidated statements of net income. The impairment charges primarily related to intangible assets. Assets held for sale were valued at $ 0.6 million on December 31, 2024, and have been presented within other current assets in the accompanying balance sheets.
The transaction was completed in February 2025 and the related loss on sale of $ 0.1 million was recognized in the consolidated statements of net income for the six months ended June 30, 2025.
25
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. Goodwill
The changes in the carrying amount of goodwill consisted of the following:
Six Months Ended
Year Ended
June 30, 2025
December 31, 2024
(In thousands)
Beginning balance
$
667,152
$
509,571
Acquisitions
8,551
164,529
Adjustments for purchase price allocation of businesses acquired in prior year
1,892
( 6,551
)
Other
-
( 397
)
Ending balance
$
677,595
$
667,152
For the three and six months ended June 30, 2025, and 2024, no triggering events or indicators were identified that would require impairment assessments as
of such periods.
7. Intangible Assets
The Company’s intangible assets, net, consisted of the following:
June 30, 2025
December 31, 2024
Gross Amount
Accumulated Amortization
Net Carrying
Amount
Gross Amount
Accumulated Amortization
Net Carrying
Amount
(In thousands)
Customer and referral relationships
$
158,474
$
( 44,895
)
$
113,579
$
156,747
$
( 39,218
)
$
117,529
Tradenames
57,586
-
57,586
57,041
-
57,041
Non-compete agreements
13,369
( 8,907
)
4,462
13,077
( 8,336
)
4,741
$
229,429
$
( 53,802
)
$
175,627
$
226,865
$
( 47,554
)
$
179,311
Tradenames, customer and referral relationships, and non-compete agreements are related to the businesses acquired. The value assigned to tradenames has an indefinite
life and is tested at least annually for impairment using the relief from royalty method in conjunction with the Company’s annual goodwill impairment test. The value assigned to customer and referral relationships is being amortized over their
respective estimated useful lives which range from 8.0 to 15.0 years. Non-compete agreements are amortized over the respective term of the agreements which range from 5.0
to 6.0 years. During the year ended December 31, 2024, the Company recognized charges of $ 2.0 million related to the impairment of assets held for sale. This impairment loss is presented in the impairment of assets held for sale in the Consolidated Statements of
Income.
The following table details the amount of amortization expense recorded for
intangible assets for the periods presented:
Three Months Ended
Six Months Ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
(In thousands)
Customer and referral relationships
$
2,870
$
2,066
$
5,677
$
3,884
Non-compete agreements
270
191
571
354
$
3,140
$
2,257
$
6,248
$
4,238
26
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Based on the balance of referral relationships and non-compete agreements as of June 30, 2025, the
expected amount to be amortized in 2025 and thereafter by year is as follows:
For the Year Ending December 31,
Customer and Referral
Relationships
Non-Compete
Agreements
(In thousands)
2025
(excluding the six months ended June 30, 2025)
$
5,912
$
562
2026
11,375
1,007
2027
11,212
881
2028
10,943
802
2029
10,565
629
Thereafter
63,572
581
8. Accrued Expenses
Accrued expenses consists of the following for the period presented.
June 30, 2025
December 31, 2024
(In thousands)
Salaries and related costs
$
31,559
$
34,886
Credit balances due to patients and payors
6,985
6,359
Group health insurance claims
4,723
2,462
Federal income taxes payable
-
4,544
Contingent consideration payable
14,147
3,043
Other property taxes payable
564
371
Interest payable
378
402
Closure costs
2,085
2,828
Professional fees
1,249
860
Other
3,746
3,758
Total
$
65,436
$
59,513
9. Borrowings
Amounts outstanding under the Company’s Senior Credit Facilities (as defined below) and notes payable
consisted of the following:
June 30, 2025
December 31, 2024
Principal
Amount
Unamortized
discount and
debt issuance
cost
Net Debt
Principal
Amount
Unamortized
discount and
debt issuance
cost
Net Debt
(In thousands)
Term Facility
$
135,000
$
( 830
)
$
134,170
$
140,625
$
( 1,049
)
$
139,576
Revolving Facility
24,500
-
24,500
11,000
-
11,000
Other
1,412
-
1,412
2,953
-
2,953
Total debt
160,912
( 830
)
160,082
154,578
( 1,049
)
153,529
Less: Current portion of long-term debt (1)
8,591
( 423
)
8,168
11,422
( 423
)
10,999
Long-term debt, net of current portion
$
152,321
$
( 407
)
$
151,914
$
143,156
$
( 626
)
$
142,530
(1)
The long-term portion is included as part of Other Long-Term Liabilities in the
Consolidated Balance Sheet.
