UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from to
Commission file number 1-11151
U.S. PHYSICAL THERAPY, INC.
(Name of registrant as specified in its charter)
Nevada 76-0364866
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3040 Post Oak Blvd., Suite 222, Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 297-7000
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: 3,610,734
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the
three months ended March 31, 1998 and 1997 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 8
<PAGE>
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
1998 1997
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,396 $ 5,556
Patient accounts receivable, less
allowance for doubtful accounts
of $1,596 and $1,595,
respectively 7,995 7,707
Accounts receivable-other 242 187
Other current assets 439 504
Total current assets 15,072 13,954
Fixed assets:
Furniture and equipment 8,461 8,111
Leasehold improvements 3,943 3,869
12,404 11,980
Less accumulated depreciation 6,414 5,951
5,990 6,029
Noncompete agreements, net of
amortization of $524, and $501,
respectively 101 124
Goodwill, net of amortization of
$158, and $138, respectively 1,020 1,042
Other assets 1,395 1,399
$ 23,578 $ 22,548
See notes to consolidated financial statements.
3 <PAGE>
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
March 31, December 31,
1998 1997
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 142 $ 250
Accrued expenses 1,618 1,333
Estimated third-party payor
(Medicare) settlements 1,274 1,095
Notes payable 72 72
Total current liabilities 3,106 2,750
Notes payable - long-term portion 172 189
Convertible subordinated notes
payable 8,050 8,050
Minority interests in subsidiary
limited partnerships 1,779 1,557
Commitments - -
Shareholders' equity:
Preferred stock, $.01 par value,
500,000 shares authorized, -0-
shares outstanding - -
Common stock, $.01 par value,
10,000,000 shares authorized,
3,615,634 shares outstanding
at March 31, 1998 and
December 31, 1997, respectively 36 36
Additional paid-in capital 11,689 11,689
Accumulated deficit (1,207) (1,676)
Treasury stock at cost, 4,900
shares held at March 31, 1998
and December 31, 1997,
respectively (47) (47)
Total shareholders' equity 10,471 10,002
$ 23,578 $ 22,548
See notes to consolidated financial statements.
4<PAGE>
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
March 31,
1998 1997
(unaudited)
Net patient revenues $ 10,452 $ 8,627
Other revenues 138 65
Net revenues 10,590 8,692
Clinic operating costs:
Salaries and related costs 4,967 4,127
Rent, clinic supplies and other 2,666 2,349
Provision for doubtful accounts 273 234
7,906 6,710
Corporate office costs:
General and administrative 1,010 844
Recruitment and development 288 269
1,298 1,113
Operating income before non-
operating expenses 1,386 869
Interest expense 182 183
Minority interests in subsidiary
limited partnerships 430 276
Income before income taxes 774 410
Provision for income taxes 305 16
Net income $ 469 $ 394
Basic earnings per common share $ .13 $ .11
Earnings per common share-assuming
dilution $ .13 $ .11
See notes to consolidated financial statements.
5<PAGE>
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
1998 1997
(unaudited)
Operating activities
Net income $ 469 $ 394
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 512 452
Minority interests in earnings
of subsidiary limited
partnerships 430 276
Provision for bad debts 273 234
Loss (gain) on sale of fixed
assets 1 (3)
Changes in operating assets and
liabilities:
Increase in patient accounts
receivable (562) (514)
Increase in accounts receivable-
other (55) (75)
Decrease (increase) in other
assets 64 (112)
Increase (decrease) in accounts
payable and accrued expenses 177 (52)
Increase in estimated third-
party payor (Medicare)
settlements 179 286
Net cash provided by operating
activities 1,488 886
See notes to consolidated financial statements.
