US Physical Therapy
Annual Report 2021

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-K(Mark One)☑ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-11151U.S. PHYSICAL THERAPY, INC.(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)NEVADA 76-0364866(STATE OR OTHER JURISDICTION OF INCORPORATIONOR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)1300 WEST SAM HOUSTON PARKWAY SOUTH,SUITE 300,HOUSTON, TEXAS 77042(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 297-7000SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:Title of Each ClassTrading SymbolName of Each Exchange on Which RegisteredCommon Stock, $.01 par valueUSPHNew York Stock ExchangeSECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT: NONEIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No☑Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months(or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of“large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer☑Accelerated filer☐Non-accelerated filer☐ (Do not check if a smaller reporting company)Smaller reporting company☐ Emerging growth company☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standardsprovided pursuant to Section 13(a) of the Exchange Act.  ☐Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No ☑The aggregate market value of the shares of the registrant’s common stock held by non-affiliates of the registrant at June 30, 2021 was $838 million based on the closing sale price reported on theNYSE for the registrant’s common stock on June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter. For purposes of this computation, all executive officers,directors and 5% or greater beneficial owners of the registrant were deemed to be affiliates. Such determination should not be deemed an admission that such executive officers, directors and beneficialowners are, in fact, affiliates of the registrant.As of March 1, 2022, the number of shares outstanding of the registrant’s common stock, par value $.01 per share, was: 12,950,588.DOCUMENTS INCORPORATED BY REFERENCEDOCUMENTPART OF FORM 10-K Portions of Definitive Proxy Statement for the 2021 Annual Meeting of ShareholdersPart IIITable of Contents PagePART I Item 1.Business2 Item 1A.Risk Factors12 Item 1B.Unresolved Staff Comments18 Item 2.Properties18 Item 3.Legal Proceedings19 Item 4.Mine Safety Disclosures19 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities19 Item 6.Management’s Discussion and Analysis of Financial Condition and Results of Operations22 Item 7.Quantitative and Qualitative Disclosures About Market Risk36 Item 8.Financial Statements and Supplementary Data37 Notes to Consolidated Financial Statements44 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure67 Item 9A.Controls and Procedures67 Item 9B.Other Information68 PART III Item 10.Directors, Executive Officers and Corporate Governance68 Item 11.Executive Compensation68 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters68 Item 13.Certain Relationships and Related Transactions, and Director Independence69 Item 14.Principal Accountant Fees and Services69 PART IV Item 15.Exhibits and Financial Statement Schedules69 Item 16.Form 10-K Summary69 Signatures76 Table of ContentsFORWARD-LOOKING STATEMENTS We make statements in this report that are considered forward-looking statements within the meaning given such term under Section 21E of the Securities Exchange Act of 1934, as amended (the“Exchange Act”). These statements contain forward-looking information relating to the financial condition, results of operations, plans, objectives, future performance and business of our Company. Thesestatements (often using words such as “believes”, “expects”, “intends”, “plans”, “appear”, “should” and similar words) involve risks and uncertainties that could cause actual results to differ materiallyfrom those we project. Included among such statements are those relating to opening clinics, availability of personnel and the reimbursement environment. The forward-looking statements are based onour current views and assumptions, and actual results could differ materially from those anticipated in such forward-looking statements as a result of certain risks, uncertainties, and factors, which include,but are not limited to: •the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19 and its variants, for which the total financial magnitude cannot becurrently estimated;•changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;•revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction;•changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients;•compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for failure to comply;•competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs including thepossible write-down or write-off of goodwill and other intangible assets;•the impact of COVID-19 related vaccination and/or testing mandates at the federal, state and/or local level, which could have an adverse impact on staffing, revenue, costs and the results ofoperations:•changes as the result of government enacted national healthcare reform;•business and regulatory conditions including federal and state regulations;•governmental and other third party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs;•revenue and earnings expectations;•legal actions, which could subject us to increased operating costs and uninsured liabilities;•general economic conditions;•availability and cost of qualified physical therapists;•personnel productivity and retaining key personnel;•competitive environment in the industrial injury prevention services business, which could result in the termination or non-renewal of contractual service arrangements and other adversefinancial consequences for that service line;•acquisitions, and the successful integration of the operations of the acquired businesses;•impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interest (minority interests);•maintaining our information technology systems with adequate safeguards to protect against cyber-attacks;•a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of the HealthInsurance Portability and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act;•maintaining clients for which we perform management and other services, as a breach or termination of those contractual arrangements by such clients could cause operating results to be lessthan expected;•maintaining adequate internal controls;•maintaining necessary insurance coverage;•availability, terms, and use of capital; and•weather and other seasonal factors. Many factors are beyond our control. Given these uncertainties, you should not place undue reliance on our forward-looking statements. Please see the other sections of this report and our other periodicreports filed with the Securities and Exchange Commission (the “SEC”) for more information on these factors. Our forward-looking statements represent our estimates and assumptions only as of the dateof this report. Except as required by law, we are under no obligation to update any forward-looking statement, regardless of the reason the statement may no longer be accurate.1Table of ContentsPART I ITEM 1.BUSINESS.GENERALU.S. Physical Therapy, Inc. and subsidiaries (“we”, “us”, “our” or the “Company”), operates its business through two reportable business segments. Our reportable segments include the physicaltherapy operations segment and the industrial injury prevention services segment. Through our subsidiaries, we operate outpatient physical therapy clinics that provide pre-and post-operative care for avariety of orthopedic-related disorders and sports-related injuries, treatment for neurological-related injuries and rehabilitation of injured workers. We also have a majority interest in businesses which areleading providers of industrial injury prevention services. Services provided in this business include onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing,functional capacity evaluations and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Otherclients include large insurers and their contractors. These services are performed through Industrial Sports Medicine Professionals, consisting of both physical therapists and specialized certified athletictrainers (ATCs). Prior to the second quarter of 2020, we operated as a single segment. All prior year segment information has been reclassified to conform to the current segment presentation.We were re-incorporated in April 1992 under the laws of the State of Nevada and have operating subsidiaries organized in various states in the form of limited partnerships, limited liability companiesand wholly-owned corporations. This description of our business should be read in conjunction with our financial statements and the related notes contained in Item 8 in this Annual Report on Form 10-K.Our principal executive offices are located at 1300 West Sam Houston Parkway South, Suite 300, Houston, Texas 77042. Our telephone number is (713) 297-7000. Our website is www.usph.com.Acquisitions of Businesses and Acquired InterestsDuring the last three years we completed the acquisitions of seven clinic practices and three industrial injury prevention services businesses as detailed below.Acquisition Date % InterestAcquired Number ofClinicsDecember 2021 Acquisition December 31, 2021 75% 3November 2021 Acquisition November 30, 2021 70% *September 2021 Acquisition September 30, 2021 100% *June 2021 Acquisition June 30, 2021 65% 8March 2021 Acquisition March 31, 2021 70% 6November 2020 Acquisition November 30, 2020 75% 3September 2020 Acquisition September 30, 2020 70% **February 2020 Acquisition February 27, 2020 65% *** 4September 2019 Acquisition September 30, 2019 67% 11April 2019 Acquisition April 11, 2019 100% **Industrial injury prevention services business**The business includes six management contracts which have been in place for a number of years. As of the date acquired, the contracts had a remaining term of five years.