NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
1. Organization, Nature of Operations and Basis of Presentation
U.S. Physical Therapy, Inc. and its subsidiaries (together, the Company) operate outpatient physical
therapy clinics that provide pre-and post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. As of December 31, 2013
the Company owned and operated 472 clinics in 43 states. The clinics business primarily originates from physician referrals. The principal sources of payment for the clinics services are managed care programs, commercial health
insurance, Medicare/Medicaid, workers compensation insurance and proceeds from personal injury cases. In addition to the Companys ownership of outpatient physical therapy clinics, it also manages physical therapy facilities for third
parties, primarily physicians, with 18 such third-party facilities under management as of December 31, 2013.
The consolidated
financial statements include the accounts of U.S. Physical Therapy, Inc. and its subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company primarily operates through subsidiary clinic partnerships,
in which the Company generally owns a 1% general partnership interest and a 64% limited partnership interest. The managing therapist of each clinic owns the remaining limited partnership interest in the majority of the clinics (hereinafter referred
to as Clinic Partnership). To a lesser extent, the Company operates some clinics through wholly-owned subsidiaries under profit sharing arrangements with therapists (hereinafter referred to as Wholly-Owned Facilities).
During the last three years, the Company completed the following multi-clinic acquisitions:
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|
|
|
|
|
Acquisition
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|
Date
|
|
% Interest
Acquired
|
|
|
Number of
Clinics
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
February 2013 Acquisition
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|
February 28
|
|
|
72
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%
|
|
9
|
April 2013 Acquisition
|
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April 30
|
|
|
50
|
%
|
|
5
|
May 2013 Acquistion
|
|
May 24
|
|
|
80
|
%
|
|
5
|
December 9, 2013 Acquisition
|
|
December 9
|
|
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60
|
%
|
|
12
|
December 13, 2013 Acquisition
|
|
December 13
|
|
|
90
|
%
|
|
11
|
|
|
|
|
|
|
2012
|
|
|
|
|
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May 2012 Acquisition
|
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May 22
|
|
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70
|
%
|
|
7
|
|
|
|
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2011
|
|
|
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|
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July 2011 Acquisition
|
|
July 25
|
|
|
51
|
%
|
|
20
|
In addition to the five multi-clinic acquisitions detailed above, in 2013, the Company acquired three
individual clinics in separate transactions. In addition to the May 2012 Acquisition, in 2012, the Company acquired seven individual clinics in separate transactions. Two of the acquired clinic practices operate in two separate partnerships and the
remaining five operate as satellites of existing partnerships.
Clinic Partnerships
For Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interest, typically owned by the managing therapist,
directly or indirectly, are recorded within the statements of net income and balance sheets as non-controlling interests.
44
Wholly-Owned Facilities
For Wholly-Owned Facilities with profit sharing arrangements, an appropriate accrual is recorded for the amount of profit sharing due the
clinic partners/directors. The amount is expensed as compensation and included in clinic operating costssalaries and related costs. The respective liability is included in current liabilitiesaccrued expenses on the balance sheet.
2. Significant Accounting Policies
Cash Equivalents
The Company maintains its cash and cash equivalents at financial institutions. The combined account balances at several institutions typically
exceed Federal Deposit Insurance Corporation (FDIC) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes that this risk is
not significant.
Long-Lived Assets
Fixed assets are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets.
Estimated useful lives for furniture and equipment range from three to eight years and for software purchased from three to seven years. Leasehold improvements are amortized over the shorter of the related lease term or estimated useful lives of the
assets, which is generally three to five years.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain
events or circumstances that indicate the related amounts may be impaired. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Goodwill
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 intangible assets. Historically, goodwill has been derived from acquisitions and,
prior to 2009, from the purchase of some or all of a particular local managements equity interest in an existing clinic. Effective January 1, 2009, if the purchase price of a non-controlling interest 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.
The fair
value of goodwill and other intangible assets with indefinite lives are tested for impairment annually and upon the occurrence of certain events, and are written down to fair value if considered impaired. The Company evaluates goodwill for
impairment on at least an annual basis (in its third quarter) by comparing the fair value of its reporting units to the carrying value of each reporting unit including related goodwill. The Company operates a one segment business which is made up of
various clinics within partnerships. The partnerships are components of regions and are aggregated to the operating segment level for the purpose of determining the Companys reporting units when performing its annual goodwill impairment test.
An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit, inclusive of goodwill
and other intangible assets, exceeds the estimated fair value of the reporting unit. The estimated fair value of a reporting unit is determined using two factors: (i) earnings prior to taxes, depreciation and amortization for the reporting unit
multiplied by a price/earnings ratio used in the industry and (ii) a discounted cash flow analysis. A weight is assigned to each factor and the sum of each weight times the factor is considered the estimated fair value. For 2013, the factors
(i.e., price/earnings ratio, discount rate and residual capitalization rate) were updated to reflect current market conditions. The evaluation of goodwill in 2013, 2012 and 2011 did not result in any goodwill amounts that were deemed impaired.
45
The Company has not identified any triggering events occurring after the testing date that would
impact the impairment testing results obtained. Factors which could result in future impairment charges include but are not limited to:
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changes as the result of government enacted national healthcare reform;
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changes in Medicare guidelines and reimbursement or failure of our clinics to maintain their Medicare certification status;
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|
business and regulatory conditions including federal and state regulations;
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|
changes in reimbursement rates or payment methods from third party payors including government agencies and deductibles and co-pays owed by patients;
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revenue and earnings expectations;
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general economic conditions;
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availability and cost of qualified physical and occupational therapists;
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personnel productivity;
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competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain operations and thereby incur losses and/or closure costs including the possible write-down or
write-off of goodwill and other intangible assets;
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maintaining adequate internal controls;
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availability, terms, and use of capital;
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acquisitions, purchase of non-controlling interests (minority interests) and the successful integration of the operations of the acquired businesses; and
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weather and other seasonal factors.
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The Company will continue to monitor for any triggering
events or other indicators of impairment.
Non-controlling Interests
The Company recognizes non-controlling interests as equity in the consolidated financial statements separate from the parent entitys
equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the income statement. Changes in a parent entitys 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.
The non-controlling interests that are reflected as redeemable
non-controlling interests in the consolidated financial statements consist of those outside owners that have certain put rights that are currently exercisable, and that, if exercised, require that the Company purchases the non-controlling interest
of the particular limited partner. The redeemable non-controlling interests reflect the book value of the respective non-controlling interests. The redeemable non-controlling interests will be adjusted to the fair value in the reporting period in
which the Company deems it probable that the limited partner will assert the put rights. Typically, for
46
acquisitions, the Company agrees to purchase the individuals non-controlling interest at a predetermined multiple of earnings before interest and taxes. As of December 31, 2012, there
were no non-controlling interests with put rights that were exercisable.
Revenue Recognition
Revenues are recognized in the period in which services are rendered. Net patient revenues (patient revenues less estimated contractual
adjustments) are reported at the estimated net realizable amounts from third-party payors, patients and others for services rendered. The Company has agreements with third-party payors that provide for payments to the Company at amounts different
from its established rates. The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience.
The Company determines allowances for doubtful accounts based on the specific agings and payor classifications at each clinic. The provision
for doubtful accounts is included in clinic operating costs in the statement of net income. Net accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for doubtful accounts,
includes only those amounts the Company estimates to be collectible.
