US Physical Therapy Inc (USPH) 2005 Q4 法說會逐字稿

At this time I would like to welcome everyone to U.S. Physical Therapy 2005 earnings call. (OPERATOR INSTRUCTIONS). It is now my pleasure to turn the floor over to your host, Chris Reading. Sir, you may begin your conference.

Good morning everyone. Thank you for joining us this morning as we discuss our fourth quarter and year-end 2005 earnings results. With me here in Houston are Larry McAfee, Executive Vice President and Chief Financial Officer; Glenn McDowell, our Chief Operating Officer; and David Richardson, Vice President and Controller.

Before we begin today's call, David, I would like to ask you to read a brief statement.

Sure. This presentation contains forward-looking statements which involve certain risks and uncertainties. The forward-looking statements are based the Company's current views and assumptions, and the Company's actual results can differ materially from those anticipated. Please see the Company's filings of the Securities and Exchange Commission for more information.

Thanks, David. Larry, please review our earnings performance for 2005.

By virtually every measure U.S. Physical Therapy had a very successful 2005. For the year our total revenue increased 11.7% to 132 million, due to an 11.7% increase in patient visits combined with a slight increase in our net rate per visit. For the year patient visits totaled 1,348,000.

Our operating margin before corporate costs and clinic closure costs was 35.9 million, or 27.2% of revenue. Operating margins grew 70 basis points from 2004. This increase would have been more pronounced if not for the change in accounting treatment for partner compensation. You will remember that EITF 23 from back in 2001 resulted in a divided or bifurcation accounting treatment, where some costs that were previously included under minority interests are now instead expensed in operating costs. For the year the portion attributable to operating costs increased by 430,000 from 635,000 in 2004 to 1 million 65 in 2005.

This change is compared to a 215k reduction in minority interest expense. If you combine the two numbers and look at it as a percentage of revenues, it went from 5.7% of revenues in 2004 to 5.3% in 2005.

We closed nine clinics in 2005 as compared to 13 in 2004. The combined operating losses and closure costs for those clinics in 2005 -- for the clinics closed in 2005 -- was 959,000 as compared to 1 million 26 for the clinics closed in '04.

Corporate cost was reduced from 14.2% of revenue in 2004 to 12.4% in 2005, as we continue to realize additional efficiencies by leveraging our corporate functions. Operating income improved by 18% in 2005, and was 18.8 million for the year. Reported net income rose 32% to 8.8 million. And reported EPS grew 35% from $0.54 to $0.73. EBITDA after minority interest grew 22% to 18.2 million.

If you take out the onetime cost we incurred in 2004 in conjunction with the CEO change, and the SAB’s 2004 Bulletin on straight-lining of rent, and kind to try to do an apples-to-apples comparison, then adjustable income from 2004 to 2005 grew by 23%, and adjusted EPS grew 27%.

In 2005 we opened 28 new clinics, closed nine, sold two, and acquired five, ending the year with 286 clinics.

As you know, our Company doesn't give earnings guidance. At the beginning of the year the analyst consensus estimate for 2005 was $0.71. As it turned out, we bettered that figure, earning $0.73 for the year. We met earnings expectations in the first quarter and exceeded expectations in each of the second and third quarters. As this positive quarterly earnings trend unfolded, the analysts naturally adjusted their annual estimates and eventually raised their projections for Q4 as well.

The fourth quarter is historically our lowest earnings quarter due to the seasonality of the business. We had a new firm pick up coverage of the stock in December, and their forecast for the quarter and the year was higher than the other estimates, such that by the end of the year the consensus estimate eventually rose to $0.77. As it turned out, that was a little ahead of what we could deliver.

For the fourth quarter of 2005, net revenue rose 12.2% from the fourth quarter of 2004, based on a 13% increase in patient visits, combined with a less than 1% reduction in average net rate per visit. As described in today's new release, patient visits in the last two weeks of 2005 came in at about 2,800 less than we expected. And this was due to a combination of some bad weather in actually local parts of the country in the third week, and in the fourth week a sharper holiday climb than we originally anticipated.