***The four clinics are in four separate partnerships. The Company's interest in the four partnerships range from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction.Physical Therapy OperationsWe primarily operate through subsidiary clinic partnerships in which we generally own a 1% general partnership interest and a 10% to 99% limited partnership interest and the managing therapist(s) ofthe clinics owns the remaining limited partnership interest in the majority of the clinics (hereinafter referred to as “Clinic Partnerships”). To a lesser extent, we operate some clinics through wholly-ownedsubsidiaries under profit sharing arrangements with therapists (hereinafter referred to as “Wholly-Owned Facilities”).2Table of ContentsWe continue to seek to attract for employment physical therapists who have established relationships with physicians and other referral sources by offering these therapists a competitive salary andincentives based on the profitability of the clinic that they manage. For multi-site clinic practices in which a controlling interest is acquired by us, the prior owners typically continue on as employees tomanage the clinic operations, retaining a non-controlling ownership interest in the clinics and receiving a competitive salary for managing the clinic operations. In addition, we have developed satelliteclinic facilities as part of existing Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operate more than one cliniclocation. During 2022, we intend to continue to acquire multi-clinic practices and to continue to develop outpatient physical therapy clinics as satellites in existing partnerships, along with increasing ourpatient volume through marketing and new programs.Therapists at our clinics initially perform a comprehensive evaluation of each patient, which is then followed by a treatment plan specific to the injury as prescribed by the patient’s physician. Thetreatment plan may include a number of procedures, including therapeutic exercise, manual therapy techniques, ultrasound, electrical stimulation, hot packs, iontophoresis, education on management ofdaily life skills and home exercise programs. A clinic’s business primarily comes from referrals by local physicians. The principal sources of payment for the clinics’ services are managed care programs,commercial health insurance, Medicare/Medicaid and workers’ compensation insurance. Besides the multi-clinic acquisitions referenced in the table above, during 2021 and 2020 we purchased the assets and business of three physical therapy clinics in separate transactions. The clinicsoperate as satellite clinics of three of our existing clinic partnerships. During the year ended December 31, 2021, we sold two clinics. The aggregate sales price was $0.1 million. During the year ended December 31, 2020, we sold 14 previously closed clinics. Theaggregate sales price was $1.1 million, of which $0.7 million was paid in cash and $0.4 million in a note receivable payable in two equal installments of principal and any accrued interest. The first paymentwas received in June 2021 and the next payment is due on June 15, 2022. At December 31, 2021, we operated 591 clinics in 39 states. Our highest concentration of clinics are in the following states: Texas, Tennessee, Michigan, Virginia, Florida, Oregon, Maryland, Georgia,Pennsylvania, Arizona, Idaho, Missouri and South Carolina. In addition to our 591 clinics, on December 31, 2021, we also managed 35 physical therapy practices for unrelated physician groups andhospitals.Our ClinicsMost of our clinics are operated as Clinic Partnerships in which we own the general partnership interest and a majority of the limited partnership interests. The managing healthcare practitioner of theclinics usually owns a portion of the limited partnership interests. Generally, the therapist partners have no interest in the net losses of Clinic Partnerships, except to the extent of their capital accounts.Since we also develop satellite clinic facilities of existing clinics, most Clinic Partnerships consist of more than one clinic location. As of December 31, 2021, through wholly-owned subsidiaries, we owned a1% general partnership interest in all the Clinic Partnerships. Our limited partnership interests range from 10% to 99% in the Clinic Partnerships. For the vast majority of the Clinic Partnerships, themanaging healthcare practitioner is a physical therapist who owns the remaining limited partnership interest in the Clinic Partnership.For our Clinic Partnership agreements related to those in which we acquired a majority interest, generally, the prior management continues to own a 10% to 50% interest.Typically, each therapist partner or director, including those employed by Clinic Partnerships in which we acquired a majority interest, enters into an employment agreement for a term of up to fiveyears with their Clinic Partnership. Each agreement typically provides for a covenant not to compete during the period of his or her employment and for up to two years thereafter. Under each employmentagreement, the therapist partner receives a base salary and may receive a bonus based on the net revenues or profits generated by their Clinic Partnership or specific clinic. In the case of ClinicPartnerships, the therapist partner receives earnings distributions based upon their ownership interest. Upon termination of employment, we typically have the right to purchase the therapist’s partnershipinterest in Clinic Partnerships; for those Clinic Partnerships we created in connection with an acquisition, our partner also has the right to cause us to purchase their interest upon termination of theiremployment.In connection with most of our acquired clinics, in the event that a limited minority partner’s employment ceases and certain requirements are met as detailed in the respective limited partnershipagreements, we have a call right (the “Call Right”) and the selling entity or individual has a put right (the “Put Right”) with respect to the partner’s limited partnership interests. The Put Right and the CallRight do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature. The purchase price of the partner’s limited partnership interest upon exercise of the Put Right orthe Call Right is calculated at a predetermined multiple of earnings performance as detailed in the respective agreements.3Table of ContentsEach Clinic Partnership maintains an independent local identity, while at the same time enjoying the benefits of national purchasing, negotiated third-party payor contracts, centralized support servicesand management practices. Under a management agreement, one of our subsidiaries provides a variety of support services to each clinic, including supervision of site selection, construction, clinic designand equipment selection, establishment of accounting systems and billing procedures and training of office support personnel, processing of accounts payable, operational direction, auditing ofregulatory compliance, payroll, benefits administration, accounting services, legal services, quality assurance and marketing support.Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 17 clinics occupying space in the range of over 7,000 square feet to 13,500square feet. We attempt to lease ground level space for patient ease of access to our clinics.Typical minimum staff at a clinic consists of a licensed physical therapist and an office manager. As patient visits grow, staffing may also include additional physical therapists, occupational therapists,therapy assistants, aides, exercise physiologists, athletic trainers and office personnel. Therapy services are performed under the supervision of a licensed therapist.We provide services at our clinics on an outpatient basis. Patients are usually treated for approximately one hour per day, two to three times a week, typically for two to six weeks. We generally chargefor treatment on a per procedure basis. Medicare patients are charged based on prescribed time increments and Medicare billing standards. In addition, our clinics will develop, when appropriate, individualmaintenance and self-management exercise programs to be continued after treatment. We continually assess the potential for developing new services and expanding the methods of providing our existingservices in the most efficient manner while providing high quality patient care.Factors Influencing Demand For Physical Therapy ServicesWe believe that the following factors, among others, influence the growth of outpatient physical therapy services:Economic Benefits of Therapy Services. Purchasers and providers of healthcare services, such as insurance companies, health maintenance organizations, businesses and industries, continuouslyseek cost savings for traditional healthcare services. We believe that our therapy services provide a cost-effective way to prevent short-term disabilities from becoming chronic conditions, to help avoidinvasive procedures, to speed recovery from surgery and musculoskeletal injuries and eliminate or minimize the need for opioids.Earlier Hospital Discharge. Changes in health insurance reimbursement, both public and private, have encouraged the earlier discharge of patients to reduce costs. We believe that early hospitaldischarge practices foster greater demand for outpatient physical therapy services.Aging Population. In general, the elderly population has a greater incidence of disability compared to the population as a whole. As this segment of the population continues to grow, we believe thatdemand for rehabilitation services will expand.Increase in Obesity. Two of every three American men are considered to be overweight or obese and the rate continues to grow. The strain on a person’s body can be significant. Physical therapyservices help the obese become more active and fit by teaching them how to move in ways that are pain free.Marketing We focus our marketing efforts primarily on physicians, including orthopedic surgeons, neurosurgeons, physiatrists, internal medicine physicians, podiatrists, occupational medicine physicians andgeneral practitioners. In marketing to the physician community, we emphasize our commitment to quality patient care and regular communication