6<PAGE>
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
1998 1997
(unaudited)
Investing activities
Purchase of fixed assets (423) (322)
Purchase of intangibles - -
Proceeds on sale of fixed assets - 67
Net cash used in investing
activities (423) (255)
Financing activities
Proceeds from notes payable - 40
Payment of notes payable (17) (21)
Proceeds from investment of minority
investors in subsidiary limited
partnerships 1 1
Distributions to minority investors
in subsidiary limited partnerships (209) (156)
Net cash used in financing
activities (225) (136)
Net increase in cash and cash
equivalents 840 495
Cash and cash equivalents -
beginning of period 5,556 4,912
Cash and cash equivalents -
end of period $ 6,396 $ 5,407
Supplemental disclosures of cash
flow information
Cash paid during the period for:
Income taxes $ 55 $ 89
Interest $ 162 $ 165
See notes to consolidated financial statements.
7<PAGE>
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
1. Basis of Presentation and Significant Accounting Policies
The consolidated financial statements include the accounts of U.S.
Physical Therapy, Inc. and its wholly-owned subsidiaries (the
"Company"). All significant intercompany transactions and balances
have been eliminated. The Company, through its wholly-owned
subsidiaries, currently owns a 1% general partnership interest and
limited partnership interests ranging from 59% to 99% in the
clinics it operates (89% of the clinics were at 64% as of March 31,
1998). For the majority of the clinics, the managing therapist of
each such clinic, along with other therapists at the clinic in
several of the partnerships, own the remaining limited partnership
interest in the clinic which ranges from 0% to 40%. The minority
interest in the equity and earnings of the subsidiary clinic
limited partnerships are presented separately in the consolidated
financial statements.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with
the instructions for Form 10-Q. Accordingly, the statements do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying unaudited financial
statements contain all necessary adjustments (consisting only of
normal recurring adjustments) to present fairly the Company's
financial position, results of operations and cash flows for the
interim periods presented. For further information regarding the
Company's accounting policies, refer to the audited financial
statements included in the Company's Form 10-KSB for the year ended
December 31, 1997.
Operating results for the three months ended March 31, 1998 ("1998
First Quarter") are not necessarily indicative of the results
expected for the entire year.
Use of Estimates
Management is required to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
8<PAGE>
Reclassifications
The accompanying financial statements for 1997 have been
reclassified to conform with the presentation used for 1998.
2. Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share:
Three Months Ended
March 31,
1998 1997
Numerator:
Net income $ 469,000 $ 394,000
Numerator for basic earnings
per share and diluted earnings
per share $ 469,000 $ 394,000
Denominator:
Denominator for basic earnings
per share--weighted-average shares 3,610,734 3,594,715
Effect of dilutive securities:
Stock options 138,766 94,125
Warrants - 28,036
Dilutive potential common shares 138,766 122,161
Denominator for diluted earnings
per share--adjusted weighted-
average shares and assumed
conversions 3,749,500 3,716,876
Basic earnings per share $ 0.13 $ 0.11
Diluted earnings per share $ 0.13 $ 0.11
During the 1998 and 1997 First Quarters, the Company had outstanding
the following notes payable: 8% Convertible Subordinated Notes due
June 30, 2003, for an aggregate principal amount of $3,050,000; 8%
Convertible Subordinated Notes, Series B, due June 30, 2004, for an
aggregate principal amount of $2,000,000; and 8% Convertible
Subordinated Notes, Series C, due June 30, 2004, for an aggregate
principal amount of $3,000,000 (collectively "the Notes"). The Notes
were not included in the computation of diluted earnings per share
because the effect on the computation was anti-dilutive.
9<PAGE>
3. Income Taxes
Significant components of the provision for income taxes, for the
three months ended March 31, were as follows:
1998 1997
Current:
Federal $1,083,000 $ 94,000
State 55,000 45,000
Total current 1,138,000 139,000
Deferred:
Federal (833,000) (123,000)
State - -
Total deferred (833,000) (123,000)
Total income tax provision $ 305,000 $ 16,000
10<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Overview
The Company operates outpatient physical and occupational therapy
clinics which provide post-operative care and treatment for a
variety of orthopedic-related disorders and sports-related injuries.