Also, as described in today's news release, the continuing tight market for therapists has resulted in higher clinical salary costs, which pinched our operating margins by a couple of points in the quarter. Partner incentive comp expense included in operating cost increased from 178,000 for the fourth quarter of 2004 to 244,000 in the fourth quarter of '05. This was offset by about a 62,000 reduction in minority interest expense.

In the fourth quarter as part of the 2006 budget process we thoroughly reviewed the operations of all our facilities, and we made the decision to close eight underperforming clinics. The combined operating loss and closure costs for those eight clinics in the fourth quarter was approximately 400,000 pretax, or $0.02 per share after-tax. Operating income for the quarter was 3.8 million. Net income for the fourth quarter was 1.6 million, and earnings per share of $0.14, or about $0.01 less than the fourth quarter of '04.

We closed 2005 with 15 million in cash and investments, and this was after we spent 15.8 million during the year for share repurchases and acquisitions. Net of approximately 725.000 in seller notes, the cash balance equates to about $1.18 per share.

USPH shareholders fared well in 2005. Our weighted average trading price for the entire year rose 23% from 13.77 on average in 2004 to 16.89 in 2005. Our stock closed at 15.42 at the end of December '04, and it was up 20% to 18.47 at the end of December 2005.

The Company continues to repurchase shares under our stock buyback program. In the fourth quarter we acquired approximately 165,000 shares, at prices ranging from 16.16 to 18.15, for an average price of 17.40 per share. For the year we acquired 489,000 shares at prices ranging from 13.53 to 18.40, for an average price of 16.30.

Since we instituted the share repurchase program in the fall of 2004, we have thus far acquired over 850,000 shares, or approximately 7% of the total. The authorization provides for up to an additional 455,000 shares that can be purchased under this program as of December 31, 2005.

Thank you. I would like to begin by recapping the year and looking at some of the progress we have made, as well as some of the positive recent news before we discuss our significant 2006 focus.

As Larry discussed, 2005 produced a record year for the Company in terms of EBITDA, net income and EPS. Additionally, over the past year we have been able to realize 6% same-store volume growth achieved through a number of initiatives, which include adding this year 15 sales and marketing representatives who assist in finding and driving new referral volume. That brings our marketing rep total for the year currently at 23 reps covering approximately 125 facilities.

In the fourth quarter we had very solid facility openings, with seven out of the ten new facilities we added being with new partners. Additionally, we completed our second acquisition this year of a great practice in Anchorage, Alaska which had two locations. As Larry mentioned, we have been active in the market repurchasing our stock and have accumulated over 480,000 shares this year.

We have created infrastructure improvements and systems which have allowed us to lever our overhead as we continue to grow the Company, both through DeNovo facility growth and with acquisitions.

And we continue to roll new tools out to the partners. One such tool that we recently introduced we refer to as the Yardstick. You've all heard us talk about the scorecard. We now have a tool which is a screen shot tool located on the partner's computer which allows him or her to see the current weekly snapshot of critical indicators compared with the same week a year earlier.

The purpose of this tool is to more clearly communicate the perspective of progress or momentum in controllable indicators of significance such as referrals, visits, gross charge per visit, total revenue, clinical durations, which we also refer to as visits per referral and cancellation rates. Early feedback from our partners has been positive, as they are able to spot trends sooner so that they can either modify or reinforce certain behaviors in order to make clear and steady progress week after week, year after year.

Additional positive news surrounds recent favorable developments in the Medicare fee schedule, as well as recent communication on the current cap policy concerning exceptions and extensions.

Now for 2006. In 2006 you'll see us focus heavily on the following. You'll see us accelerate our DeNovo new partner openings. We had a good fourth quarter. We've got a good pipeline right now. We've got a lot of heavy focus and a lot of activity of development. You'll see us continue to focus on our net rate through organize and aggressive recontracting, as well as select pricing changes in certain markets where we expect a beneficial result.