with physicians regarding patient progress. We employpersonnel to assist clinic directors in developing and implementing marketing plans for the physician community and to assist in establishing relationships with health maintenance organizations, preferredprovider organizations, case managers and insurance companies.Industrial Injury Prevention ServicesServices provided in the industrial injury prevention services segment include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacityevaluations, and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include largeinsurers and their contractors. Our Company performs these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and ATCs.In March 2017, we acquired a 55% interest in an initial industrial injury prevention services business. On April 30, 2018, we acquired a 65% interest in another business in the industrial injuryprevention sector. On April 30, 2018, we combined the two businesses. After the combination, we owned a 59.45% interest in the combined business, Briotix Health, Limited Partnership (“Briotix Health”).4Table of ContentsOn April 11, 2019, we acquired 100% of a third company that is a provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offeremployment testing, functional capacity evaluations and return-to-work services. It performs these services across a network in 45 states including onsite at eleven client locations. The business was thencombined with Briotix Health increasing our ownership position in the partnership to approximately 76.0%.On September 30, 2021, we acquired a company that specializes in return-to-work and ergonomic services, among other offerings and contributed those assets to industrial injury prevention servicessubsidiary. Subsequent to this acquisition and the purchase of the redeemable non-controlling interest of one of the limited partners, our ownership in Briotix Health is approximately 85%.On November 30, 2021, we acquired an approximate 70.0% interest in a leading provider of industrial injury prevention services. The founders and owners retained the remaining interest. The initialpurchase price for the approximate 70% equity interest, not inclusive of a $2.0 million contingent payment in conjunction with the acquisition if specified future operational objectives are met, wasapproximately $63.2 million.SOURCES OF REVENUEPhysical Therapy OperationsPayor sources for physical therapy operations are primarily managed care programs, commercial health insurance, Medicare/Medicaid and workers’ compensation insurance. Commercial healthinsurance, Medicare and managed care programs generally provide coverage to patients utilizing our clinics after payment by the patients of normal deductibles and co-insurance payments. Workers’compensation laws generally require employers to provide, directly or indirectly through insurance, costs of medical rehabilitation for their employees from work-related injuries and disabilities and, insome jurisdictions, mandatory vocational rehabilitation, usually without any deductibles, co-payments or cost sharing. Treatments for patients who are parties to personal injury cases are generally paidfrom the proceeds of settlements with insurance companies or from favorable judgments. If an unfavorable judgment is received, collection efforts are generally not pursued against the patient and thepatient’s account is written-off against established reserves. Bad debt reserves relating to all receivable types are regularly reviewed and adjusted as appropriate.The following table shows our payor mix for the years ended ($ in thousands): December 31, 2021 December 31, 2020 December 31, 2019 Payor Net PatientRevenue Percentage Net PatientRevenue Percentage Net PatientRevenue Percentage Managed Care Programs/ Commercial Health Insurance $209,129 47.7% $177,877 47.7% $204,051 47.1%Medicare/Medicaid 155,122 35.4% 118,030 31.6% 132,611 30.6%Workers' Compensation Insurance 44,549 10.2% 48,628 13.0% 63,542 14.7%Other 29,530 6.7% 28,805 7.7% 33,141 7.6%Total $438,330 100.0% $373,340 100.0% $433,345 100.0% Our physical therapy business depends to a significant extent on our relationships with commercial health insurers, health maintenance organizations, preferred provider organizations and workers’compensation insurers. In some geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans to obtain payments. Failure to obtainor maintain these approvals would adversely affect financial results. 5Table of ContentsDuring the year ended December 31, 2021, approximately 37.3% of our visits and 35.4% of our net patient revenue was from patients with Medicare or Medicaid program coverage. To receive Medicarereimbursement, a facility (Medicare Certified Rehabilitation Agency) or the individual therapist (Physical/Occupational Therapist in Private Practice) must meet applicable participation conditions set by theDepartment of Health and Human Services (“HHS”) relating to the type of facility, equipment, recordkeeping, personnel and standards of medical care, and also must comply with all state and local laws.HHS, through Centers for Medicare & Medicaid Services (“CMS”) and designated agencies, periodically inspects or surveys clinics/providers for approval and/or compliance. Failure of our subsidiaries toobtain or maintain certifications as Medicare providers or failure to enroll as a group of physical/occupational therapists in a private practice could adversely affect financial results.The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). For services provided in 2017 through 2019, a 0.5% increase wasapplied to the fee schedule payment rates before applying the mandatory budget neutrality adjustment.In the 2020 MPFS Final Rule, CMS revised coding, documentation guidelines, and increased the code values for office/outpatient evaluation and management (E/M) codes and cuts to other codes tomaintain budget neutrality of the MPFS beginning in 2021. Under the 2021 MPFS Final Rule, CMS increased the values for the E/M office visit codes and cuts to other specialty codes to maintain budgetneutrality. As a result, CMS projected a 9% decrease in fee schedule payment rates for therapy services set to take effect in 2021. However, Congress intervened with passage of the ConsolidatedAppropriations Act, 2021, and reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics received an estimated 3.5% decrease in the aggregate in paymentfrom Medicare in calendar year 2021 as compared to 2020.In the 2022 MPFS Final Rule published on November 2, 2021, there was to be an approximately 3.75% reduction to Medicare payments for physical/occupational therapy services. This was due to theexpiration of the additional funding to the conversion factor provided by Congress in 2021 under the Consolidated Appropriations Act, 2021. However, this reduction was addressed in the ProtectingMedicare and American Farmers from Sequester Cuts Act (“2021 Act”) signed into law on December 10, 2021. Based on various provisions in the 2021 Act, the Company now estimates that the Medicarerate reduction for the full year of 2022 will be approximately 0.75%.In addition, the Consolidated Appropriations Act, 2021 includes reductions in Medicare payment rates of approximately 3% in each of calendar years 2023 and 2024, unless regulatory orCongressional action results in modifications to such rates as has occurred in 2021 and 2022.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. TheBipartisan Budget Act of 2015, enacted on November 2, 2015, extended the 2% reductions to Medicare payments through fiscal year 2025. The Bipartisan Budget Act of 2018, enacted on February 9, 2018,extends the 2% reductions to Medicare payments through fiscal year 2027. The CARES Act suspended the 2% payment reduction to Medicare payments for dates of service from May 1, 2020 throughDecember 31, 2020. The Consolidated Appropriations Act, 2021 further suspended the 2% payment reduction until March 31, 2021. On April 14, 2021, additional legislation was enacted that waived the 2%payment reduction for the remainder of calendar 2021. The 2021 Act, which was signed into law on December 10, 2021, included a three-month extension of the 2% sequester relief applied to all Medicarepayments through March 31, 2022, followed by three months of 1% sequester relief through June 30, 2022. Sequester relief is scheduled to then end on June 30, 2022.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 beensubject 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 Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) directed CMS to modify the manual medical review process such thatthose reviews will no longer apply to all claims exceeding the $3,700 threshold and instead will be determined on a targeted basis based on a variety of factors that CMS considers appropriate. TheBipartisan Budget Act of 2018 extends the targeted medical review indefinitely but reduces the threshold to $3,000 through December 31, 2027. For 2028, the threshold amount will be increased by thepercentage increase in the Medicare Economic Index (“MEI”) for 2028 and in subsequent years the threshold amount will increase based on the corresponding percentage increase in the MEI for suchsubsequent year.CMS adopted a multiple procedure payment reduction (‘‘MPPR’’) for therapy services in the final update to the MPFS for calendar year 2011. The MPPR applied to all outpatient therapy services paidunder 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 RelativeValue 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 orunits of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate sessions. In 2013, the practice expense component for thesecond and subsequent therapy service furnished during the same day for the same patient was reduced by 50%.6Table of ContentsMedicare claims for outpatient therapy services furnished by therapist assistants on or after January 1, 2020 must include a modifier indicating the service was furnished by a therapist assistant.Outpatient therapy services furnished on or after January 1, 2022 in whole or part by a therapist assistant are paid at an amount equal to 85% of the payment amount otherwise applicable for the service.Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation. We believe that we are in compliance, in allmaterial respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect onour financial statements as of December 31, 2021. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory actionincluding fines, penalties, and exclusion from the Medicare program. For the year ended December 31, 2021 and 2020, respectively, net patient revenue from Medicare were approximately $134.4 million and$101.6 million, respectively.Industrial Injury Prevention ServicesServices provided in this business include onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomicassessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors.These services are performed through Industrial Sports Medicine Professionals, consisting of both physical therapists and ATCs.REGULATION AND HEALTHCARE REFORMNumerous federal, state and local regulations regulate healthcare services and those who provide them. Some states into which we may expand have laws requiring facilities employing healthprofessionals and providing health-related services to be licensed and, in some cases, to obtain a certificate of need (that is, demonstrating to a state regulatory authority the need for, and financialfeasibility of, new facilities or the commencement of new healthcare services). Only one of the states in which we currently operate requires a certificate of need for the operation of our physical therapybusiness functions. Our therapists and/or clinics, however, are required to be licensed, as determined by the state in which they provide services. Failure to obtain or maintain any required certificates,approvals or licenses could have a material adverse effect on our business, financial condition and results of operations.Regulations Controlling Fraud and Abuse. Various federal and state laws regulate financial relationships involving providers of healthcare services. These laws include Section 1128B(b) of the SocialSecurity Act (42 U.S. C. § 1320a-7b[b]) (the “Fraud and Abuse Law”), under which civil and criminal penalties can be imposed upon persons who, among other things, offer, solicit, pay or receiveremuneration in return for (i) the referral of patients for the rendering of any item or service for which payment may be made, in whole or in part, by a Federal health care program (including Medicare andMedicaid); or (ii) purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, ordering any good, facility, service, or item for which payment may be made, in whole or in part, by aFederal health care program (including Medicare and Medicaid). We believe that our business procedures and business arrangements are in compliance with these provisions. However, the provisions arebroadly written and the full extent of their specific application to specific facts and arrangements to which we are a party is uncertain and difficult to predict. In addition, several states have enacted statelaws similar to the Fraud and Abuse Law, which may be more restrictive than the federal Fraud and Abuse Law.The Office of the Inspector General (“OIG”) of HHS has issued regulations describing compensation financial arrangements that fall within a “Safe Harbor” and, therefore, are not viewed as illegalremuneration under the Fraud and Abuse Law. Failure to fall within a Safe Harbor does not mean that the Fraud and Abuse Law has been violated; however, the OIG has indicated that failure to fall within aSafe Harbor may subject an arrangement to increased scrutiny under a “facts and circumstances” test.The OIG also has issued special fraud alerts and special advisory bulletins to remind the provider community of the importance and application of certain aspects of the Fraud and Abuse Law. One ofthe OIG special fraud alerts related to the rental of space in physician offices by persons or entities to which the physicians refer patients. The OIG’s stated concern in these arrangements is that rentalpayments may be disguised kickbacks to the physician-landlords to induce referrals. We rent clinic space for some of our clinics from referring physicians and have taken the steps that we believe arenecessary to ensure that all leases comply to the extent possible and applicable, with the space rental Safe Harbor to the Fraud and Abuse Law. One of the OIG’s special advisory bulletins addressed certain complex contractual arrangements for the provision of items and services. This special advisory bulletin identified several characteristicscommonly exhibited by suspect arrangements, the existence of one or more of which could indicate a prohibited arrangement to the OIG. Generally, the indicia of a suspect contractual joint venture asidentified by the special advisory bulletin and an associated OIG advisory opinion include the following:7Table of ContentsNew Line of Business. A provider in one line of business (“Owner”) expands into a new line of business that can be provided to the Owner’s existing patients, with another party who currently providesthe same or similar item or service as the new business (“Manager/Supplier”).Captive Referral Base. The arrangement predominantly or exclusively serves the Owner’s existing patient base (or patients under the control or influence of the Owner).Little or No Bona Fide Business Risk. The Owner’s primary contribution to the venture is referrals; it makes little or no financial or other investment in the business, delegating the entire operation to theManager/Supplier, while retaining profits generated from its captive referral base.Status of the Manager/Supplier. The Manager/Supplier is a would-be competitor of the Owner’s new line of business and would normally compete for the captive referrals. It has the capacity to providevirtually identical services in its own right and bill insurers and patients for them in its own name.Scope of Services Provided by the Manager/Supplier. The Manager/Supplier provides all, or many, of the new business’ key services.Remuneration. The practical effect of the arrangement, viewed in its entirety, is to provide the Owner the opportunity to bill insurers and patients for business otherwise provided by the Manager/Supplier.The remuneration from the venture to the Owner (i.e., the profits of the venture) takes into account the value and volume of business the Owner generates.Exclusivity. The arrangement bars the Owner from providing items or services to any patients other than those coming from Owner and/or bars the Manager/Supplier from providing services in its ownright to the Owner’s patients.Due to the nature of our business operations, many of our management service arrangements exhibit one or more of these characteristics. However, we believe we have taken steps regarding thestructure of such arrangements as necessary to sufficiently distinguish them from these suspect ventures, and to comply with the requirements of the Fraud and Abuse Law. However, if the OIG believeswe have entered into a prohibited contractual joint venture, it could have an adverse effect on our business, financial condition and results of operations.Although the business of managing physician-owned and hospital-owned physical therapy facilities is regulated by the Fraud and Abuse Law, the manner in which we contract with such facilitiesoften falls outside the complete scope of available Safe Harbors. We believe our arrangements comply with the Fraud and Abuse Law, even though federal courts provide limited guidance as to theapplication of the Fraud and Abuse Law to these arrangements. If our management contracts are held to violate the Fraud and Abuse Law, it could have an adverse effect on our business, financialcondition and results of operations.Stark Law. Provisions of the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. § 1395nn) (the “Stark Law”) prohibit referrals by a physician of “designated health services” which are payable, inwhole or in part, by Medicare or Medicaid, to an entity in which the physician or the physician’s immediate family member has an investment interest or other financial relationship, subject to severalexceptions. Unlike the Fraud and Abuse Law, the Stark Law is a strict liability statute. Proof of intent to violate the Stark Law is not required. Physical therapy and occupational therapy services are amongthe “designated health services”. Further, the Stark Law has application to our management contracts with individual physicians and physician groups, as well as, any other financial relationship betweenus and referring physicians, including medical advisor arrangements and any financial transaction resulting from a clinic acquisition. The Stark Law also prohibits billing for services rendered pursuant to aprohibited referral. Several states have enacted laws similar to the Stark Law. These state laws may cover all (not just Medicare and Medicaid) patients. As with the Fraud and Abuse Law, we consider theStark Law in planning our clinics, establishing contractual and other arrangements with physicians, marketing and other activities, and believe that our operations are in compliance with the Stark Law. Ifwe violate the Stark Law or any similar state laws, our financial results and operations could be adversely affected. Penalties for violations include denial of payment for the services, significant civilmonetary penalties, and exclusion from the Medicare and Medicaid programs. HIPAA. In an effort to further combat healthcare fraud and protect patient confidentially, Congress included several anti-fraud measures in the Health Insurance Portability and Accountability Act of1996 (“HIPAA”). HIPAA created a source of funding for fraud control to coordinate federal, state and local healthcare law enforcement programs, conduct investigations, provide guidance to thehealthcare industry concerning fraudulent healthcare practices, and establish a national data bank to receive and report final adverse actions. HIPAA also criminalized certain forms of health