Medicare Reimbursement
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (MPFS). The MPFS
rates are automatically updated annually based on a formula, called the sustainable growth rate (SGR) formula. The use of the SGR formula would have resulted in calculated automatic reductions in rates in every year since 2002; however,
for each year through March 31, 2014, Centers for Medicare & Medicaid Services (CMS) or Congress has taken action to prevent the implementation of SGR formula reductions. The Bipartisan Budget Act of 2013 froze the Medicare
physician fee schedule rates at 2013 levels through March 31, 2014, averting a scheduled 20.1% cut in the MPFS as a result of the SGR formula that would have taken effect on January 1, 2014. Unless Congress again takes legislative action
to prevent the SGR formula reductions from going into effect automatic reductions in the MPFS will commence on April 1, 2014.
The
Budget Control Act of 2011 increased the federal debt ceiling in connection with deficit reductions over the next ten years, and requires automatic reductions in federal spending by approximately $1.2 trillion. Payments to Medicare providers are
subject to these automatic spending reductions, subject to a 2% cap. On April 1, 2013, a 2% reduction to Medicare payments was implemented.
As a result of the Balanced Budget Act of 1997, the formula for determining the total amount paid by Medicare in any one year for outpatient
physical therapy, occupational therapy, and/or speech-language pathology services provided to any Medicare beneficiary (
i.e.
, the Therapy Cap or Limit) was established. Based on the statutory definitions which
constrained how the Therapy Cap would be applied, there is one Limit for Physical Therapy and Speech Language Pathology Services combined, and one Limit for Occupational Therapy. During 2013, the annual Limit on outpatient therapy services was
$1,900 for Physical Therapy and Speech Language Pathology Services combined and $1,900 for Occupational Therapy Services. Effective January 1, 2014, the annual Limit on outpatient therapy services is $1,920 for Physical and Speech Language
Pathology Services combined and $1,920 for Occupational Therapy Services. Historically, these Therapy Caps applied to outpatient therapy services provided in all settings, except for services provided in departments of hospitals. However, the
American Taxpayer Relief Act of 2012 and the Bipartisan Budget Act of 2013 extended the annual limits on therapy expenses to services furnished in hospital outpatient department settings through March 31, 2014. Unless Congress enacts
legislation to extend the application of these limits to therapy provided in hospital outpatient settings, the Therapy Caps will no longer apply to such services starting as of April 1, 2014.
47
In the Deficit Reduction Act of 2005, Congress implemented an exceptions process to the annual
Limit for therapy expenses for therapy services above the annual Limit. The Bipartisan Budget Act of 2013 extended the exceptions process for outpatient Therapy Caps through March 31, 2014. Therapy services above the annual Limit that are
medically necessary satisfy an exception to the annual Limit and such claims are payable by the Medicare program. Unless Congress extends the exceptions process, the Therapy Caps will apply to all claims regardless of medical necessity beginning
April 1, 2014. For any claim above the annual Limit, the claim must contain a modifier indicating that the services are medically necessary and justified by appropriate documentation in the medical record.
Furthermore, under the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRA), since October 1, 2012, patients who met
or exceeded $3,700 in therapy expenditures during a calendar year have been subject to a manual medical review to determine whether applicable payment criteria are satisfied. The $3,700 threshold is applied to Physical Therapy and Speech Language
Pathology Services; a separate $3,700 threshold is applied to the Occupational Therapy. The Bipartisan Budget Relief Act of 2013 extended through March 31, 2014 the requirement that Medicare perform manual medical review of therapy services
beyond the $3,700 threshold. In addition, as of January 1, 2013, CMS implemented a claims based data collection strategy that is designed to assist in reforming the Medicare payment system for outpatient therapy. Since January 1, 2013, all
therapy claims must include additional codes and modifiers providing information about the beneficiarys functional status at the outset of the therapy episode of care, specified points during treatment, and at the time of discharge. Effective
July 1, 2013, claims submitted without the appropriate codes and modifiers are returned unpaid.
CMS adopted a multiple procedure
payment reduction (MPPR) for therapy services in the final update to the MPFS for calendar year 2011. During 2011, the MPPR applied to all outpatient therapy services paid under Medicare Part B occupational therapy,
physical therapy and speech-language pathology. Under the policy, the Medicare program pays 100% of the practice expense component of the Relative Value Unit (RVU) for the therapy procedure with the highest practice expense RVU, then
reduces the payment for the practice expense component for the second and subsequent therapy procedures or units of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate
sessions. In 2011 and 2012, the practice expense component for the second and subsequent therapy service furnished during the same day for the same patient was reduced by 20% in office and other non-institutional settings and by 25% in institutional
settings. The American Taxpayer Relief Act of 2012 increased the payment reduction of the practice expense component to 50%, on subsequent therapy procedures in either setting, effective April 1, 2013. In addition, the Middle Class Tax Relief
and Job Creation Act of 2012 (MCTRA) directed CMS to implement a claims-based data collection program to gather additional data on patient function during the course of therapy in order to better understand patient conditions and
outcomes. All practice settings that provide outpatient therapy services are required to include this data on the claim form. Since July 1, 2013, therapists have been required to report new codes and modifiers on the claim form that
reflect a patients functional limitations and goals at initial evaluation, periodically throughout care, and at discharge. Since July 1, 2013, CMS has rejected claims if the required data is not included in the claim.
The Physician Quality Reporting System, or PQRS, is a CMS reporting program that uses a combination of incentive payments and
payment reductions to promote reporting of quality information by eligible professionals. Although physical therapists, occupational therapists and qualified speech-language therapists are generally able to participate in the PQRS
program, therapy professionals for whose services we bill through our rehab agencies cannot participate because the Medicare claims processing systems currently cannot accommodate institutional providers such as rehab agencies. Eligible
professionals, such as those of our therapy professionals for whose services we bill using their individual Medicare provider numbers, who do not satisfactorily report data on quality measures will be subject to a 2% reduction in their Medicare
payment in 2016.
Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are
complex and subject to interpretation. The Company believes that it is in substantial compliance in all material respects with all applicable laws and regulations and is not aware of any pending or threatened
48
investigations involving allegations of potential wrongdoing that would have a material effect on the Companys financial statements as of December 31, 2013. Compliance with such laws
and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program.
Management Contract Revenues
Management contract revenues are derived from contractual arrangements whereby the Company manages a clinic for third party owners. The Company
does not have any ownership interest in these clinics. Typically, revenues are determined based on the number of visits conducted at the clinic and recognized when services are performed. Costs, typically salaries for the Companys employees,
are recorded when incurred. Management contract revenues are included in other revenues in the accompanying Consolidated Statements of Net Income.
Contractual Allowances
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
Companys 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 collectibility estimates. However, the
services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from the Companys estimates. Payor terms are periodically revised necessitating continual review and assessment
of the estimates made by management. The Companys billing system does not capture the exact change in its contractual allowance reserve estimate from period to period in order to assess the accuracy of its revenues and hence its contractual
allowance reserves. Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, historically the difference between net revenues and corresponding
cash collections has generally reflected a difference within approximately 1% of net revenues. Additionally, analysis of subsequent periods contractual write-offs on a payor basis reflects a difference within approximately 1% between the
actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated with the same period end balance. As a result, the Company believes that a change in the contractual allowance reserve
estimate would not likely be more than 1% at December 31, 2013.
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.
49
The Company did not have any accrued interest or penalties associated with any unrecognized tax
benefits nor was any interest expense recognized during the twelve months ended December 31, 2013 and 2012. The Company will book any interest or penalties, if required, in interest and/or other income/expense as appropriate.
Fair Values of Financial Instruments
The carrying amounts reported in the balance sheet for cash and cash equivalents, 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 revolving credit facility approximates its fair value. The interest rate on the Credit Agreement, which is tied to the Eurodollar
Rate, is set at various short-term intervals, as detailed in the credit agreement.