We must, and this is important to us right now, we must beneficially impact our clinical productivity measures in visit per full-time clinical FTE. This is a considerable area of focus for right now as we look to overcome salary pressure from a tight labor market. We must concurrently reduce turnover and work to fill open positions quickly and effectively.

We will plan to work closely with our largest most successful partnerships to move market share more aggressively. When we first got here we worked on a lot of remediation activities, and moved a lot of our underperforming partnerships forward. Our plan this year really is to shift focus a bit as we have elevated a lot of those underperforming partnerships and work with our largest most successful partners on really going out and moving market share.

We will also focus and continue to work very hard on maintaining a full pipeline of partner candidates throughout the year, as we continue with our branding, advertising and partner outreach activities. And lastly, we will remain active in search of the right kind of acquisitions to complement our current business philosophy, which we have discussed numerous times.

In closing, I would like to say that we have a plan to meet the challenges and opportunities we face head-on. These are not unlike many of the challenges we have been able to overcome as we have made a great deal of progress over the past couple of years. One of the things that is different now is that the culture of the Company has changed significantly to be one of what I would describe as very much of a can do attitude within the Company.

There is trust and communication right now that is strong, both within the office here in Houston with our partners. And that will assist us in ensuring that our focus on delivering growth and shareholder return over the long run will continue.

We thank you for your continued interest, trust and support. And with that, operator, we can open it up for questions.

(OPERATOR INSTRUCTIONS). Rob Hawkins of Stifel Nicolaus.

A couple of things. The first one is kind of a macro I guess regulatory environment question. I've been getting some calls about investors on the whole therapy cap issue and maybe --.

You're drowning out. I'm sorry. We can't hear you.

I just got a macro question on the therapy cap issues. I have been getting some calls from investors, and maybe I haven't been keeping as current, or maybe they're working off of old information, but I wanted to get some clarification.

In the latest therapy cap waver discussions, certain chronic conditions have been exempted in the waiver. And I just wanted to get a feel will that help you guys somewhat, or is mainly more towards probably the snip type of patient that might be seeking rehab, or a rehab hospital patient?

There have been some reason updates on that. And the government has put out a list of the criteria and also a diagnostic list. And interestingly for us is we consider it very positive, because many of the conditions on that list involve osteoarthritis, as well traumas and surgeries that we would typically see in our mainstream orthopedic outpatient facilities. It was a fairly inclusive list.

I don't have a copy in front of me right now, but it hit across a fairly broad swath of the vast majority of the orthopedic diagnosis that we would typically see in the clinic. Now we haven't been in this long enough to actually have gone through the process yet, but as described, we perceive it as being considerably positive right now.

And something to keep in mind too for somebody who is not familiar with the Company, Medicare in total is about 21% of our business. We looked last year -- the cap is what, 1,740?

1,740.

1740. And really that means somebody would have to see us 20 or more times probably. And only 2% of our patients overall met that criteria. We never thought the Medicare changes were going have a huge impact.

One other Medicare change that is favorable is that we had anticipated, and in fact, I think said on our last conference call that we thought that our reimbursement rates under Medicare, which typically run in the mid-80s, would decline about $1 a visit this year. In fact, in the final rule the Medicare rates stayed the same as they were in '05, so we're not going to take a hit, it doesn't appear, on the reimbursement side.

Overall now I guess concerns about the therapy caps are more or less eliminated. Is that a fair way to characterize it?

I wouldn't say they are eliminated, but they're not --.

They have been mitigated considerably.

Fair enough. And then I guess one area I would really like to spend some time in is the market for therapists, what you guys are seeing as broader trends. One, where are you guys seeing competition? I guess there are new competition in the market for therapists that you hadn't really seen before in the past. More or less what is going on there? Is it a lot of contract labor that you're having to fill in with? Just a general labor market question.