fraud againstall public and private payors. Additionally, HIPAA mandates the adoption of standards regarding the exchange of healthcare information in an effort to ensure the privacy and electronic security of patientinformation and standards relating to the privacy of health information. Sanctions for failing to comply with HIPAA include criminal penalties and civil sanctions. In February of 2009, the AmericanRecovery and Reinvestment Act of 2009 (“ARRA”) was signed into law. Title XIII of ARRA, the Health Information Technology for Economic and Clinical Health Act (“HITECH”), provided for substantialMedicare and Medicaid incentives for providers to adopt electronic health records (“EHRs”) and grants for the development of health information exchange (“HIE”). Recognizing that HIE and EHRsystems will not be implemented unless the public can be assured that the privacy and security of patient information in such systems is protected, HITECH also significantly expanded the scope of theprivacy and security requirements under HIPAA. Most notable are the mandatory breach notification requirements and a heightened enforcement scheme that includes increased penalties, and which nowapply to business associates as well as to covered entities. In addition to HIPAA, a number of states have adopted laws and/or regulations applicable in the use and disclosure of individually identifiablehealth information that can be more stringent than comparable provisions under HIPAA.8Table of ContentsWe believe that our operations comply with applicable standards for privacy and security of protected healthcare information. We cannot predict what negative effect, if any, HIPAA/HITECH or anyapplicable state law or regulation will have on our business.Other Regulatory Factors. Political, economic and regulatory influences are fundamentally changing the healthcare industry in the United States. Congress, state legislatures and the private sectorcontinue to review and assess alternative healthcare delivery and payment systems. Potential alternative approaches could include mandated basic healthcare benefits, controls on healthcare spendingthrough limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, and price controls. Legislative debate isexpected to continue in the future and market forces are expected to demand only modest increases or reduced costs. For instance, managed care entities are demanding lower reimbursement rates fromhealthcare providers and, in some cases, are requiring or encouraging providers to accept capitated payments that may not allow providers to cover their full costs or realize traditional levels ofprofitability. We cannot reasonably predict what impact the adoption of federal or state healthcare reform measures or future private sector reform may have on our business.COMPETITIONThe healthcare industry, including the physical therapy business and the industrial injury prevention services business are highly competitive. The physical therapy business as well as the industrialinjury prevention services business are both highly fragmented with no company having a significant market share nationally. We believe that we are one of the largest national outpatient physical therapyservices providers.Competitive factors affecting our business include quality of care, cost, treatment outcomes, convenience of location, and relationships with, and ability to meet the needs of, referral and payorsources. Our clinics compete, directly or indirectly, with many types of healthcare providers including the physical therapy departments of hospitals, private therapy clinics, physician-owned therapyclinics, and chiropractors. We may face more intense competition if consolidation of the therapy industry continues.We believe that our strategy of providing key therapists in a community with an opportunity to participate in ownership or clinic profitability provides us with a competitive advantage by helping toensure the commitment of local management to the success of the clinic.We also believe that our competitive position is enhanced by our strategy of locating our clinics, when possible, on the ground floor of buildings and shopping centers with nearby parking, therebymaking the clinics more easily accessible to patients. We offer convenient hours. We also attempt to make the decor in our clinics less institutional and more aesthetically pleasing than traditional hospitalclinics.ENFORCEMENT ENVIRONMENTIn recent years, federal and state governments have launched several initiatives aimed at uncovering behavior that violates the federal civil and criminal laws regarding false claims and fraudulentbilling and coding practices. Such laws require providers to adhere to complex reimbursement requirements regarding proper billing and coding in order to be compensated for their services by governmentpayors. Our compliance program requires adherence to applicable law and promotes reimbursement education and training; however, a determination that our clinics’ billing and coding practices are falseor fraudulent could have a material adverse effect on us.As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental inspections, reviews, audits and investigations to verify our compliance with theseprograms and applicable laws and regulations. In addition, our prior Corporate Integrity Agreement, which expired in February 2021, required annual audits to be performed by an independent revieworganization on a small sample of our clinics, the results of which were reported to the federal government. See “-Compliance Program—Corporate Integrity Agreement” for more on the Corporate IntegrityAgreement (“CIA”). Managed care payors may also reserve the right to conduct audits. An adverse inspection, review, audit or investigation could result in: refunding amounts we have been paid; finespenalties and/or revocation of billing privileges for the affected clinics; the imposition of a new Corporate Integrity Agreement; exclusion from participation in the Medicare or Medicaid programs or one ormore managed care payor networks; or damage to our reputation. We and our clinics are subject to federal and state laws prohibiting entities and individuals from knowingly and willfully making claims to Medicare, Medicaid and other governmental programs andthird party payors that contain false or fraudulent information. The federal False Claims Act encourages private individuals to file suits on behalf of the government against healthcare providers such asus. As such suits are generally filed under seal with a court to allow the government adequate time to investigate and determine whether it will intervene in the action, the implicated healthcare providersoften are unaware of the suit until the government has made its determination and the seal is lifted. Violations or alleged violations of such laws, and any related lawsuits, could result in (i) exclusion fromparticipation in Medicare, Medicaid and other federal healthcare programs, or (ii) significant financial or criminal sanctions, resulting in the possibility of substantial financial penalties for small billingerrors that are replicated in a large number of claims, as each individual claim could be deemed a separate violation. In addition, many states also have enacted similar statutes, which may include criminalpenalties, substantial fines, and treble damages.9Table of ContentsCOMPLIANCE PROGRAMOur Compliance Program. Our ongoing success depends upon our reputation for quality service and ethical business practices. We operate in a highly regulated environment with many federal, stateand local laws and regulations. We take a proactive interest in understanding and complying with the laws and regulations that apply to our business.Our Board of Directors (the “Board”) has adopted a Code of Business Conduct and Ethics and a set of Corporate Governance Guidelines to clarify the ethical standards under which the Board andmanagement carry out their duties. In addition, the Board has created a Compliance Committee of the Board (“Compliance Committee”) whose purpose is to assist the Board in discharging their oversightresponsibilities with respect to compliance with federal and state laws and regulations relating to healthcare.We have issued a Compliance Manual and created compliance training materials, hand-outs and an on-line testing program. These tools were prepared to ensure that every employee of our Companyand subsidiaries has a clear understanding of our mutual commitment to high standards of professionalism, honesty, fairness and compliance with the law in conducting business. These standards areadministered by our Chief Compliance Officer (“CCO”), who has the responsibility for the day-to-day oversight, administration and development of our compliance program. The CCO, internal and externalcounsel, management and the Compliance Committee review our policies and procedures for our compliance program from time to time in an effort to improve operations and to ensure compliance withrequirements of standards, laws and regulations and to reflect the on-going compliance focus areas which have been identified by management, counsel or the Compliance Committee. We also haveestablished systems for reporting potential violations, educating our employees, monitoring and auditing compliance and handling enforcement and discipline.Committees. Our Compliance Committee, appointed by the Board, consists of four independent directors. The Compliance Committee has general oversight of our Company’s compliance with the legaland regulatory requirements regarding healthcare operations. The Compliance Committee relies on the expertise and knowledge of management, the CCO and other compliance and legal personnel. TheCCO regularly communicates with the Chairman of the Compliance Committee. The Compliance Committee meets at least four times a year or more frequently as necessary to carry out its responsibilitiesand reports regularly to the Board regarding its actions and recommendations.We also have an Internal Compliance Committee, which is comprised of Company leaders