At March 31, 1998, the Company operated 84 outpatient physical and
occupational therapy clinics in 25 states. The average age of the
84 clinics in operation at March 31, 1998 is 3.1 years old. Since
inception of the Company, 85 clinics have been developed and six
clinics have been acquired by the Company. To date, the Company has
closed two facilities, due to adverse clinic performance,
consolidated the operations of three of its clinics with other
existing clinics to more efficiently serve various geographic
markets and sold certain fixed assets at two of the Company's
clinics and then closed such facilities. The sale of fixed assets
and the concurrent closure of the two clinics occurred during the
three months ended March 31, 1997 ("1997 First Quarter"). No loss
was recognized relating to these 1997 First Quarter closures. These
two clinics combined accounted for net patient revenues and clinic
operating costs for the 1997 First Quarter of $(1,000) and $48,000,
respectively.
Results of Operations
Three Months Ended March 31, 1998 Compared to the Three Months Ended
March 31, 1997
Net Patient Revenues
Net patient revenues increased to $10,452,000 for the 1998 First
Quarter from $8,627,000 for the 1997 First Quarter, an increase of
$1,825,000, or 22 percent. Net patient revenues from the 15 clinics
developed since the 1997 First Quarter (the "New Clinics") accounted
for 43 percent of the increase or $779,000. The remaining increase
of $1,046,000 in net patient revenues comes from those 69 clinics
opened more than one year as of March 31, 1998 (the "Pre-March 1998
Clinics"). The majority of the $1,046,000 increase in net patient
revenues from these clinics resulted from an 11 percent increase in
the number of patient visits, while the average rate charged per
visit remained stable.
Net patient revenues are based on established billing rates less
allowances and discounts for patients covered by worker's
compensation programs and other contractual programs. Payments
received under these programs are based on predetermined rates and
are generally less than the established billing rates of the
clinics. Net patient revenues reflect reserves, which are evaluated
quarterly by management, for contractual and other adjustments
relating to patient discounts from certain payors. Net patient
revenues also are reported net of estimated retrospective
adjustments under Medicare. Medicare reimbursement for outpatient
physical or occupational therapy services furnished by clinics or
11<PAGE>
rehabilitation agencies is paid based on a cost reimbursement
methodology. The Company is initially reimbursed at a tentative
rate with final settlement determined after submission of an annual
cost report by the Company and audits thereof by the Medicare fiscal
intermediary. Beginning in 1998, certain changes were imposed in
the method in which the Company is reimbursed for its services by
Medicare as defined in the Balanced Budget Act of 1997 ("BBA"). See
Factors Affecting Future Results section of Management's Discussion
and Analysis or Plan of Operation.
Other Revenues
Other revenues, consisting of interest, management fees and sublease
income, increased by $73,000, or 112 percent, to $138,000 for the
1998 First Quarter from $65,000 for the 1997 First Quarter. This
increase was due primarily to management fees earned in connection
with a contract the Company entered into during the 1997 First
Quarter to manage a third party physical therapy clinic and an
increase in interest income as a result of the higher average amount
of cash and cash equivalents available for investment during the
1998 First Quarter.
Clinic Operating Costs
Clinic operating costs as a percent of net patient revenues declined
to 76% for the 1998 First Quarter from 78% for the 1997 First
Quarter.
Clinic Operating Costs - Salaries and Related Costs
Clinic operating costs - salaries and related costs increased to
$4,967,000 for the 1998 First Quarter from $4,127,000 for the 1997
First Quarter, an increase of $840,000 or 20 percent. Approximately
52 percent of the increase, or $439,000, was due to the New Clinics.
The remaining 48 percent increase or $401,000 is due principally to
increased staffing to meet the increase in patient visits for the
clinics opened prior to the 1998 First Quarter, coupled with an
increase in bonuses earned by the managing therapists at the clinics
opened prior to the 1998 First Quarter. Such bonuses are based on
the net revenues or operating profit generated by the individual
clinics. Clinic operating costs - salaries and related costs as a
percent of net patient revenues remained stable at 48 percent for
both the 1998 First Quarter and the 1997 First Quarter.