Good question. And it is a big focus for us right now. There are a few different factors that are driving I think the cost of the labor market right now. One factor which is now several years old is that there just aren't as many foreign trained therapists in the country as there were pre 9/11.

Probably a bigger factor I think is that the educational requirements for physical therapists have ratcheted up considerably. Historically from a bachelor's to a master's, and now with a lot of programs switching to an entry-level doctorate program. That means a couple of things. Kids are in school longer. They come out with greater costs associated with their education. And it is taking them longer to get into the market.

The people that are in the market who maybe weren't in the market a few years ago, at least not as heavily, got physician ownership, which has kicked up considerably. I think what we have seen with that is that they are willing to pay considerably higher prices because they have ultimate control over the volume that gets delivered at those facilities in terms of referrals. And so they can stretch a little bit more.

You also have seen a resurgence on the nursing home side with therapy being a valuable addition. And with the disappearance of the foreign trained therapists who largely operated in that sector before, or a significant amount, you have seen a tightening of the market.

I will tell you that the way that we're going to mitigate that is through some modest increases in clinical productivity. We are working very hard with our partners and our staff. We are at a level, which has improved over the last two years, but we're at a level which is below the typical I would say average private practice facility that is out there. I see it probably between 12 and 15 visits per clinical FTE. We're just under 10 right now.

And that has afforded us historically salary pressure, a solid operating margin, and we've got to ratchet that up a little bit. We can do that without any decrement in care. But it is going to take us a little time. And we've got a lot of people working on it. That is how we're going to overcome some of this margin pressure that we got right now.

Falling along that a quick question on that. On the productivity, is it a patient recruitment or is it more kind of clinical (multiple speakers).

Not so much. If you look this year we have got better same-store volume growth than we have had historically, and we've got better visit per or clinic volume than we have had historically. It is not a recruitment issue because the sales and marketing folks really have been a big benefit to us. It is a visit [casher] issue in some cases where therapists have to be retrained in terms of how they schedule and how they approach their day. But no, it is not patient availability historically.

If you look back, and the people that have owned the stock longer, follow it longer are familiar with this, but in the fall of '03 when Chris and Glenn and I joined the Company, OUR average visits per full-time equivalent were less than 8. And we worked hard on that, and set a scorecard target of 10. And we have gotten it up to close to 10.

But basically we flat lined the last few quarters. We didn't see continued productivity increases. And it is something that we got to deliver. It is something we know how to deliver. It takes a little bit of time. But again we're well below the industry averages. It is not something we can't do.

Alec Silverman of Special Situation.

This is not really a question, more of a statement. Having owned your stock for a very, very long time, we're obviously very, very happy with the execution of your team since you guys joined.

The point you made earlier about not giving guidance, and the new analyst coming on board and dragging the consensus up, so on and so forth, is a perfect example of why given the visibility you have into your business why you guys need to give some sort of guidance. It doesn't have to be -- it can be a full year guidance. It can be just top line, but you guys need to give better body language, whatever to the Street in order to prevent the stock that is down 2 plus points today on what I think what was a great quarter.

That is a fair comment. This is something I will be honest with you that we discuss constantly. We discuss it at every single Board meeting. And we at least once a year, we have an independent third party go out and poll our major shareholders to ask them what they think we should do. There is also some disagreement, but the majority of our shareholders have said they prefer that we don't give guidance, that they are really in it for the long term. And it is kind of a got you. Even companies that give guidance miss their numbers, so --.

We have been in this stock since the middle of '02. I understand being in for the long term.

I don't mean that you're not in for the long term.

No, I'm just saying that this was a very, very good quarter. On the top line you guys have done a great job of leveraging costs in a tough environment. You have done the right by closing certain clinics that had to be closed. You put a salesforce in place -- all the right things. And you're getting beaten up here because you missed a number that you couldn't have made anyway.

I appreciate that. Unfortunately, the SEC kind of frowns on body language now.