in the areas of operations, clinical services, finance, human resources, legal, information technology andcredentialing. The Internal Compliance Committee has the responsibility for evaluating and assessing Company areas of risk relating to compliance with federal and state healthcare laws, and generally toassist the CCO. The Internal Compliance Committee meets at least four times a year or more frequently as necessary to carry out its responsibilities. In addition, management has appointed a team toaddress our Company’s compliance with HIPAA. The HIPAA team consists of a security officer and employees from our legal, information systems, finance, operations, compliance, business services andhuman resources departments. The team prepares assessments and makes recommendations regarding operational changes and/or new systems, if needed, to comply with HIPAA.Each clinic certified as a Medicare Rehabilitation Agency has a formally appointed governing body composed of a member of our management and the director/administrator of the clinic. Thegoverning body retains legal responsibility for the overall conduct of the clinic. The members confer regularly and discuss, among other issues, clinic compliance with applicable laws and regulations. Inaddition, there are Professional Advisory Committees which serve as Infection Control Committees. These committees meet in the facilities and function as advisors.We have in place a Risk Management Committee consisting of, among others, the CCO, the Vice President of Human Resources, and other legal, compliance and operations personnel. This committeereviews and monitors all employee and patient incident reports and provides clinic personnel with actions to be taken in response to the reports.Reporting Violations. In order to facilitate our employees’ ability to report in confidence, anonymously and without retaliation any perceived improper work-related activities, accounting irregularitiesand other violations of our compliance program, we have set up an independent national compliance hotline. The compliance hotline is available to receive confidential reports of wrongdoing Mondaythrough Friday (excluding holidays), 24 hours a day. The compliance hotline is staffed by experienced third party professionals trained to utilize utmost care and discretion in handling sensitive issues andconfidential information. The information received is documented and forwarded timely to the CCO, who, together with the Compliance Committee, has the power and resources to investigate and resolvematters of improper conduct.Educating Our Employees. We utilize numerous methods to train our employees in compliance related issues, including an online learning management system. All employees complete acomprehensive training program comprised of numerous modules relating to our business and proper practices when newly hired and annually thereafter. The directors/administrators also provide periodic“refresher” training for existing employees and one-on-one comprehensive training with new hires. The corporate compliance group responds to questions from clinic personnel and conducts frequentteleconference meetings, webinars and training sessions on a variety of compliance related topics. When a clinic opens, we provide a package of compliance materials containing manuals and detailed instructions for meeting Medicare Conditions of Participation Standards and other compliancerequirements. During follow up training with the director/administrator of the clinic, compliance department staff explain various details regarding requirements and compliance standards. Compliance staffwill remain in contact with the director/administrator while the clinic is implementing compliance standards and will provide any assistance required. All new office managers receive training (includingMedicare, regulatory and corporate compliance, insurance billing, charge entry and transaction posting and coding, daily, weekly and monthly accounting reports) from the training staff at the corporateoffice. The corporate compliance group will assist in continued compliance, including guidance to the clinic staff with regard to Medicare certifications, state survey requirements and responses to anyinquiries from regulatory agencies.10Table of ContentsMonitoring and Auditing Clinic Operational Compliance. We have in place audit programs and other procedures to monitor and audit clinic operational compliance with applicable policies andprocedures. We employ internal auditors who, as part of their job responsibilities, conduct periodic audits of each clinic. Most clinics are audited at least once every 24 months and additional focusedaudits are performed as deemed necessary. During these audits, particular attention is given to compliance with Medicare and internal policies, Federal and state laws and regulations, third party payorrequirements, and patient chart documentation, billing, reporting, record keeping, collections and contract procedures. The audits are conducted on site or remotely and include interviews with theemployees involved in management, operations, billing and accounts receivable.Formal audit reports are prepared and reviewed with corporate management and the Compliance Committee. Each clinic director/administrator receives a letter instructing them of any correctivemeasures required. Each clinic director/administrator then works with the compliance team and operations to ensure such corrective measures are achieved.Handling Enforcement and Discipline. It is our policy that any employee who fails to comply with compliance program requirements or who negligently or deliberately fails to comply with known lawsor regulations specifically addressed in our compliance program should be subject to disciplinary action up to and including discharge from employment. The Compliance Committee, compliance staff,human resources staff and management investigate violations of our compliance program and impose disciplinary action as considered appropriate.Corporate Integrity Agreement. We also performed certain additional compliance related functions pursuant to CIA that we entered into with the OIG. The CIA, which became effective as of December21, 2015, and expired in February 2021, outlined certain specific requirements relating to compliance oversight and program implementation, as well as periodic reporting. In addition, pursuant to the CIA, anindependent review organization annually performed a Medicare billing and coding audit on a small group of randomly selected Company clinics. Our Compliance Program was modified so as to complywith the requirements of the CIA. The term of the CIA was five years and expired in February 2021.EMPLOYEESOur strategy is to acquire physical therapy practices, develop outpatient physical therapy clinics as satellites within existing partnerships, acquire industrial injury prevention services businesses, andcontinue to support the growth of our existing businesses requires a talented workforce that can grow with us. As of December 31, 2021, we employed approximately 5,500 people nationwide, of whichapproximately 3,000 were full-time employees.It is crucial that we continue to attract and retain top talent. To attract and retain talented employees, we strive to make our corporate office and all of our practices and businesses a diverse andhealthy workplace, with opportunities for our employees to receive continuing education, skill development, encouragement to grow and develop their career, all supported by competitive compensation,incentives, and benefits. Our clinical professionals are all licensed and a vast majority have advanced degrees. Our operational leadership teams have long-standing relationships with local and regionaluniversities, professional affiliations, and other applicable sources that provide our practices with a talent pipeline.We provide competitive compensation and benefits programs to help meet our employees’ needs in the practices and communities in which they serve. These programs (which can vary by practiceand employment classification) include incentive compensation plans, a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, educationassistance, mental health and other employee assistance benefits.We invest resources to develop the talent needed to support our business strategy. Resources include a multitude of training and development programs delivered internally and externally, online andinstructor-led, and on-the-job learning formats.We expect to continue adding personnel in the future as we focus on potential acquisition targets and organic growth opportunities.11Table of ContentsAVAILABLE INFORMATIONOur annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the ExchangeAct are made available free of charge on our internet website at www.usph.