Effective December 5, 2013, the Company entered into an Amended and Restated Credit Agreement with a commitment for a $ 125.0 million revolving credit facility. This agreement was amended and/or restated in August 2015,
January 2016, March 2017, November 2017, and January 2021 . On June 17, 2022, the Company entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) among Bank of
America, N.A., as administrative agent (“Administrative Agent”) and the lenders from time-to-time party thereto.
27
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Credit Agreement, which matures on June 17, 2027 , provides for loans in an aggregate principal amount
of $ 325 million . Such loans were made available through the following facilities
(collectively, the “Senior Credit Facilities”):
1)
Revolving Facility: $ 175 million , five-year , revolving credit facility (“Revolving Facility”), which includes a $ 12 million sublimit for the issuance of standby letters of credit and a $ 15 million sublimit for swingline loans (each, a “Swingline Loan”).
2)
Term Facility: $ 150 million term loan facility (the “Term Facility”). The Term
Facility amortizes in quarterly installments of: (a) 0.625 % in each of the first two years, (b)
1.250 % in the third and fourth year, and (c) 1.875 % in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date.
The proceeds of the Revolving Facility shall be used by the Company for working capital and other general corporate purposes of the Company and
its subsidiaries, including to fund future acquisitions and invest in growth opportunities. The proceeds of the Term Facility were used by the Company to refinance the indebtedness outstanding under the Amended Credit Agreement, to pay fees and
expenses incurred in connection with the transactions involving the loan facilities, for working capital and other general corporate purposes of the Company and its subsidiaries.
The Company is permitted to increase the Revolving Facility and/or add one or more tranches of term loans in an aggregate amount not to exceed the sum of (i) $ 100 million plus (ii) an
unlimited additional amount, provided that (in the case of clause (ii)), after giving effect to such increases, the pro forma Consolidated Leverage Ratio (as defined in the Credit Agreement) would not exceed 2.0 : 1.0, and the aggregate amount of all incremental increases under
the Revolving Facility does not exceed $ 50,000,000 .
The interest rates per annum applicable to the Senior Credit Facilities (other
than in respect of Swingline Loans) will be Term SOFR (as defined in the Credit Agreement) plus an applicable margin or, at the option of the Company, an alternate base rate plus an applicable margin. Each Swingline Loan shall bear interest at
the base rate plus the applicable margin. The applicable margin for Term SOFR borrowings ranges from 1.50 % to 2.25 %, and the
applicable margin for alternate base rate borrowings ranges from 0.50 % to 1.25 % , in each case, based on the Consolidated Leverage Ratio of the Company and its subsidiaries. Interest is payable at the end of the
selected interest period but no less frequently than quarterly and on the date of maturity.
The Company is also required to pay to the Administrative Agent, for the account
of each lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”). Such unused fee will range between 0.25 % and 0.35 % per annum and is also based on the Consolidated Leverage Ratio of the Company and its subsidiaries. The
Company may prepay and/or repay the revolving loans and the term loans, in whole or in part, at any time without premium or penalty, subject to certain conditions.
The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of
liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions,
thresholds and baskets. The Credit Agreement includes certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement also
contains customary events of default.
The Company’s obligations under the Credit Agreement are guaranteed by its wholly
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 June 30, 2025, $ 135.0 million was outstanding on the Term Facility while $ 24.5 million was outstanding under the Revolving Facility resulting in $ 150.5 million of credit availability. As of June 30, 2025, the Company was in compliance with all of the covenants contained in the Credit
Agreement.
28
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The interest rate on the Company’s Senior Credit Facilities was 5.1 % for the three months ended June 30, 2025, and 4.7 % for the three months ended June 30, 2024,
with an all-in effective interest rate, including all associated costs, of 5.6 % and 5.4 % 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, 2025 was 5.5 % and 5.4 % for the six months ended June 30, 2024.
The Company generally enters into various notes payable as a means of financing acquisitions. As of June 30 , 2025, the Company’s remaining outstanding balance on these notes amounte d to $ 1.4 million, of which $ 0.3 million is due in 2025, $ 0.9 million is due in 2026, and $ 0.2
million is due in 2027. Notes are generally payable in equal annual installments of principal over two years plus any accrued and
unpaid interest. Interest accrues at various interest rates ranging from 4.5 % to 8.5 % per annum.
10. Derivative Instruments
The Company is
exposed to certain market risks in the ordinary course of business due to adverse changes in interest rates. 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 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.
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 . 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. In connection with the swap, no cash was exchanged between the Company and the counterparty.