I didn't mean body language. But even a top line guidance for the year.

All right. That is something we will consider, and we will talk --.

We will talk about it.

Thank you guys.

And we really appreciate your comment.

We do very much, thank you.

Mitra Ramgopal of Sidoti.

Just a couple of questions. Also, just coming back a little in terms of the labor market, I think you mentioned you might have seen some turnover. If you could maybe add some color on that, and how quickly you expect to fill the vacancies?

The turnover, as being a point of focus for us really comes as a result of not having more turnover historically than we have seen. But anytime we have key employee turnover because the market is tight, it takes us a while to fill those positions.

I will tell you that it varies considerably whether we're talking about Chicago or middle of nowhereville USA. Sometimes it depends on what the market is and what the population is. We are really working hard internally and with our partners to really understand the market, understand how to move market share, understand how to keep a heads up in a tight labor market where people are getting called at home and at night, just to try to prevent that.

It isn't that we have seen a dramatic change as problem. It is that we're trying to use that as a focus point to ratchet this down a little bit so that we don't have turnover where we have good volume opportunities.

It is not uncommon now to take signing bonuses when you hire new employees. That is an expense we didn't used to incur. To the extent that you can retain staff rather than turn it over that is cheaper.

It is cheaper.

Yes, it is cheaper. Plus it takes longer to fill positions now on average that it used to. Now a major change we made since we took over is we used to use a third party do our staff recruiting. We have always done our partner recruiting internally, but we hired our therapists and business office managers through a third party. We have actually brought that in-house. Did that last year or over a year ago. I think we are seeing some significant improvements there. We are also, frankly, doing more training, which I think will reduce our turnover.

Just on a separate note, if you could address also the slight decline you saw in the revenue per visit, I believe -- it is the first one I can recall for a long time where year-over-year you saw the decline. If you could comment on the reimbursement trends as you look out to '06?

It bounces around a little bit from quarter to quarter. We were up for the year. I think the fourth quarter of '04 was our highest quarter that year, wasn't it? So '05 fourth quarter would be down a little bit from the fourth quarter of '04. I wouldn't read too much into it.

We haven't seen any big contracts that had been posted, particularly in the middle to latter part of this year, that had been backups or substantial decreases. In fact, we have made some pretty good progress. We have reworked our managed care department, and I am pleased to say that the early results have been promising and positive. What we don't have in this Company, which you are familiar with, is the ability to lever across our entire platform through one major contract. We contract more on an individual basis. It is going to take a little time. We've got a good focus, and I see a pretty stable market right now.

Yes, I don't think we're going to --.

I don't think it is going to go up or down.

It is not going to move much. But I'm not really concerned about our net rate dropping. That could happen, but I'm not seeing any indicators. I think that quarter is an aberration.

Okay. And also if you could comment on the clinic closures. And regarding the openings net net should we see an acceleration in '06 or do you feel more pressure to be aggressive on that front as a regard of the closures?

I hope I answered your question the way that that you said it. We see two things right now. We've got as good a pipeline as we have had since I joined the Company in terms of pure partner expected openings. We've got a much more seasoned recruiter group. We've got a development group which has really come to understand some performance issues that we struggled on occasion with last year. It took us a little time to get our legs. I think that has occurred. I think some of the activities that we've done in the marketplace in terms of trade shows, individual state focus some of the rebranding has paid off.

In terms of the closures it is purely an economic issue. I don't think we're going to change our screen, nor broaden or narrow our partners’ selection criteria. I think that is going to state pretty stringent. Many of these facilities were facilities that opened years and years ago. And for one reason or another stagnated or lost somebody or the market changed and the time and the costs associated with trying to remediate these on a continued basis were over run or outweighed the closure costs.

What we looked at, kind of a rule of thumb we used this time was if the projected operating losses were going to be roughly equivalent to the closure costs, then we just closed it. That is not to say that the new clinic we're not going to make an exception and try to continue to work with a partner. But we just don't get the returns to focus on the smallest clinics that are typically losing money.