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. ITEM 1A.RISK FACTORS.Our business, operations and financial condition are subject to various risks. Some of these risks are described below, and readers of this Annual Report on Form 10-K should take such risks intoaccount in evaluating our Company or making any decision to invest in us. This section does not describe all risks applicable to our Company, our industry or our business, and it is intended only as asummary of material factors affecting our business.Risks related to our business and operationsWe are subject to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus (“COVID-19”). Our operations expose us to risks associated with public health crises and epidemics/pandemics, such as COVID-19 that has spread globally. Since early 2020, the continued spread has led todisruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty. COVID-19 is having, and will continue to have, an adverse impact on our operations and supply chains, including a temporary loss of physical therapists and other employees who are infected orquarantined for a period of time, an increase in cancellations of physical therapy patient appointments and a decline in the scheduling of new or additional patient appointments. Due to these impacts andmeasures, we have experienced, and will continue to experience, significant and unpredictable impact on employees and reductions and cancellations of our patient visits. Starting in mid-2021, certain local jurisdictions have imposed vaccination and/or mask mandates, and many of the Company’s clinics and their employees are now subject to a vaccination mandatepromulgated by CMS as a condition of continued participation in the Medicare and Medicaid programs as a certified rehabilitation agency. At this time, it is not possible to predict the impact of these andother similar mandates on the Company or its workforce. These and other mandates may result in employee attrition and could have a material adverse effect on our business, including future revenue,costs, and results of operations.Decreases in Medicare reimbursement rate may adversely affect our financial results.The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). On an annual basis, our reimbursement under the MPFS is subject tochanges, which could include reductions in such reimbursement amounts. The Company estimates that the Medicare rate reduction for the full year of 2022 will be approximately 0.75%. See “Business—Sources of Revenue – Physical Therapy Services” in Item 1 for more information. The Consolidated Appropriations Act of 2021, includes reductions in Medicare payment rates of approximately 3% ineach of calendar years 2023 and 2024, which would be instituted unless regulatory or Congressional action results in modifications to such rates as occurred in 2021 and 2022. In addition, 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 byapproximately $1.2 trillion. Payments to Medicare providers are subject to these automatic spending reductions, subject to a 2% cap. Congress has taken action to waive the 2% payment reduction during2021 and continuing through March 31, 2022, followed by three months of 1% sequester relief through June 30, 2022. Sequester relief is scheduled to then end on June 30, 2022.Furthermore, Medicare claims for outpatient therapy services furnished by therapist assistants on or after January 1, 2020, must include a modifier indicating the service was furnished by a therapistassistant. Outpatient therapy services furnished on or after January 1, 2022 in whole or part by a therapist assistant are paid at an amount equal to 85% of the payment amount otherwise applicable for theservice.Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation. We believe that we are in compliance, in allmaterial respects, with all applicable laws and regulations governing the services we provide to Medicare patients and are not aware of any pending or threatened investigations involving allegations ofpotential wrongdoing that could have a material effect on our financial statements as of December 31, 2021. Compliance with such laws and regulations can be subject to future government review andinterpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program. For the years ended December 31, 2021, and 2020, respectively, net patientrevenue from Medicare were approximately $134.4 million and $101.6 million, respectively. Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare that sufficientlycompensate us for our services or, in some instances, cover our operating costs. Limits on reimbursement rates or the scope of services being reimbursed could have a material adverse effect on ourrevenue, financial condition, and results of operations. Additionally, any delay or default by the federal or state governments in making Medicare and/or Medicaid reimbursement payments could materiallyand, adversely, affect our business, financial condition and results of operations.12Table of ContentsWe expect the federal and state governments to continue their efforts to contain growth in Medicaid expenditures, which could adversely affect our revenue and profitability.Medicaid spending has increased rapidly in recent years, becoming a significant component of state budgets. This, combined with slower state revenue growth, has led both the federal governmentand many states to institute measures aimed at controlling the growth of Medicaid spending, and in some instances reducing aggregate Medicaid spending. We expect these state and federal efforts tocontinue for the foreseeable future. Furthermore, not all of the states in which we operate, most notably Texas, have elected to expand Medicaid as part of federal healthcare reform legislation. There can beno assurance that the program, on the current terms or otherwise, will continue for any particular period of time beyond the foreseeable future. If Medicaid reimbursement rates are reduced or fail toincrease as quickly as our costs, or if there are changes in the rules governing the Medicaid program that are disadvantageous to our businesses, our business and results of operations could be materiallyand adversely affected.Revenue we receive from Medicare and Medicaid is subject to potential retroactive reduction.Payments we receive from Medicare and Medicaid can be retroactively adjusted after examination during the claims settlement process or as a result of post-payment audits. Payors may disallow ourrequests for reimbursement, or recoup amounts previously reimbursed, based on determinations by the payors or their third-party audit contractors that certain costs are not reimbursable because eitheradequate or additional documentation was not provided or because certain services were not covered or deemed to not be medically necessary. Significant adjustments, recoupments or repayments of ourMedicare or Medicaid revenue, and the costs associated with complying with investigative audits by regulatory and governmental authorities, could adversely affect our financial condition and results ofoperations.Additionally, from time to time we become aware, either based on information provided by third parties and/or the results of internal audits, of payments from payor sources that were either wholly orpartially in excess of the amount that we should have been paid for the service provided. Overpayments may result from a variety of factors, including insufficient documentation supporting the servicesrendered or medical necessity of the services or other failures to document the satisfaction of the necessary conditions of payment. We are required by law in most instances to refund the full amount ofthe overpayment after becoming aware of it, and failure to do so within requisite time limits imposed by the law could lead to significant fines and penalties being imposed on us. Furthermore, our initialbilling of and payments for services that are unsupported by the requisite documentation and satisfaction of any other conditions of payment, regardless of our awareness of the failure at the time of thebilling or payment, could expose us to significant fines and penalties. We, and/or certain of our operating companies, could also be subject to exclusion from participation in the Medicare or Medicaidprograms in some circumstances as well, in addition to any monetary or other fines, penalties or sanctions that we may incur under applicable federal and/or state law. Our repayment of any such amounts,as well as any fines, penalties or other sanctions that we may incur, could be significant and could have a material and adverse effect on our results of operations and financial condition.From time to time we are also involved in various external governmental investigations, audits and reviews. Reviews, audits and investigations of this sort can lead to government actions, which canresult in the assessment of damages, civil or criminal fines or penalties, or other sanctions, including restrictions or changes in the way we conduct business, loss of licensure or exclusion fromparticipation in government programs. Failure to comply with applicable laws, regulations and rules could have a material and adverse effect on our results of operations and financial condition.Furthermore, becoming subject to these governmental investigations, audits and reviews can also require us to incur significant legal and document production expenses as we cooperate with thegovernment authorities, regardless of whether the particular investigation, audit or review leads to the identification of underlying issues.As a result of increased post-payment reviews of claims we submit to Medicare for our services, we may incur additional costs and may be required to repay amounts already paid to us.We are subject to regular post-payment inquiries, investigations and audits of the claims we submit to Medicare for payment for our services. These post-payment reviews have increased as a resultof government cost-containment initiatives. These additional post-payment reviews may require us to incur additional costs to respond to requests for records and to pursue the reversal of paymentdenials, and ultimately may require us to refund amounts paid to us by Medicare that are determined to have been overpaid.For a further description of this and other laws and regulations involving governmental reimbursements, see “Business—Sources of Revenue” and “—Regulation and Healthcare Reform” in Item 1.An economic downturn, state budget pressures, sustained unemployment and continued deficit spending by the federal government may result in a reduction in reimbursement and covered services.An economic downturn, including the consequences of a pandemic, such as COVID-19, could have a detrimental effect on our revenues. Historically, state budget pressures have translated intoreductions in state spending. Given that Medicaid outlays are a significant component of state budgets, we can expect continuing cost containment pressures on Medicaid outlays for our services in thestates in which we operate. In addition, an economic downturn, coupled with sustained unemployment, may also impact the number of enrollees in managed care programs as well as the profitability ofmanaged care companies, which could result in reduced reimbursement rates.13Table of ContentsThe existing federal deficit, as well