Segment Reporting
Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by chief
operating decision makers in deciding how to allocate resources and in assessing performance. The Company identifies operating segments based on management responsibility and believes it meets the criteria for aggregating its operating segments into
a single reporting segment.
Use of Estimates
In preparing the Companys consolidated financial statements, management makes certain estimates and assumptions, especially in relation
to, but not limited to, goodwill impairment, 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.
Self-Insurance Program
The Company utilizes a self insurance plan for its employee group health insurance coverage administered by a third party. Predetermined loss
limits have been arranged with the insurance company to minimize the Companys maximum liability and cash outlay. Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims.
Management believes that the current accrued amounts are sufficient to pay claims arising from self insurance claims incurred through December 31, 2013.
Stock Options
The
Company measures and recognizes compensation expense for all stock-based payments at fair value. Compensation cost recognized includes compensation for all stock-based payments granted prior to, but not yet vested on January 1, 2006, based on
the grant-date fair value estimated at the time of grant and compensation cost for the stock-based payments granted subsequent to January 1, 2006, based on the grant-date fair value. There was no stock option compensation in the years ended
December 31, 2013, 2012 and 2011. No stock options were granted during the years ended December 31, 2013, 2012 and 2011. As of December 31, 2013, there were no non vested stock options.
Restricted Stock
Restricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively.
Typically, the transfer restrictions for shares granted to employees lapse in equal installments on the following four or five annual anniversaries of 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 restricted stock issued is included in basic and diluted shares for the earnings per share computation.
50
Reclassifications
Reclassification has been made to prior period amounts to conform to the current period presentation of the physician services business, which
was sold in 2013, as discontinued operations.
Subsequent Event
The Company has evaluated events occurring after the balance sheet date for possible disclosure as a subsequent event through the date that
these financial statements were issued.
3. Acquisitions of Businesses and Non-controlling Interests
Acquisition of Businesses
During 2013, 2012 and 2011, the Company completed the following multi-clinic acquisitions of physical therapy practices:
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|
|
|
|
|
|
|
|
|
|
% Interest
|
|
|
Number of
|
Acquisition
|
|
Date
|
|
Acquired
|
|
|
Clinics
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
February 2013 Acquisition
|
|
February 28
|
|
|
72
|
%
|
|
9
|
April 2013 Acquisition
|
|
April 30
|
|
|
50
|
%
|
|
5
|
May 2013 Acquisition
|
|
May 24
|
|
|
80
|
%
|
|
5
|
December 9, 2013 Acquisition
|
|
December 9
|
|
|
60
|
%
|
|
12
|
December 13, 2013 Acquisition
|
|
December 13
|
|
|
90
|
%
|
|
11
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
May 2012 Acquisition
|
|
May 22
|
|
|
70
|
%
|
|
7
|
|
|
|
|
|
|
2011
|
|
|
|
|
|
July 2011 Acquisition
|
|
July 25
|
|
|
51
|
%
|
|
20
|
In addition to the five multi-clinic acquisitions detailed above, in 2013, the Company acquired three
individual clinics in separate transactions. In addition to the May 2012 Acquisition, in 2012, the Company acquired seven individual clinic in separate transactions. Two of the acquired clinic practices operate in two separate partnerships and the
remaining five operate as satellites of existing partnerships.
The purchase price for the 72% interest in the February 2013 Acquisition
was $4.3 million in cash and $400,000 in a seller note, that is payable in two principal installments totaling $200,000 each, plus accrued interest, in February 2014 and 2015. The purchase price for the 50% interest in the April 2013 Acquisition was
$2.4 million in cash and $200,000 in a seller note, that is payable in two principal installments totaling $100,000 each, plus accrued interest, in April of 2014 and 2015. The purchase price for the 80% interest in the May 2013 Acquisition was $3.6
million in cash and $200,000 in a seller note, that is payable in two principal installments totaling $100,000 each, plus accrued interest, in May of 2014 and 2015. The purchase price for the 60% interest in the December 9, 2013 Acquisition was
$1.7 million in cash.
The purchase price for the 90% interest in the December 13, 2013 Acquisition was $35.5 million in cash and
$500,000 in a seller note, that is payable in two principal installments totaling $250,000 each, plus accrued interest, in December 2014 and 2015. On December 13, 2013, U.S. Physical Therapy, Ltd. (USPT Ltd. and
Purchaser), a wholly-owned subsidiary of the Company, entered into a Reorganization and Purchase Agreement (the Purchase Agreement) with ARC Rehabilitation Services, LLC, Athletic & Rehabilitation Center, LLC,
Matthew J. Condon and Kevin ORourke (collectively referred to as Sellers). Prior to, and in
51
connection with the transaction contemplated by the Purchase Agreement, the Sellers and Purchaser, formed or caused to be formed ARC Physical Therapy Plus, Limited Partnership, a Texas limited
partnership (ARC PT) and ARC PT Management GP, LLC, a Texas limited liability company (ARC GP). ARC GP, which owns a 1% interest in ARC PT, is the sole general partner of ARC PT. ARC PT owns and operates 11 outpatient
physical and occupational therapy clinics and has three on site industrial client locations it serves. As a result of the closing under the Purchase Agreement, USPT Ltd. owns 89% of the limited partnership interests of ARC PT and 100% of the
membership interests in ARC GP (the Acquired Interests). The business acquired complements the Companys business since it focuses on developing programs for traditional physical and occupational therapy, work hardening, corporate
wellness, as well as pre and post offer employment testing and functional capacity testing. The results of operations are included in the consolidated results of the Company since December 13, 2013 which includes $505,000 of net revenues and
$119,000 of earnings from the December 13, 2013 Acquisition.
Unaudited proforma net revenue and net income from continuing
operations for the Company as if the December 13, 2013 Acquisition occurred as of January 1, 2012 is as follows (in thousands, except per share data):
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|
For the Year Ended December 31,
|
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|
|
2013
|
|
|
2012
|
|
Net revenues
|
|
$
|
275,511
|
|
|
$
|
261,231
|
|
Net income attributable to common shareholders from continuing operations
|
|
$
|
19,231
|
|
|
$
|
19,894
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic - net income attributable to common shareholders from continuing operations
|
|
$
|
1.60
|
|
|
$
|
1.69
|
|
Diluted - net income attributable to common shareholders from continuing operations
|
|
$
|
1.59
|
|
|
$
|
1.67
|
|
Shares used in computation:
|
|
|
|
|
|
|
|
|
Basic - net income attributable to common shareholders from continuing operations
|
|
|
12,050
|
|
|
|
11,804
|
|
Diluted - net income attributable to common shareholders from continuing operations
|
|
|
12,069
|
|
|
|
11,904
|
|
The aggregate purchase price for the three clinic practices acquired in 2013 was $238,000.
The purchase prices for the acquisitions in 2013 have been preliminarily allocated as follows (in thousands):
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|
|
|
|
Cash paid, net of cash acquired
|
|
$
|
46,628
|
|
Seller notes
|
|
|
1,300
|
|
|
|
|
|
|
Total consideration
|
|
$
|
47,928
|
|
|
|
|
|
|
Estimated fair value of net tangible assets acquired:
|
|
|
|
|
Total current assets
|
|
$
|
3,895
|
|
Total non-current assets
|
|
|
2,283
|
|
Total liabilities
|
|
|
(1,082
|
)
|
|
|
|
|
|
Net tangible assets acquired
|
|
$
|
5,096
|
|
Referral relationships
|
|
|
400
|
|
Non compete
|
|
|
160
|
|
Tradename
|
|
|
600
|
|
Goodwill
|
|
|
52,213
|
|
Fair value of noncontrolling interest
|
|
|
(10,541
|
)
|
|
|
|
|
|
|
|
$
|
47,928
|
|
|
|
|
|
|
52
The purchase price for the 70% interest in the May 2012 Acquisition was $6,090,000 in cash and
$250,000 in seller notes, that are payable in two principal installments totaling $125,000 each, plus any accrued interest, in May 2013 and 2014. The seller notes accrue interest at 3.25% per annum. For the Company, 70% of the goodwill for the
May 2012 Acquisition is tax deductible. In addition to the above multi-clinic acquisitions, in 2012, the Company, through its subsidiaries, purchased seven outpatient therapy practices in seven transactions for aggregate cash consideration of
$1,938,000 and, in one transaction, a $100,000 note payable. For the Company, approximately 67% of the goodwill for the acquisitions in 2012 is tax deductible.