So I anticipate going forward. You'll see us close -- what we had said last year -- or at the beginning of this year we thought we would close five, six clinics in '05. We ended up closing nine. I anticipate that in 2006 we will close probably between five and ten clinics. It is not some -- we are of a size now that you're probably going to cull a few clinics every year.

The other thing too on the development side, one of the reasons I'm pretty bullish about development is that for the year we opened 28 new clinics, 13 new partners. It is not a bad mix, based on an historical mix of partners to satellites.

But what was really positive to me was in the fourth quarter we opened ten clinics, which is obviously an accelerated rate, and to me more important, seven out of the ten were new partners. Those are the kind of trend lines we want to try to start delivering. Because if we do that, the quality of new partners begets satellites. It is just the way it works. We can really affect our growth not only this year but in the next couple of years by recruiting a large number of high-quality partners.

We are seeing some really good people right now. I have been very pleased.

Finally, your balance sheet remains debt free, given a likelihood of further share repurchases and potential acquisitions, are you considering levering it somewhat?

I think ultimately some time we will -- honestly for a business that has this predictability of its cash flows to not have some modest leverage is probably a disservice to our shareholders.

I think what you'll see is us continuing to buy back shares, and do the right kind of acquisitions. And in a year or two we will have some modest amount of leverage. Now I will tell you, management and the Board here are inherently conservative, so you're never going to see it very levered. But we will have some modest debt to capitalization ratio and it will increase our return on capital.

Mike Petusky of Thompson Davis.

Did you guys give the payor mix? And if not, could you give that?

Yes. You want it for the quarter or the year?

Just for the quarter.

For the fourth quarter -- this is based on charges, not visits -- private was 27.6%; managed care 31.8; workers' comp 15; Medicare -- well, Medicaid, but it is almost all Medicare, 22; personal injury and self pay or other was 3.5%.

Could you guys talk about as far as data that you might have facilities that have sales reps versus facilities that don't have sales reps. Can you talk about value-add and quantify it in some way what you're seeing?

Yes. Right now we have -- we just hired a couple of new sales reps. We have 24 sales reps in the Company. They cover 141 centers, with the two that we just acquired. Looking at the fourth quarter we saw where we had sales reps in place for seven months or longer, we have seen about an 8% increase in new patients, leading to about a 9 to 10% increase in visits per day from the new patients that we bring on board.

When we bring on a sales rep we are seeing within four to six months of them coming on board where they get some experience and learn their territories, what we believe to be at least a 5% or greater increase in new patient referrals coming in because of the sales rep.

It takes a little while. It takes them a few months. The first few months we don't see much of an impact, and we obviously would carry the cost. But the downstream impact has been pretty good.

Chris, or whoever wants to take this, is there any reason than that over time all your facilities wouldn't have a sales rep attached? Is there any facility that for whatever reason couldn't benefit from a sales rep?

There is a reason from a timing perspective -- (multiple speakers).

I understand that, but I mean ultimately.

You know in terms of facilities that are new and there is plenty of time for the existing staff, which typically for us as you know is the initial partner, until he or she has a full schedule they have got time to go out and do it. But there is a point in time at which, sure, it may become, or probably will become, prudent to look at that.

On a smaller facility it is going to be on a part-time basis. Honestly, I don't think we'll get to the point based on certain market dynamics at certain facilities where we will have 100% of our facilities covered. I don't think that is necessarily going to happen. But I think we'll continue to grow and be smart about how we do it.

Where you have seen the biggest positive impact is actually in more mature markets where we have multiple facilities. Where in fact maybe their growth has plateaued or even started to decline. It is not the new clinics or younger clinics, say the ones that vintage 2002 or later that you really want the salesforce as much as in some of the more mature markets.