Clinic Operating Costs - Rent, Clinic Supplies and Other
Clinic operating costs - rent, clinic supplies and other increased
to $2,666,000 for the 1998 First Quarter from $2,349,000 for the
1997 First Quarter, an increase of $317,000, or 13 percent.
Approximately 67 percent of the increase, or $213,000, was due to
the New Clinics, while 33 percent, or $104,000, of the increase was
due to clinics opened prior to the 1998 First Quarter. Clinic
operating costs - rent, clinic supplies and other as a percent of
net patient revenues declined to 26 percent for the 1998 First
Quarter from 27 percent for the 1997 First Quarter.
12<PAGE>
Clinic Operating Costs - Provision for Doubtful Accounts
Clinic operating costs - provision for doubtful accounts increased
to $273,000 for the 1998 First Quarter from $234,000 for the 1997
First Quarter, an increase of 17 percent or $39,000. Approximately
42 percent of the increase, or $16,000, was due to the New Clinics,
while 58 percent, or $23,000, of the increase relates to the clinics
opened prior to the 1998 First Quarter. The provision as a percent
of net patient revenues declined to 2.6 percent for the 1998 First
Quarter compared to 2.7 percent for the 1997 First Quarter.
Corporate Office Costs - General & Administrative
Corporate office costs - general and administrative, consisting
primarily of salaries of corporate office personnel and related
costs, recruiting fees associated with hiring personnel at both the
corporate office and at the seasoned clinics, insurance costs,
depreciation and amortization, travel, legal, application fees and
professional fees increased to $1,010,000 for the 1998 First Quarter
from $844,000 for the 1997 First Quarter, an increase of $166,000,
or 20 percent. Corporate office costs - general and administrative
increased primarily as a result of additional personnel hired to
oversee the operations of an increasing number of clinics in
operation and increased legal and professional fees relating to
operating these additional clinics. Corporate office costs -
general and administrative, as a percent of net patient revenues,
remained stable at 10 percent for the 1998 First Quarter and for the
1997 First Quarter.
Corporate Office Costs - Recruitment & Development
Corporate office costs - recruitment and development primarily
represent salaries of recruitment and development personnel, travel,
marketing and recruiting fees attributed directly to the Company's
activities in the development and acquisition of new clinics. All
recruitment and development personnel are located at the corporate
office in Houston, Texas. Once a clinic has opened, these personnel
are not involved with the clinic. Corporate office costs -
recruitment and development increased $19,000 or 7 percent to
$288,000 for the 1998 First Quarter from $269,000 for the 1997 First
Quarter. The majority of this increase relates to an increase in
salaries and related costs of recruitment and development personnel
which were added in response to management's intention to accelerate
the pace of new clinic openings during 1998 from the level of 13 new
clinics developed and opened during 1997. Corporate office costs -
recruitment and development, as a percent of net patient revenues,
remained stable at 3 percent for the 1998 First Quarter and for the
1997 First Quarter.
13<PAGE>
Interest Expense
Interest expense of $182,000 for the 1998 First Quarter relates
primarily to $56,000 of interest expense on the $3,050,000 aggregate
principal amount of 8% Convertible Subordinated Notes issued by the
Company in June 1993 and $99,000 of interest expense on the
$5,000,000 aggregate principal amount of 8% Series B and Series C
Notes issued by the Company in May 1994. In addition, $19,000 of
interest expense was recorded in the 1998 First Quarter relating to
the Contingent Interest Enhancement feature of the Series B Notes.
This feature allowed Series B Note holders to receive an interest
enhancement payable in shares of Company Common Stock based upon the
market value of the Company's shares for the month of June 1996,
which corresponded to two years from the date of issuance of the
Series B Notes (the "Contingent Interest Enhancement"). A total of
70,965 shares of Company Common Stock were issued in connection with
the Contingent Interest Enhancement feature.