The purchase prices for the acquisitions in 2012 were allocated as follows (in thousands):
|
|
|
|
|
Cash paid, net of cash acquired
|
|
$
|
7,929
|
|
Seller notes
|
|
|
350
|
|
|
|
|
|
|
Total consideration
|
|
$
|
8,279
|
|
|
|
|
|
|
Estimated fair value of net tangible assets acquired:
|
|
|
|
|
Total current assets
|
|
$
|
410
|
|
Total non-current assets
|
|
|
525
|
|
Total liabilities
|
|
|
(333
|
)
|
|
|
|
|
|
Net tangible assets acquired
|
|
$
|
602
|
|
Referral relationships
|
|
|
857
|
|
Non compete
|
|
|
265
|
|
Tradename
|
|
|
1,300
|
|
Goodwill
|
|
|
8,147
|
|
Fair value of noncontrolling interest
|
|
|
(2,892
|
)
|
|
|
|
|
|
|
|
$
|
8,279
|
|
|
|
|
|
|
The purchase price for the 51% interest in the July 2011 Acquisition was $8,426,000, which consisted of
$8,226,000 in cash and a $200,000 seller note, that is payable in two principal installments totaling $100,000 each, plus any accrued interest, in July 2012 and 2013. The seller note accrues interest at 3.25% per annum. For the Company 51% of
the goodwill for the July 2011 Acquisition is tax deductible.
The purchase price for the July 2011 Acquisition was allocated as follows
(in thousands):
|
|
|
|
|
Cash paid, net of cash acquired
|
|
$
|
7,930
|
|
Seller notes
|
|
|
200
|
|
|
|
|
|
|
Total consideration
|
|
$
|
8,130
|
|
|
|
|
|
|
Estimated fair value of net tangible assets acquired:
|
|
|
|
|
Total current assets
|
|
$
|
1,341
|
|
Total non-current assets
|
|
|
902
|
|
Total liabilities
|
|
|
(581
|
)
|
|
|
|
|
|
Net tangible assets acquired
|
|
$
|
1,662
|
|
Tradename
|
|
|
1,900
|
|
Referral relationships
|
|
|
1,100
|
|
Non compete
|
|
|
300
|
|
Goodwill
|
|
|
11,263
|
|
Fair value of noncontrolling interest
|
|
|
(8,095
|
)
|
|
|
|
|
|
|
|
$
|
8,130
|
|
|
|
|
|
|
The purchase prices plus the fair value of the non-controlling interests for the February 2013 Acquisition and
the acquisitions in 2012 and 2011 were allocated to the fair value of the assets acquired, inclusive of
53
identifiable intangible assets, i.e. tradenames, referral relationships and non compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount
exceeding the fair values being recorded as goodwill. For the remaining acquisitions in 2013, the purchase prices plus the fair value of the non-controlling interests were allocated to the fair value of the assets acquired, exclusive of identifiable
intangible assets and liabilities assumed based on the preliminary estimates of the fair values at the acquisition date, with the amount exceeding the estimated fair values being recorded as goodwill.
For the remaining acquisitions in 2013, the Company is in the process of completing its formal valuation analysis to identify and determine
the fair value of tangible and intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates used at December 31, 2013 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.
For the February 2013 Acquisition and for the acquisitions in 2012 and 2011, the values assigned to the referral relationships and non compete
agreements are being amortized to expense equally over the respective estimated lives. For referral relationships, the range of the estimated lives was 12 to 13 years, and for non compete agreements the estimated lives was six years. The values
assigned to goodwill and tradenames are tested annually for impairment.
In April 2012, the Company sold 1% of its interest in the July
2011 Acquisition to the limited partners. The Company now owns a 50% interest in the July 2011 Acquisition, 1% as a general partner and 49% as a limited partner.
For the 2013, 2012 and 2011 acquisitions, total current assets primarily represent primarily patient accounts receivable. Total non current
assets are fixed assets, primarily equipment, used in the practices.
The consideration paid for each of the acquisitions was derived
through arms length negotiations. Funding for the cash portions was derived from proceeds from the Companys previous revolving credit facility. The results of operations of the acquisitions have been included in the Companys
consolidated financial statements since their respective date of acquisition. Unaudited proforma consolidated financial information for the acquisitions in 2013, with the exception of the December 13, 2013 Acquisition, 2012 and 2011
acquisitions have not been included as the results, individually and in the aggregate, were not material to current operations.
In
November 2011, the Company and the seller of an acquisition in 2010 reached an agreement regarding an adjustment to purchase price. The Company received $1.5 million cash, the forgiveness of the balance of $0.1 million on the notes payable as well
as the 30% partnership interest originally held by the seller which had a book value of $3.8 million.
Acquisitions of
Non-controlling Interests
In 15 separate transactions during 2013, the Company purchased partnership interests in 10 partnerships
and sold interests in five partnerships . The interests in the partnerships purchased and sold ranged from less than 1% to 35%. The aggregate of the purchase prices paid, was $1.9 million and the proceeds for the sales was $0.8 million, which
included cash of $0.2 million and notes receivable of $0.6 million. The purchase prices paid included a net of $0.1 million of undistributed earnings. The remaining $1.0 million, less future tax benefits of $0.4 million, was recognized as an
adjustment to additional paid-in capital.
In 15 separate transactions during 2012, the Company purchased partnership interests in 15
partnerships. The interests in the partnerships purchased ranged from 10% to 35%. The aggregate of the purchase prices paid
54
was $2.2 million, which included $0.2 million of undistributed earnings. The remaining purchase price of $2.0 million, less future tax benefits of $0.8 million, was recognized as an
adjustment to additional paid-in capital. During 2012, the Company sold interests in the range of 0.64% to 1% in three partnerships for an aggregate price of $239,000. This amount less related undistributed earnings of $5,000 was credited to
additional paid-in capital.
In six separate transactions during 2011, the Company purchased a total of 22.2% of the 30% non-controlling
interest in STAR Physical Therapy, LP, a subsidiary of the Company (STAR). The aggregate purchase price paid for the 22.2% interest was $16.9 million, which included $0.8 million of undistributed earnings. The remaining purchase price of
$16.1 million, less future tax benefits of $6.3 million, was recognized as an adjustment to additional paid-in capital. After these transactions, the Company owned 92.2% and the non-controlling interest limited partners in aggregate owned the
remaining 7.8% in the partnership. Of the 22.2% aggregate non-controlling interests purchased, 17% was held by Regg Swanson, the Managing Director and a founder of STAR and a member of the Companys Board of Directors (Swanson). The
purchase prices were determined based on the contractual terms in the Reorganization of Securities Purchase Agreement dated as of September 6, 2007 among the Company, STAR, the limited partners of STAR and Regg Swanson as Seller Representative
and in his individual capacity, which was filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on September 7, 2007. After the sale of his 17.0% interest, Swanson owned 2.0% of STAR (Swanson
Interest).