I'm not sure on a facility that is -- let's say it is two years old that it would make a dramatic difference. Because in those facilities we are typically growing at a pretty good pace anyway. (multiple speakers). We may be layering additional costs if we were to do that. We're looking -- we look at those on an individual basis. We consider the partner and their appetite or their temperature and their ability to market, and then we make a decision.

If you commented on this I didn't catch it. Have you guys talked about just as far as the acquisition pipeline, what is going on there? Are you at a serious point with anybody?

No, there is no pipeline per se. We anticipate we will do two or three acquisitions a year, just like we did two last year. I would tell you we're talking to more people now than we were a year ago. That's for sure. There's nothing imminent. And if there was, if we had a deal with somebody, we would announce it. But it is not going to be every quarter we are going to close a deal because that is not the way we're going to do these deals. We're very selective, and we are only structuring them like our partnerships where they retain a significant equity interest.

To be honest, a lot out of the fishing and a lot of the culling that we're doing are with groups who are very good groups who really aren't compelled to sell. Those are the people that we want, and it takes a little bit longer, because potentially they haven't even thought about it. And it is really kind of a strategic move for them.

But Larry is right. We are talking to a greater number of people out there. We have a letter in the Private Practice Bulletin that will continue to be there throughout the year from me just trying to rebrand the Company a little bit, and let people know that we're in the market on a select basis, and what that basis is. And it will take a little time, but we will continue to make some progress on that.

Chris, is there any change in just the size of partner that you're looking at? Is that kind of -- I guess have you --?

Hamilton was a pretty good site. It only had three clinics but does quite a bit of volume. The [deal] we did in Alaska in December is much smaller, but that was a market we hadn't even been in before, so it was kind of an entree into the market.

We are looking at some practices that have multiple clinics. So I would say, yes, maybe they are a little larger, but we're not looking at practices that have 25, 30 clinics. These are still private practices, hopefully with multiple clinical partners. But I don't think -- don't expect to see us to announce that we're buying 20 clinics from one group. I don't think that is going to work that way, at least not in the near term.

Let me just make just one quick comment that could be valued add for your shareholders. My wife is actually an LT, and I would say there's not a week that goes by where she is not attempted -- or somebody doesn't attempt to recruit her. I definitely know there's a high demand for therapists out there, both on the OT and the PT front. If you doing a poll on the guidance, put me down for a no guidance.

(OPERATOR INSTRUCTIONS). David Rapson of Northwood Physical.

Chris, can you speak on the competition the Company may be facing regarding physician-owned practices and clinics? And also if there are regional trends regarding that topic?

Sure. This isn't a new thing for us, but it is a continuing thing. I think that what we have seen, and I don't have absolute statistics to support this numerically, but we have seen a lot of the specialists, particularly the orthopedics, get back into the business. That has been over the past few years. That has continued.

At the same time, this year particularly, we have posted some of the best same-store visit growth numbers that the Company has put up in quite some time. I think you guys have done a great job. For those people that don't know, Dave is a partner of ours up in Michigan. You guys have all done a great job of partners in overcoming that. I think that is a tribute to your focus and a testament to the strong clinical care that you give.

I don't see that changing in the near term. There have been some individual states that have enacted various forms of legislation that have made it typically from the practice -- from the practice side illegal for a therapist to work for a physician-owned facility. The most recent of those states was South Carolina. And that continues to be litigated.

States like Delaware, Missouri, and there may be a few others that are out there right now that have done this as well. But overwhelmingly there is still an open market when it comes to physician ownership out there. Honestly, I don't see that changing in the near term. Ultimately I think it will shift back, but I don't think it is going to happen in the next year or so. That is just my opinion though. Did that answer your question?

It does.

(OPERATOR INSTRUCTIONS). There appear to be no further questions at this time.

Thank you everybody. We appreciate you taking the time to call in today. Larry and I would are available if you have questions off-line. Thank you and have a great day.

Thank you. This concludes today's U.S. Physical Therapy 2005 earnings call. You may now disconnect your lines.