The Company designated its interest rate swap as a cash flow hedge and
structured it to be highly effective. 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
Six Months Ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
(In thousands)
Net income
$
17,720
$
11,712
$
31,188
$
23,329
Other comprehensive (loss) gain:
Unrealized (loss) gain on cash flow hedge
( 798
)
( 31
)
( 2,129
)
1,750
Tax effect at statutory rate (federal and state)
204
8
544
( 447
)
Comprehensive income
17,126
11,689
29,603
24,632
Comprehensive income attributable to non-controlling interest
( 5,327
)
( 4,206
)
( 8,896
)
( 7,777
)
Comprehensive
income attributable to USPH shareholders
$
11,799
$
7,483
$
20,707
$
16,855
The valuations of the Company’s interest rate derivatives are 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.
29
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as
follows.
June 30,
2025
December 31, 2024
(In thousands)
Other current assets
$
1,319
$
1,752
Other assets
311
2,006
$
1,630
$
3,758
11. Leases
The Company has operating leases for its corporate offices and operating facilities. 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. 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
or less. 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. These are expensed as incurred and recorded as variable lease expense.
The components of lease expense were as follows.
Three Months Ended
Six Months Ended
June 30 , 2025
June 30 , 2024
June 30 , 2025
June 30 , 2024
(In thousands)
Operating lease cost
$
12,058
$
10,263
$
23,774
$
20,216
Short-term lease cost
127
256
424
521
Variable lease cost
2,681
2,677
5,198
5,136
Sublease income
( 111
)
( 114
)
( 217
)
( 204
)
Total lease cost
$
14,755
$
13,082
$
29,179
$
25,669
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 informa tion
related to leases was as follows.
Three Months Ended
Six Months Ended
June 30, 2025
June 30, 2024
June 30 ,
2025
June 30 ,
2024
(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities
$
12,188
$
10,564
$
24,079
$
20,902
Right-of-use assets obtained in exchange for new operating lease liabilities
$
15,200
$
12,901
$
25,955
$
20,628
30
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The aggregate future lease payments for operating leases as of June 30, 2025, were
as follows.
Amount
Fiscal Year
(In thousands)
2025 (excluding the six months ended June 30, 2025)
$
24,169
2026
43,047
2027
33,672
2028
23,620
2029 and thereafter
38,028
Total lease payments
$
162,536
Less: imputed interest
17,219
Total operating lease liabilities
$
145,317
Average lease terms and discount rates were as follows.
June 30, 2025
June 30, 2024
Weighted-average remaining lease term - Operating leases
4.5 years
3.9 years
Weighted-average discount rate - Operating leases
4.9 %
4.4 %
The Company leases certain properties from Michael G. Mayrsohn (lessor), who is the President of Metro and elected to the Board of Directors by the Company’s
shareholders as of May 20, 2025. The two leases are classified as operating leases that expire on April 30, 2030 and December 31, 2031 .
For the six months ended June 30, 2025, the Company paid a total of $ 0.2 million of lease payments to Mr. Mayrsohn. Metro has made
leasehold improvements valued at $ 0.3 million as of June 30, 2025. The total of minimum future rental payments under these related
party lease agreements is $ 2.9 million as of June 30, 2025.
12. Segment Information
The Company’s reportable segments include the physical therapy operations segment and the IIP segment. Also included in the physical therapy operations segment are
revenues from management contract services and other services, which include services the Company provides on-site, such as athletic trainers for schools.
Physical Therapy Operations
The physical therapy operations segment primarily operates
through subsidiary clinic partnerships (“Clinic Partnerships”), in which the Company generally owns a 1 % general partnership interest in
all the Clinic Partnerships. The Company’s limited partnership interests generally range from 65 % to 75 % (the range is 25 % - 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”). Some of the Clinic Partnerships serve as management services organizations which manage and provide staffing and a variety of administrative services to physical therapy provider
entities in which the Company does not have an ownership interest. These Clinic Partnerships similarly are owned collectively by the Company and one or more physical therapists who are involved in the management of the operations. To a lesser
extent, the Company operates some clinics, through wholly-owned subsidiaries (hereinafter referred to as “Wholly-Owned Facilities).
The Company continues to seek to attract for employment
physical therapists who have established relationships with physicians and other referral sources, by offering these therapists a competitive salary and incentives based on the profitability of the clinic that they manage. 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.
31
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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 n on-c ontrolling 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 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
Services provided in the IIP segment include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacity
evaluations, 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. IIP services are
performed through Industrial Sports Medicine Professionals with specialized training related to the musculoskeletal system.