Effective June 30, 2011, the Company purchased the 35% non-controlling interest in one of its Texas partnerships.
The aggregate purchase price for the 35% interest was $3.9 million, of which $3.5 million was paid in cash and $367,272 was paid in the form of a note to the seller, which is payable in two equal annual installments of principal plus any accrued and
unpaid interest. Interest accrues at 3.25% per annum. The purchase price included $0.2 million of undistributed earnings and $0.2 million in invested capital. The remaining purchase price of $3.5 million, less future tax benefits of $1.4
million, was recognized as an adjustment to additional paid-in capital. After this transaction, the Company owns 100% of the partnership.
In addition, during 2011, the Company purchased the non-controlling interests of several other partners for $142,000, which included $48,000
of undistributed earnings and sold additional interest to an existing partner for $58,000. The net purchase price of approximately $36,000, less future tax benefits of $23,000, was recognized as an adjustment to additional paid-in capital.
The results of operations of the acquired non-controlling interests are included in the accompanying financial statements from the dates of
purchase in the net income attributable to common shareholders.
4. Divestiture of Business
On September 30, 2013, the Company sold the remainder of its physician services business. Previously, the Company
closed its two physician services facilities one in August 2013 and the other in December 2012. As previously disclosed in the Companys public filings, the physician services business incurred negative gross margins in 2012 and through
the first nine months of 2013. Revenues from physician services were generated by patient visits, franchise arrangements and fees from third parties. The results of operations and the loss on the sale of the physician services business have been
reclassified to discontinued operations for all periods presented.
The Company received $400,000 cash and a note receivable of $500,000.
The sale less the write-off of assets, primarily of goodwill and other intangible assets, and recording of appropriate accruals resulted in an after-tax loss of $4.4 million.
55
The following table details the losses, including the operating results, from discontinued
operations reported for the physician services business (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Net revenues
|
|
$
|
864
|
|
|
$
|
2,435
|
|
|
$
|
5,483
|
|
Operating costs
|
|
|
1,537
|
|
|
|
2,761
|
|
|
|
702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
(673
|
)
|
|
|
(326
|
)
|
|
|
4,781
|
|
Direct general and administrative expenses less proceeds
|
|
|
1,176
|
|
|
|
278
|
|
|
|
278
|
|
Write off of goodwill and other intangible assets
|
|
|
6,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,187
|
)
|
|
|
(604
|
)
|
|
|
4,503
|
|
Tax benefit (provision)
|
|
|
3,180
|
|
|
|
181
|
|
|
|
(1,399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations
|
|
$
|
(5,007
|
)
|
|
$
|
(423
|
)
|
|
$
|
3,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The cash flow impact of the sale and closures is deemed immaterial for the consolidated statements of cash
flows. The reclassifications on the consolidated balance sheet as of December 31, 2012 are also deemed immaterial.
5. Goodwill
The changes in the carrying amount of goodwill as of December 31, 2013 and 2012 consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31
|
|
|
|
2013
|
|
|
2012
|
|
Beginning balance
|
|
$
|
100,188
|
|
|
$
|
92,750
|
|
Goodwill acquired during the year
|
|
|
52,213
|
|
|
|
10,538
|
|
Goodwill allocated to specific assets for businesses acquired in 2011
|
|
|
|
|
|
|
(3,300
|
)
|
Goodwill allocated to specific assets for businesses acquired in 2012
|
|
|
(2,340
|
)
|
|
|
|
|
Goodwill adjustments for purchase price allocation of businesses acquired
|
|
|
(48
|
)
|
|
|
200
|
|
Goodwill written off - sale of physician services business
|
|
|
(6,058
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
143,955
|
|
|
$
|
100,188
|
|
|
|
|
|
|
|
|
|
|
6. Intangible Assets, net
Intangible assets, net as of December 31, 2013 and 2012 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Tradenames
|
|
$
|
9,814
|
|
|
$
|
7,973
|
|
Referral relationships, net of accumulated amortization of $1,582 and $1,217, respectively
|
|
|
3,959
|
|
|
|
3,501
|
|
Non compete agreements, net of accumulated amortization of $1,950 and $1,848, respectively
|
|
|
706
|
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,479
|
|
|
$
|
12,146
|
|
|
|
|
|
|
|
|
|
|
56
Tradenames, 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 Companys annual goodwill impairment test. The value assigned to
referral relationships is being amortized over their respective estimated useful lives which range from six to 16 years. Non compete agreements are amortized over the respective term of the agreements which range from five to six years.
The following table details the amount of amortization expense recorded for intangible assets for the years ended December 31, 2013, 2012
and 2011 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Referral relationships
|
|
$
|
521
|
|
|
$
|
433
|
|
|
$
|
305
|
|
Non compete agreements
|
|
|
372
|
|
|
|
405
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
893
|
|
|
$
|
838
|
|
|
$
|
695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2013, in conjunction with the sale of the physician services business, the Company wrote-off the
referral relationships and non compete agreements related to this business which included accumulated amortization of $156,000 and $270,000, respectively.
The remaining balance of referral relationships and non compete agreements is expected to be amortized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Referral Relationships
|
|
|
Non Compete Agreements
|
|
|
|
Annual
|
|
|
|
|
Annual
|
|
Years
|
|
Amount
|
|
|
Years
|
|
Amount
|
|
2014
|
|
|
461
|
|
|
2014
|
|
|
207
|
|
2015
|
|
|
440
|
|
|
2015
|
|
|
207
|
|
2016
|
|
|
440
|
|
|
2016
|
|
|
144
|
|
2017
|
|
|
440
|
|
|
2017
|
|
|
100
|
|
2018
|
|
|
404
|
|
|
2018
|
|
|
43
|
|
2019
|
|
|
367
|
|
|
2019
|
|
|
4
|
|
2020
|
|
|
367
|
|
|
|
|
|
|
|
2021
|
|
|
367
|
|
|
|
|
|
|
|
2022
|
|
|
318
|
|
|
|
|
|
|
|
2023
|
|
|
211
|
|
|
|
|
|
|
|
2024
|
|
|
108
|
|
|
|
|
|
|
|
2025
|
|
|
31
|
|
|
|
|
|
|
|
2026
|
|
|
5
|
|
|
|
|
|
|
|
7. Accrued Expenses
Accrued expenses as of December 31, 2013 and 2012 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Salaries and related costs
|
|
$
|
11,686
|
|
|
$
|
8,941
|
|
Group health insurance claims
|
|
|
2,023
|
|
|
|
991
|
|
Credit balances and overpayments due to patients and payors
|
|
|
2,371
|
|
|
|
1,513
|
|
Other
|
|
|
4,545
|
|
|
|
2,671
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,625
|
|
|
$
|
14,116
|
|
|
|
|
|
|
|
|
|
|
57
8. Notes Payable
Notes payable as of December 31, 2013 and 2012 consisted of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Credit Agreement average effective interest rate of 2.9% inclusive of unused fee
|
|
$
|
40,000
|
|
|
$
|
17,400
|
|
Various notes payable with $825 plus accrued interest due in the next year interest accrues at 3.25% per annum
|
|
|
1,475
|
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,475
|
|
|
|
18,034
|
|
Less current portion
|
|
|
(825
|
)
|
|
|
(459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40,650
|
|
|
$
|
17,575
|
|
|
|
|
|
|
|
|
|
|
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 with a maturity date of November 30, 2018 (Credit Agreement). The Credit Agreement is unsecured and has loan covenants, including requirements that the Company comply with a
consolidated fixed charge coverage ratio and consolidated leverage ratio. Proceeds from the Credit Agreement may be used for working capital, acquisitions, purchases of the Companys common stock, dividend payments to the Companys common
stockholders, capital expenditures and other corporate purposes. The pricing grid is based on the Companys consolidated leverage ratio with the applicable spread over LIBOR ranging from 1.5% to 2.5% or the applicable spread over the Base Rate
ranging from 0.1% to 1%. Fees under the Credit Agreement include an unused commitment fee ranging from 0.1% to 0.25% depending on the Companys consolidated leverage ratio and the amount of funds outstanding under the Credit Agreement.