Minority Interests in Subsidiary Limited Partnerships
Minority interests in subsidiary limited partnerships increased
$154,000, or 56 percent, to $430,000 for the 1998 First Quarter from
$276,000 for the 1997 First Quarter due to the increase in aggregate
profitability of those clinics in which partners have achieved
positive retained earnings and are accruing partnership income.
Provision for Income Taxes
The provision for income taxes increased to $305,000 for the 1998
First Quarter from $16,000 for the 1997 First Quarter, an increase
of $289,000. The increase in federal income taxes to $250,000 in
the 1998 First Quarter from $(29,000) in the comparable 1997 quarter
is due to the fact that during 1997, the Company utilized all of its
unused net operating loss carryforwards. Accordingly, during the
1998 First Quarter, the Company was taxed at the corporate level
federal tax rate of 34%. Coupled with this is the fact that during
the 1997 First Quarter, the Company reduced its valuation allowance
against its deferred federal tax asset by $123,000. State income
taxes increased to $55,000 for the 1998 First Quarter from $45,000
for the comparable 1997 quarter, and increase of $10,000. The
increase in state tax expense corresponds to the increase in
profitability of the clinics.
Net Income
The Company's net income for 1998 First Quarter of $469,000 exceeded
the 1997 First Quarter's net income of $394,000 principally due to
the $1,898,000 increase in net revenues, which more than offset the
$1,196,000 increase in clinic operating costs, the $185,000 increase
in corporate office costs, the $154,000 increase in minority
interests in subsidiary limited partnerships and the $289,000
increase in income taxes.
14<PAGE>
Liquidity and Capital Resources
At March 31, 1998, the Company had $6,396,000 in cash and cash
equivalents, which is available to fund the working capital needs of
its operating subsidiaries, future clinic developments and
acquisitions and the Company's repurchase of shares of its common
stock. Included in cash and cash equivalents at March 31, 1998
is $4,300,000 of short-term United States government agency
securities and $525,000 of short-term United States government money
market funds. The market value of the short-term United States
government agency securities and the United States government money
market funds approximated the carrying value of such securities as
of March 31, 1998.
The increase in cash of $840,000 from December 31, 1997 to March 31,
1998 is due to cash provided by operating activities of $1,488,000,
offset, in part, by the Company's use of cash to fund capital
expenditures, primarily for physical therapy equipment and leasehold
improvements, in the amount of $423,000, distributions to minority
partners in subsidiary limited partnerships of $209,000 and payment
on notes payable of $17,000.
The Company's current ratio decreased to 4.85 to 1.00 at March 31,
1998 from 5.07 to 1.00 at December 31, 1997. The decrease in the
current ratio is due primarily to an increase in accrued expenses
and estimated third-party payor (Medicare) settlements, offset, in
part, by an increase in net patient revenues, which, in turn, have
caused an increase in patient accounts receivable. At March 31,
1998, the Company had a debt-to-equity ratio of 0.79 to 1.00
compared to 0.83 to 1.0 at December 31, 1997. The improvement in
the debt-to-equity ratio from December 31, 1997 to March 31, 1998
relates primarily to the increase in equity as a result of the net
income of $469,000 for the quarter ended March 31, 1998.
The quarterly interest obligation on the outstanding 8% Convertible
Subordinated Notes, the 8% Convertible Subordinated Notes, Series
B and the 8% Convertible Subordinated Notes, Series C is $61,000,
$40,000 and $60,000, respectively, through June 30, 2003, June 30,
2004 and June 30, 2004, respectively.
In January 1997, the Company's Board of Directors authorized it to
repurchase up to 200,000 shares of its common stock. The timing of
which and the actual number of shares purchased will depend on
market conditions. The repurchased shares, which will be financed
with available cash, will be held as treasury shares and will
thereafter be available for general corporate purposes. As of March
31, 1998, 4,900 shares have been repurchased at a cost of $47,000.
