U.S. Physical Therapy net income for second-quarter 2010 increases 23% to $4.5 million

U.S. Physical Therapy, Inc. (NasdaqGS: USPH), a national operator of outpatient physical therapy clinics, today reported results for the second quarter and six months ended June 30, 2010.

“The Company's net free cash flow remains strong. During the second quarter, notes and bank borrowings were reduced by approximately $7.8 million down to $4.3 million. USPH's cash less debt, or net cash, at June 30th was $2.8 million.”

U.S. Physical Therapy's net income for the quarter ended June 30, 2010 increased approximately 23% to $4.5 million from $3.6 million in the second quarter of 2009. Diluted earnings per share rose to $.38 from $.31.

Net income for the six months ended June 30, 2010 increased approximately 20% to $7.6 million as compared to $6.4 million for the first six months of 2009. Diluted earnings per share increased to $.64 from $.54.

Second Quarter 2010 compared to Second Quarter 2009

• Net revenue increased 4.5% from $51,787,000 in the second quarter of 2009 to $54,103,000 in the second quarter of 2010, due to an increase in average net patient revenue per visit of $1.91, or 1.9%, from $103.21 to $105.12 and an increase of 2.1% in patient visits from 487,000 to 497,000.
• Gross margin increased to 28.7% for the 2010 second quarter as compared to 27.7% in the 2009 second quarter. Total clinic operating costs were $38,602,000, or 71.3% of net revenue in the second quarter of 2010, as compared to $37,429,000, or 72.3% of net revenue, in the 2009 period. Clinic salaries and related costs were the same for both quarters at 51.0% of net revenue. Rent, clinic supplies, contract labor and other costs as a percentage of net revenue were 18.9% for the 2010 period versus 19.5% for the 2009 comparable period. The provision for doubtful accounts was 1.4% of net revenue in the second quarter of 2010 as compared to 1.7% in the 2009 second quarter.
• Corporate office costs were $5,511,000, or 10.2% of net revenue, in the second quarter of 2010 versus $5,871,000, or 11.3% of net revenue, in the 2009 quarter.
• Operating income increased in the second quarter of 2010 by 17.7% to $9,990,000 from $8,487,000 for the 2009 second quarter. The operating income margin percentage of 18.5% for the second quarter of 2010 compares to 16.4% for the second quarter 2009.
• Provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interests was 39.3% for both quarters.
• Net income attributable to common shareholders in the second quarter of 2010 rose 22.9% to $4,451,000 from $3,622,000 in the second quarter of 2009. Diluted earnings per share increased to $.38 from $.31.
• Same store revenues for de novo and acquired clinics open for one year or more declined by less than a percent. Average net rate per visit increased by 1.6% while same store visits decreased by 2.4%.
• The Company ended the second quarter of 2010 with 369 clinics. During the period, the Company opened seven start-up de novo clinics and closed five clinics.

Six Months 2010 compared to Six Months 2009

• Net revenue increased 4.6% from $99,956,000 in the first six months of 2009 to $104,508,000 in the 2010 period, due to an increase in average net patient revenue per visit of $2.59, or 2.5%, from $102.03 to $104.62 and an increase of 1.7% in patient visits from 950,000 to 966,000.
• Gross margin increased slightly to 26.8% for the 2010 six months as compared to 26.2% in the comparable period in 2009. Total clinic operating costs were $76,536,000, or 73.2% of net revenue in the first six months of 2010, as compared to $73,753,000, or 73.8% of net revenue, in 2009. Clinic salaries and related costs as a percentage of net revenue remained constant at approximately 52.0% for both periods. Rent, clinic supplies, contract labor and other costs as a percentage of net revenue were 19.5% for the 2010 first half versus 20.3% in 2009. The provision for doubtful accounts was approximately 1.7% of net revenue in the first half of both years.
• Corporate office costs were $11,316,000, or 10.8% of net revenue, in the 2010 period versus $11,259,000, or 11.3% of net revenue, in the 2009 period.
• Operating income increased in the first six months of 2010 by 11.5% to $16,656,000 from $14,944,000 for the 2009 six months. The operating income margin percentage of 15.9% for the first six months of 2010 compares to 15.0% for the first six months of 2009.
• Other income in the 2010 period included a net pre-tax gain of $578,000 in the first quarter from the sale of a five clinic joint venture.
• Provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interests was 39.3% for both of the 2010 and 2009 periods.
• Net income attributable to common shareholders in the 2010 first half rose 19.6% to $7,623,000 from $6,376,000 in 2009. Diluted earnings per share increased to $.64 from $.54.
• Same store revenues for de novo and acquired clinics open for one year or more decreased slightly. Average net rate per visit increased by 2.3% while same store visits decreased by 1.6%.
• The Company ended June 2010 with 369 clinics. During the six month period, the Company acquired five clinics, opened eight start-up de novo clinics, sold a five clinic joint venture and closed seven locations.

Chris Reading, Chief Executive Officer, said, "Despite challenges in the economy, our team has made the necessary adjustments producing solid earnings per share growth as well as margin expansion for both the quarter and year to date periods. We see continued pressure on same store volumes as unemployment remains high; however, we believe USPH has significant opportunities for continued growth and future expansion."

Larry McAfee, Chief Financial Officer, noted, "The Company's net free cash flow remains strong. During the second quarter, notes and bank borrowings were reduced by approximately $7.8 million down to $4.3 million. USPH's cash less debt, or net cash, at June 30^th was $2.8 million."

2010 Earnings Guidance Raised

U.S. Physical Therapy now expects the Company's earnings for the full year 2010 to be in the range of $13.8 million to $14.5 million in net income and $1.17 to $1.22 in diluted earnings per share. The Company does not provide quarterly guidance. The annual guidance figures will not be updated again unless there is a material development that causes management to believe that earnings will be significantly outside the given range.