On December 31, 2013, $40.0 million was outstanding on the Credit Agreement resulting in $85.0 million of availability. As of
December 30, 2013, the Company was in compliance with all of the covenants thereunder.
The Company generally enters into various
notes payable as a means of financing a portion of its acquisitions and purchases of non-controlling interests. In conjunction with the acquisitions in 2013, the Company entered into notes payable in the aggregate amount of $1.3 million, each
payable in two equal annual installments totaling $650,000 plus any accrued and unpaid interest. Interest accrues at 3.25% per annum, subject to adjustment. In conjunction with the acquisitions in 2012, the Company entered into notes payable in
the aggregate amount of $350,000, each payable in two equal annual installments totaling $175,000 plus any accrued and unpaid interest. Interest accrues at 3.25% per annum. In conjunction with the July 2011 Acquisition, the Company entered into
a note payable in the amount of $200,000 payable in two equal annual installments of $100,000 plus any accrued and unpaid interest. Interest accrues at 3.25% per annum. In June 2011, the Company, in conjunction with the purchase of a
non-controlling interest, entered into a note payable in the amount of $367,272 payable in two equal annual installments of $183,636 plus any accrued and unpaid interest. Interest accrued at 3.25% per annum.
Aggregate annual payments of principal required pursuant to the Credit Agreement and the above notes payable subsequent to December 31,
2013 are as follows (in thousands):
|
|
|
|
|
During the twelve months ended December 30, 2014
|
|
$
|
825
|
|
During the twelve months ended December 30, 2015
|
|
|
650
|
|
During the twelve months ended December 30, 2018
|
|
|
40,000
|
|
|
|
|
|
|
|
|
$
|
41,475
|
|
|
|
|
|
|
58
9. Income Taxes
Significant components of deferred tax assets included in the consolidated balance sheets at December 31, 2013 and 2012
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Compensation
|
|
$
|
1,280
|
|
|
$
|
1,059
|
|
Allowance for doubtful accounts
|
|
|
449
|
|
|
|
607
|
|
Lease obligations - closed clinics
|
|
|
77
|
|
|
|
39
|
|
Other
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
$
|
1,806
|
|
|
$
|
1,727
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
(4,237
|
)
|
|
$
|
(2,166
|
)
|
Other
|
|
|
(546
|
)
|
|
|
(575
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
(4,783
|
)
|
|
|
(2,741
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
(2,977
|
)
|
|
$
|
(1,014
|
)
|
|
|
|
|
|
|
|
|
|
Amount included in:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
482
|
|
|
$
|
590
|
|
Long term liabilities
|
|
$
|
(3,459
|
)
|
|
$
|
(1,604
|
)
|
During 2013 and 2012, the Company recorded deferred tax assets of $0.4 million and $0.8 million, respectively,
related to acquisitions of non-controlling interests. At December 31, 2013 and 2012, the Company had a tax receivable of $2.2 million and $4.2 million, respectively, included in other current assets on the accompanying consolidated balance
sheets.
The differences between the federal tax rate and the Companys effective tax rate for results of continuing operations for
the years ended December 31, 2013, 2012 and 2011 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
U. S. tax at statutory rate
|
|
$
|
10,415
|
|
|
|
35.0
|
%
|
|
$
|
10,299
|
|
|
|
35.0
|
%
|
|
$
|
9,979
|
|
|
|
35.0
|
%
|
State income taxes, net of federal benefit
|
|
|
1,814
|
|
|
|
6.1
|
%
|
|
|
1,219
|
|
|
|
4.2
|
%
|
|
|
963
|
|
|
|
3.4
|
%
|
Deductible losses
|
|
|
(98
|
)
|
|
|
-0.3
|
%
|
|
|
(404
|
)
|
|
|
-1.4
|
%
|
|
|
|
|
|
|
0.0
|
%
|
Nontaxable gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,342
|
)
|
|
|
-4.7
|
%
|
Nondeductible expenses
|
|
|
105
|
|
|
|
0.3
|
%
|
|
|
101
|
|
|
|
0.3
|
%
|
|
|
98
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,236
|
|
|
|
41.1
|
%
|
|
$
|
11,215
|
|
|
|
38.1
|
%
|
|
$
|
9,698
|
|
|
|
34.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant components of the provision for income taxes for continuing operations for the years ended
December 31, 2013, 2012 and 2011 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
8,445
|
|
|
$
|
7,117
|
|
|
$
|
6,376
|
|
State
|
|
|
1,422
|
|
|
|
360
|
|
|
|
(511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
9,867
|
|
|
|
7,477
|
|
|
|
5,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
1,970
|
|
|
|
3,183
|
|
|
|
3,603
|
|
State
|
|
|
399
|
|
|
|
555
|
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
2,369
|
|
|
|
3,738
|
|
|
|
3,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision for continuing operations
|
|
$
|
12,236
|
|
|
$
|
11,215
|
|
|
$
|
9,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
For 2012, 2011 and 2010, the Company performed a detailed reconciliation of its federal and state
taxes payable and receivable accounts along with its federal and state deferred tax asset and liability accounts. As a result of this detailed analysis, the Company recorded an increase in the 2013 state income tax provision of $393,000, for the
2012 reconciliation, and $162,000 additional provision in 2012 for the 2011 reconciliation. No adjustment was necessary for the 2010 reconciliation. The Company considers this reconciliation process to be an annual control.
The Company is required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income in the periods
which the deferred tax assets are deductible, management believes that a valuation allowance is not required, as it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax
assets.
The Companys U.S. federal returns remain open to examination for 2010 through 2012 and U.S. state jurisdictions are open
for periods ranging from 2009 through 2012.
The Company does not believe that it has any significant uncertain tax positions at
December 31, 2013, nor is this expected to change within the next twelve months due to the settlement and expiration of statutes of limitation.
The Company did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense
recognized during the years ended December 31, 2013, 2012 and 2011.
10. Equity Based Plans
The Company has the following equity based plans with outstanding equity grants:
The Amended and Restated 1999 Employee Stock Option Plan (the Amended 1999 Plan) permits the Company to grant to non-employee
directors and employees of the Company up to 600,000 non-qualified options to purchase shares of common stock and restricted stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions).
The exercise prices of options granted under the Amended 1999 Plan are determined by the Compensation Committee. The period within which each option will be exercisable is determined by the Compensation Committee. The Amended 1999 Plan was approved
by the shareholders of the Company at the 2008 Shareholders Meeting on May 20, 2008.
The Amended and Restated 2003 Stock Option
Plan (the Amended 2003 Plan) permits the Company to grant to key employees and outside directors of the Company incentive and non-qualified options and shares of restricted stock covering up to 1,750,000 shares of common stock
(subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). The Amended 2003 Plan was approved by the shareholders of the Company at the 2013 Shareholders Meeting on May 14, 2013.