Management believes that existing funds, supplemented by cash flows
from existing operations, will be sufficient to meet its current
operating needs and its development plans through at least 1998.
15<PAGE>
Recently Promulgated Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which required the Company to
change the method presently used to compute earnings per share and
to restate all prior period amounts. Statement 128 replaced primary
and fully diluted earnings per share with basic and diluted earnings
per share. Under the new requirements for calculating earnings per
share, the dilutive effect of stock options is excluded from basic
earnings per share but included in the computation of diluted
earnings per share. The new standard did not have a material impact
on the basic or fully diluted earnings per share computations for
1997.
Factors Affecting Future Results
Clinic Development
During 1998 the Company intends to further accelerate the pace of
new clinic openings from the 13 clinics opened during 1997.
Accordingly, corporate office-recruitment and development expenses
are expected to increase since new clinics traditionally involve a
significant amount of start-up costs, such as travel and recruitment
fees. In addition, the Company's operating results will be impacted
by initial operating losses from the new clinics. During the
initial period of operation, operating margins for newly opened
clinics tend to be lower than more seasoned clinics due to the
start-up costs of newly opened clinics (salaries and related costs
of the physical therapist and other clinic personnel, rent and
equipment and other supplies required to open the clinic) and the
fact that patient revenues tend to be lower in the first year of a
new clinic's operation and increase over the next several years.
The Balanced Budget Act of 1997
Beginning in 1998, Medicare imposed new constraints on reimbursement
for outpatient physical and/or occupational therapy services. In
1998, Medicare reimbursement for outpatient physical and/or
occupational therapy furnished by a Medicare-certified
rehabilitation agency or clinic is equal to the lesser of the
provider's "adjusted reasonable costs" as allowed under Medicare
regulations and defined in the Balanced Budget Act of 1997 ("BBA")
or the provider's charges, in each case less 20% of the amount of
the charge imposed for the services. For rehabilitation agencies
and clinics, the "adjusted reasonable cost" of a service is the
service's reasonable cost, as determined under Medicare regulations,
less 10%. The 10% reduction does not apply to services provided by
hospitals. The 20% deduction represents the co-insurance amount
that an individual beneficiary, or their "Medigap" insurance carrier
if such coverage exists, is required to pay in addition to the
beneficiary's annual deduction. Furthermore, the BBA also provides
that after 1998, outpatient rehabilitation services will be paid
based on a fee schedule, the amounts for which will be determined by
the Secretary of HHS. Beginning in 1999, the total amount that may
be paid by
16<PAGE>
Medicare in any one year for outpatient physical or occupational
therapy to any one patient will be limited to $1,500, except for
services provided in hospitals. The effect of these payment changes
may be to encourage patients with extensive rehabilitation needs to
seek treatment in a hospital setting. The Company will not be able
to determine the impact the changes imposed by the BBA will have on
its business for 1999 until the Secretary of HHS publishes its fee
schedule.
Year 2000
Some of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result,
those computer programs have time-sensitive software that recognize
a date using "00" as the year 1900 rather than the year 2000. The
Company has completed an assessment and will have to modify or
replace portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and
thereafter. The Company does not anticipate that the cost of such
modifications or replacements will be material to its operations.
The Company believes that with modifications to existing software
and conversions to new software, the Year 2000 issue will not pose
significant operational problems for its computer systems.
17<PAGE>
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) List of Exhibits
27. Financial Data Schedule
(b) Reports of Form 8-K
No reports on Form 8-K were filed with the Securities
and Exchange Commission during the quarter ended March 31, 1998.
18<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
U.S. PHYSICAL THERAPY, INC.
Date: May 13, 1998 By: /s/ MARK J. BROOKNER
Mark J. Brookner
Chief Financial Officer
(duly authorized officer
and principal financial
officer)
19<PAGE>
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