Segment Financials
The Company, including its chief operating decision maker, the Chief Executive Officer, uses gross profit in its budget-to-actual, forecasting,
and other analytical processes to assess segment performance and allocate resources.
32
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company has provided additional information regarding its reportable segments which contributes to the understanding of the
Company and provides useful information.
Three Months Ended
Six Months Ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
(In thousands)
(In thousands)
Net revenue:
Physical therapy operations
$
168,292
$
143,486
$
324,700
$
277,911
Industrial injury prevention services
29,052
23,704
56,432
44,954
Total Company
$
197,344
$
167,190
$
381,132
$
322,865
Operating Costs:
Salaries and related costs:
Physical therapy operations
$
95,668
$
81,452
$
189,241
$
161,226
Industrial injury prevention services
18,120
14,882
35,796
28,839
Total salaries and related costs
$
113,788
$
96,334
$
225,037
$
190,065
Rent supplies, contract labor and other:
Physical therapy operations
$
29,826
$
26,824
$
59,925
$
51,977
Industrial injury prevention services
4,301
3,511
8,046
6,342
Total rent, supplies, contract labor and other
$
34,127
$
30,335
$
67,971
$
58,319
Depreciation and amortization:
Physical therapy operations
$
5,516
$
4,067
$
10,701
$
7,840
Industrial injury prevention services
225
232
580
357
Total depreciation and amortization
$
5,741
$
4,299
$
11,281
$
8,197
Provision for credit losses:
Physical therapy operations
$
1,980
$
1,717
$
3,821
$
3,344
Industrial injury prevention services
15
-
22
-
Total provision for credit losses
$
1,995
$
1,717
$
3,843
$
3,344
Clinic closure costs:
Physical therapy operations
$
69
$
643
311
$
677
Industrial injury prevention services
-
-
-
-
Total clinic closure costs
$
69
$
643
311
$
677
Total Company
$
155,720
$
133,328
$
308,443
$
260,602
Gross profit:
Physical therapy operations
$
35,233
$
28,783
$
60,701
$
52,847
Industrial injury prevention services
6,391
5,079
11,988
9,416
Total Company
$
41,624
$
33,862
$
72,689
$
62,263
Unallocated amounts
Corporate office costs
$
17,476
$
14,249
$
33,721
$
28,334
Interest expense, debt and other
2,422
1,980
4,701
3,948
Interest income from investments
( 28
)
( 1,074
)
( 52
)
( 2,617
)
(Gain) loss on change in fair value of contingent earn-out consideration
( 790
)
4,046
( 5,612
)
3,434
Change in revaluation of put-right liability
339
223
743
303
Equity in earnings of unconsolidated affiliate
( 401
)
( 248
)
( 794
)
( 519
)
Loss on sale of a partnership
-
-
123
-
Other
$
( 47
)
( 109
)
$
( 122
)
( 171
)
Total unallocated amounts
$
18,971
$
19,067
$
32,708
$
32,712
Income before taxes
$
22,653
$
14,795
$
39,981
$
29,551
June 30, 2025
December 31, 2024
Assets:
Goodwill:
Physical therapy operations
$
589,643
$
579,046
Industrial injury prevention services
87,952
88,106
Total goodwill
$
677,595
$
667,152
All other assets:
Physical therapy operations
420,754
$
415,039
Industrial injury prevention services
81,251
85,276
Total all other assets
502,005
500,315
Total Assets
$
1,179,600
$
1,167,467
33
Table of Contents
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
13. Investment in Unconsolidated
Affiliate
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, 2025, is $ 12.3 million and the earnings amounted to approximately $ 0.4 million and $ 0.8 million for the three and six months
ended June 30, 2025, respectively. Earnings were $ 0.3 million and $ 0.5 million for the three and six months ended June 30, 2024, respectively.
14. Subsequent Events
On July 31, 2025, the Company acquired a 60 % equity interest in a three -clinic physical therapy practice with the original practice owners together retaining a 40 % equity interest.
The Company’s Board of Directors declared a quarterly dividend of $ 0.45 per share payable on September 12, 2025 ,
to shareholders of record on August 22, 2025 .
The Company’s Board
of Directors approved a share repurchase program effective August 5, 2025. The program authorizes the repurchase by the Company of up to $ 25
million of its outstanding shares of common stock over the period ending on December 31, 2026. Under the share repurchase program, shares may be repurchased from time to time in the open market or negotiated transactions at prevailing market
rates, or by other means in accordance with federal securities laws. The timing and amount of share repurchases under the share repurchase program, if any, will depend on several factors, including the Company’s stock price performance, ongoing
capital allocation priorities and general market conditions.
34
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.