A cumulative summary of equity plans as of December 31, 2013 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Restricted
|
|
|
Outstanding
|
|
|
Stock Options
|
|
|
Stock Options
|
|
|
Available
|
|
Equity Plans
|
|
Authorized
|
|
|
Stock Issued
|
|
|
Stock Options
|
|
|
Exercised
|
|
|
Exercisable
|
|
|
for Grant
|
|
Amended 1999 Plan
|
|
|
600,000
|
|
|
|
360,900
|
|
|
|
8,700
|
|
|
|
131,091
|
|
|
|
8,700
|
|
|
|
99,309
|
|
Amended 2003 Plan
|
|
|
1,750,000
|
|
|
|
422,663
|
|
|
|
30,000
|
|
|
|
748,300
|
|
|
|
30,000
|
|
|
|
549,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,350,000
|
|
|
|
783,563
|
|
|
|
38,700
|
|
|
|
879,391
|
|
|
|
38,700
|
|
|
|
648,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
A summary of the status of the Companys stock options granted under the plans as of
December 31, 2013, 2012 and 2011 and the changes during the years then ended is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
Intrinsic
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
Value
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
(000s)
|
|
Outstanding at December 31, 2010
|
|
|
723,890
|
|
|
|
14.30
|
|
|
3.6 Years
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(375,080
|
)
|
|
|
13.92
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2011
|
|
|
348,810
|
|
|
|
14.30
|
|
|
2.6 Years
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(272,750
|
)
|
|
|
14.12
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(220
|
)
|
|
|
17.89
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2012
|
|
|
75,840
|
|
|
|
14.71
|
|
|
2.2 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(37,140
|
)
|
|
|
15.25
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
38,700
|
|
|
|
18.36
|
|
|
1.6 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2013
|
|
|
38,700
|
|
|
|
|
|
|
1.6 Years
|
|
$
|
654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All shares pursuant to stock options were fully vested at December 31, 2013 and 2012.
A summary of the intrinsic value of stock options exercised during the years ended December 31, 2013, 2012 and 2011 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
Intrinsic
|
|
|
|
Number of
|
|
|
Value
|
|
|
|
Shares
|
|
|
(000)
|
|
2011
|
|
|
375,080
|
|
|
$
|
3,160
|
|
2012
|
|
|
272,750
|
|
|
$
|
3,459
|
|
2013
|
|
|
37,140
|
|
|
$
|
402
|
|
61
The following tables summarize information about the Companys stock options outstanding as
of December 31, 2013, 2012 and 2011, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Options as of
December 31, 2013
|
|
|
Exercise
Price
|
|
Weighted Average
Remaining
Contractual Life
|
|
Exercisable
|
|
Exercise
Price
|
1999 Plan
|
|
|
8,700
|
|
|
$12.60 -
$18.42
|
|
1.6 Years
|
|
8,700
|
|
$12.60 -
$18.42
|
2003 Plan
|
|
|
30,000
|
|
|
$18.42
|
|
1.6 Years
|
|
30,000
|
|
$18.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,700
|
|
|
$12.60 - $18.42
|
|
1.6 Years
|
|
38,700
|
|
$12.60 - $18.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Options as of
December 31, 2012
|
|
|
Exercise
Price
|
|
Weighted Average
Remaining
Contractual Life
|
|
Exercisable
|
|
Exercise
Price
|
1999 Plan
|
|
|
15,840
|
|
|
$12.60 - $18.42
|
|
2.2 Years
|
|
15,840
|
|
$12.60 - $18.42
|
2003 Plan
|
|
|
60,000
|
|
|
$12.51 - $18.80
|
|
2.2 Years
|
|
60,000
|
|
$12.51 - $18.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,840
|
|
|
$12.51 - $18.80
|
|
2.2 Years
|
|
75,840
|
|
$12.51 - $18.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Options as of
December 31, 2011
|
|
|
Exercise
Price
|
|
Weighted Average
Remaining
Contractual Life
|
|
Exercisable
|
|
Exercise
Price
|
1999 Plan
|
|
|
17,310
|
|
|
$12.60 - $18.42
|
|
3.2 Years
|
|
17,310
|
|
$12.60 - $18.42
|
2003 Plan
|
|
|
251,500
|
|
|
$12.51 - $18.80
|
|
2.9 Years
|
|
251,500
|
|
$12.51 - $18.80
|
Inducements
|
|
|
80,000
|
|
|
$12.75 - $14.32
|
|
1.7 Years
|
|
80,000
|
|
$12.75 - $14.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
348,810
|
|
|
$12.51 - $18.80
|
|
2.6 Years
|
|
348,810
|
|
$12.51 - $18.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2003, the Board of Directors of the Company granted inducement options (Inducements) to
five individuals in connection with their offers of employment. In 2012, the remaining options were exercised.
The following table
summarizes information about the Companys stock options outstanding and those options that are exercisable as of December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
Exercise Prices
|
|
Options
|
|
|
Options
|
|
$12.60
|
|
|
400
|
|
|
|
400
|
|
$18.42
|
|
|
38,300
|
|
|
|
38,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,700
|
|
|
|
38,700
|
|
|
|
|
|
|
|
|
|
|
62
During 2013, 2012 and 2011, the Company granted the following shares (net of those shares
cancelled in their respective grant year due to employee terminations prior to restrictions lapsing) of restricted stock to directors, officers and employees pursuant to its equity plans as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
Year
|
|
Number of
|
|
|
Fair Value
|
|
Granted
|
|
Shares
|
|
|
Per Share
|
|
2011
|
|
|
156,750
|
|
|
$
|
19.94
|
|
2012
|
|
|
80,650
|
|
|
$
|
21.65
|
|
2013
|
|
|
174,938
|
|
|
$
|
23.52
|
|
Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following
four or five 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 executive officers, the
restriction will lapse in equal quarterly installments during the three to four years following the date of grant.
As of
December 31, 2013, there were 244,018 shares outstanding for which restrictions had not lapsed. The restrictions will lapse in 2014 through 2017.
Compensation expense for grants of restricted stock will be recognized based on the fair value on the date of grant. Compensation expense for
restricted stock grants was $2,743,000, $2,102,000 and $2,032,000, respectively, for 2013, 2012 and 2011. As of December 31, 2013, the remaining $4.2 million of compensation expense will be recognized from 2014 through 2017.
11. Preferred Stock
The Board is empowered, without approval of the shareholders, to cause shares of preferred stock to be issued in one or more
series and to establish the number of shares to be included in each such series and the rights, powers, preferences and limitations of each series. There are no provisions in the Companys Articles of Incorporation specifying the vote required
by the holders of preferred stock to take action. All such provisions would be set out in the designation of any series of preferred stock established by the Board. The bylaws of the Company specify that, when a quorum is present at any meeting, the
vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before the meeting, unless a different vote is required by law or the Companys
Articles of Incorporation. Because the Board has the power to establish the preferences and rights of each series, it may afford the holders of any series of preferred stock, preferences, powers, and rights, voting or otherwise, senior to the right
of holders of common stock. The issuance of the preferred stock could have the effect of delaying or preventing a change in control of the Company.
12. Common Stock
From September 2001 through December 31, 2008, the Board authorized the Company to purchase, in the open market or in
privately negotiated transactions, up to 2,250,000 shares of the Companys common stock. In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of its common stock (March 2009
Authorization). In connection with the March 2009 Authorization, the Company amended the Credit Agreement to permit share repurchases of up to $15,000,000. The Company is required to retire shares purchased under the March 2009 Authorization.
Under the March 2009 Authorization, the Company has purchased a total of 859,499 shares. There is no expiration date for the share
repurchase program. The Credit Agreement was further amended to permit the Company to purchase, commencing on October 24, 2012 and at all times thereafter, up to $15,000,000 of its common stock subject to compliance with covenants. There are
currently an additional estimated 340,501 shares
63
that may be purchased from time to time in the open market or private transactions depending on price, availability and the Companys cash position. The Company did not purchase any shares
of its common stock during 2012 or 2013.
13. Defined Contribution Plan
The Company has a 401(k) profit sharing plan covering all employees with three months of service. The Company may make
discretionary contributions of up to 50% of employee contributions. The Company did not make any discretionary contributions and recognized no contribution expense for the years ended December 31, 2013, 2012 and 2011.
14. Commitments and Contingencies
Operating Leases
The Company has entered into operating leases for its executive offices and clinic facilities. In connection with these agreements, the Company
incurred rent expense of $22.0 million, $20.8 million and $19.4 million for the years ended December 31, 2013, 2012 and 2011, respectively. Several of the leases provide for an annual increase in the rental payment based upon the Consumer Price
Index. The majority of the leases provide for renewal periods ranging from one to five years. The agreements to extend the leases specify that rental rates would be adjusted to market rates as of each renewal date.
The future minimum operating lease commitments for each of the next five years and thereafter and in the aggregate as of December 31,
2013 are as follows (in thousands):
|
|
|
|
|
2014
|
|
$
|
22,563
|
|
2015
|
|
|
18,263
|
|
2016
|
|
|
12,761
|
|
2017
|
|
|
7,859
|
|
2018
|
|
|
4,274
|
|
Thereafter
|
|
|
1,902
|
|
|
|
|
|
|
|
|
$
|
67,622
|
|
|
|
|
|
|
Employment Agreements
At December 31, 2013, the Company had outstanding employment agreements with three of its executive officers. These agreements, which
presently expire on December 31, 2015, provide for automatic one year renewals if not terminated on at least 12 month notice. All of the agreements contain a provision for annual adjustment of salaries.
In addition, the Company has outstanding employment agreements with most of the managing physical therapist partners of the Companys
physical therapy clinics and with certain other clinic employees which obligate subsidiaries of the Company to pay compensation of $18.1 million in 2014 and $4.5 million in the aggregate from 2015 through 2018. In addition, most of the
employment agreements with the managing physical therapists provide for monthly bonus payments calculated as a percentage of each clinics net revenues (not in excess of operating profits) or operating profits.
64
15. Earnings Per Share
The computations of basic and diluted earnings per share for the years ended December 31, 2013, 2012 and 2011 are as
follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Earnings attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
17,492
|
|
|
$
|
18,212
|
|
|
$
|
18,812
|
|
From discontinued operations
|
|
|
(4,769
|
)
|
|
|
(279
|
)
|
|
|
2,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,723
|
|
|
$
|
17,933
|
|
|
$
|
20,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
1.45
|
|
|
$
|
1.54
|
|
|
$
|
1.60
|
|
From discontinued operations
|
|
|
(0.40
|
)
|
|
|
(0.02
|
)
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.05
|
|
|
$
|
1.52
|
|
|
$
|
1.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
1.45
|
|
|
$
|
1.53
|
|
|
$
|
1.57
|
|
From discontinued operations
|
|
|
(0.40
|
)
|
|
|
(0.02
|
)
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.05
|
|
|
$
|
1.51
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share - weighted-average shares
|
|
|
12,063
|
|
|
|
11,804
|
|
|
|
11,814
|
|
Effect of dilutive securities - Stock options
|
|
|
19
|
|
|
|
100
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share - adjusted weighted-average shares
|
|
|
12,082
|
|
|
|
11,904
|
|
|
|
11,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All options to purchase shares for the year ended December 31, 2013, 2012 and 2011 were included in the
diluted earnings per share calculation as the average market price for those years exceeded the options exercise price.
65
16. Selected Quarterly Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
|
(In thousands, except per share data)
|
|
Net patient revenues from continuing operations
|
|
$
|
61,432
|
|
|
$
|
65,227
|
|
|
$
|
64,368
|
|
|
$
|
67,256
|
|
Net revenues from continuing operations
|
|
$
|
62,756
|
|
|
$
|
66,868
|
|
|
$
|
65,829
|
|
|
$
|
68,605
|
|
Operating income from continuing operations
|
|
$
|
8,435
|
|
|
$
|
11,059
|
|
|
$
|
9,904
|
|
|
$
|
9,372
|
|
Net income from continuing operations including noncontrolling interests
|
|
$
|
5,809
|
|
|
$
|
7,642
|
|
|
$
|
6,756
|
|
|
$
|
5,796
|
|
Net income from continuing operations attributable to common shareholders
|
|
$
|
3,851
|
|
|
$
|
5,079
|
|
|
$
|
4,659
|
|
|
$
|
3,903
|
|
Net losses from discontinued operations attributable to common shareholders
|
|
$
|
(130
|
)
|
|
$
|
(165
|
)
|
|
$
|
(4,432
|
)
|
|
$
|
(42
|
)
|
Net income attributable to common shareholders.
|
|
$
|
3,721
|
|
|
$
|
4,914
|
|
|
$
|
227
|
|
|
$
|
3,861
|
|
Basic earnings per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations.
|
|
$
|
0.32
|
|
|
$
|
0.42
|
|
|
$
|
0.38
|
|
|
$
|
0.32
|
|
From discontinued operations
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
|
$
|
0.41
|
|
|
$
|
0.02
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations.
|
|
$
|
0.32
|
|
|
$
|
0.42
|
|
|
$
|
0.38
|
|
|
$
|
0.32
|
|
From discontinued operations
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.31
|
|
|
$
|
0.41
|
|
|
$
|
0.02
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic.
|
|
|
11,955
|
|
|
|
12,089
|
|
|
|
12,106
|
|
|
|
12,103
|
|
Diluted
|
|
|
11,979
|
|
|
|
12,110
|
|
|
|
12,120
|
|
|
|
12,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
|
(In thousands, except per share data)
|
|
Net patient revenues from continuing operations
|
|
$
|
60,366
|
|
|
$
|
61,963
|
|
|
$
|
60,719
|
|
|
$
|
61,052
|
|
Net revenues from continuing operations
|
|
$
|
61,771
|
|
|
$
|
63,397
|
|
|
$
|
62,102
|
|
|
$
|
62,381
|
|
Operating income from continuing operations
|
|
$
|
9,765
|
|
|
$
|
10,806
|
|
|
$
|
9,534
|
|
|
$
|
8,301
|
|
Net income from continuing operations including noncontrolling interests
|
|
$
|
6,733
|
|
|
$
|
7,452
|
|
|
$
|
6,423
|
|
|
$
|
6,032
|
|
Net income from continuing operations attributable to common shareholders
|
|
$
|
4,436
|
|
|
$
|
4,958
|
|
|
$
|
4,588
|
|
|
$
|
4,230
|
|
Net income (losses) from discontinued operations attributable to common shareholders
|
|
$
|
42
|
|
|
$
|
(109
|
)
|
|
$
|
(25
|
)
|
|
$
|
(187
|
)
|
Net income attributable to common shareholders
|
|
$
|
4,478
|
|
|
$
|
4,849
|
|
|
$
|
4,563
|
|
|
$
|
4,043
|
|
Basic earnings per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations.
|
|
$
|
0.37
|
|
|
$
|
0.41
|
|
|
$
|
0.39
|
|
|
$
|
0.35
|
|
From discontinued operations
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.37
|
|
|
$
|
0.40
|
|
|
$
|
0.39
|
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations.
|
|
$
|
0.37
|
|
|
$
|
0.41
|
|
|
$
|
0.38
|
|
|
$
|
0.35
|
|
From discontinued operations
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted.
|
|
$
|
0.37
|
|
|
$
|
0.40
|
|
|
$
|
0.38
|
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,955
|
|
|
|
12,089
|
|
|
|
12,106
|
|
|
|
12,103
|
|
Diluted.
|
|
|
11,979
|
|
|
|
12,110
|
|
|
|
12,120
|
|
|
|
12,117
|
|
66