as deficit spending by federal and state governments as the result of adverse developments in the economy or other reasons, can lead to continuing pressure toreduce governmental expenditures for other purposes, including government-funded programs in which we participate, such as Medicare and Medicaid. Such actions in turn may adversely affect ourresults of operations.We depend upon reimbursement by third-party payors.Substantially all of our revenues are derived from private and governmental third-party payors. In 2021, approximately 62.8% of our revenues were derived collectively from managed care plans,commercial health insurers, workers’ compensation payors, and other private pay revenue sources while approximately 37.2% of our revenues were derived from Medicare and Medicaid. Initiativesundertaken by industry and government to contain healthcare costs affect the profitability of our clinics. These payors attempt to control healthcare costs by contracting with healthcare providers toobtain services on a discounted basis. We believe that this trend will continue and may limit reimbursement for healthcare services. If insurers or managed care companies from whom we receivesubstantial payments were to reduce the amounts they pay for services, our profit margins may decline, or we may lose patients if we choose not to renew our contracts with these insurers at lower rates.In addition, in certain geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans. Failure to obtain or maintain these approvalswould adversely affect our financial results.In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program. See “Business—Sourcesof Revenue – Physical Therapy Services” in Item 1 for more information including changes to Medicare reimbursement. Additional reforms or other changes to these payment systems may be proposed oradopted, either by the U.S. Congress or by CMS, including bundled payments, outcomes-based payment methodologies and a shift away from traditional fee-for-service reimbursement. If revisedregulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at our facilities could change. Some of these changes and proposed changescould adversely affect our business strategy, operations and financial results. Impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interests (minority interests).As described in Note 5, the redeemable non-controlling interests in our partnerships are held by our partners. Upon the occurrence of certain events, such as retirement or other termination ofemployment, partners from acquired partnerships may have the right to exercise a “put” to cause us to purchase their redeemable non-controlling interests. Depending on the amount and timing of theexercise of any “put” rights, the funds required could have an adverse impact on our capital structure.Healthcare reform legislation may affect our business.In recent years, many legislative proposals have been introduced or proposed in Congress and in some state legislatures that would affect major changes in the healthcare system, either nationally orat the state level. At the federal level, Congress has continued to propose or consider healthcare budgets that substantially reduce payments under the Medicare programs. See “Business—Sources ofRevenue” in Item 1 for more information. The ultimate content, timing or effect of any healthcare reform legislation and the impact of potential legislation on us is uncertain and difficult, if not impossible, topredict. That impact may be material to our business, financial condition or results of operations.Our operations are subject to extensive regulation.The healthcare industry is subject to extensive federal, state and local laws and regulations relating to: •facility and professional licensure/permits, including certificates of need; •conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral; •addition of facilities and services; and •coding, billing and payment for services. 14Table of ContentsIn recent years, there have been heightened coordinated civil and criminal enforcement efforts by both federal and state government agencies relating to the healthcare industry. We believe we are insubstantial compliance with all laws, but differing interpretations or enforcement of these laws and regulations could subject our current practices to allegations of impropriety or illegality or could requireus to make changes in our methods of operations, facilities, equipment, personnel, services and capital expenditure programs and increase our operating expenses. If we fail to comply with these extensivelaws and government regulations, we could become ineligible to receive government program reimbursement, suffer civil or criminal penalties or be required to make significant changes to our operations.In addition, we could be forced to expend considerable resources responding to an investigation or other enforcement action under these laws or regulations. For a more complete description of certain ofthese laws and regulations, see “Business—Regulation and Healthcare Reform” and “Business—Compliance Program” in Item 1.Both federal and state regulatory agencies inspect, survey and audit our facilities to review our compliance with these laws and regulations. While our facilities intend to comply with the existinglicensing, Medicare certification requirements and accreditation standards, there can be no assurance that these regulatory authorities will determine that all applicable requirements are fully met at anygiven time. A determination by any of these regulatory authorities that a facility is not in compliance with these requirements could lead to the imposition of requirements that the facility takes correctiveaction, assessment of fines and penalties, or loss of licensure or Medicare certification of accreditation. These consequences could have an adverse effect on us.Our operations are subject to investigations, legal actions and proceedings that could result in an adverse impact on our business and financial position.Healthcare providers are subject to investigations, legal actions and proceedings, as well as lawsuits under the qui tam provisions of the federal False Claims Act, based on claims that the providerfailed to comply with applicable laws and regulations that govern coding and the submission of claims for services provided to Medicare patients, among other things. These matters can involvesignificant costs, monetary damages and penalties. We have been subject to these proceedings in the past, and future proceedings could result in an adverse impact on our business and financial results.We face inspections, reviews, audits and investigations under federal and state government programs and contracts. These audits could have adverse findings that may negatively affect our business. As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental inspections, reviews, audits and investigations to verify our compliance with theseprograms and applicable laws and regulations. Managed care payors may also reserve the right to conduct audits. An adverse inspection, review, audit or investigation could result in: •refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from managed care payors; •state or federal agencies imposing fines, penalties and other sanctions on us; •temporary suspension of payment for new patients to the facility or agency; •decertification or exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks; •the imposition of a new Corporate Integrity Agreement; •damage to our reputation; •the revocation of a facility’s or agency’s license; and •loss of certain rights under, or termination of, our contracts with managed care payors.If adverse inspections, reviews, audits or investigations occur and any of the results noted above occur, it could have a material adverse effect on our business and operating results.Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable information.HIPAA required the HHS to adopt standards to protect the privacy and security of individually identifiable health-related information. The department released final regulations containing privacystandards in 2000 and published revisions to the final regulations in 2002. The privacy regulations extensively regulate the use and disclosure of individually identifiable health-related information. Theregulations also provide patients with significant rights related to understanding and controlling how their health information is used or disclosed. The security regulations require healthcare providers toimplement administrative, physical and technical practices to protect the security of individually identifiable health information that is maintained or transmitted electronically. HITECH, which was signedinto law in 2009, enhanced the privacy, security and enforcement provisions of HIPAA by, among other things establishing security breach notification requirements, allowing enforcement of HIPAA bystate attorneys general, and increasing penalties for HIPAA violations. Violations of HIPAA or HITECH could result in civil or criminal penalties.In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information.State statutes and regulations vary from state to state. Lawsuits, including class actions and action by state attorneys general, directed at companies that have experienced a privacy or security breachalso can occur.We have established policies and procedures in an effort to ensure compliance with these privacy related requirements. However, if there is a breach, we may be subject to various penalties anddamages and may be required to incur costs to mitigate the impact of the breach on affected individuals.15Table of ContentsIn conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.Some states prohibit the “corporate practice of therapy” that restricts business corporations from providing physical therapy services through the direct employment of therapist physicians or fromexercising control over medical decisions by therapists. The laws relating to corporate practice vary from state to state and are not fully developed in each state in which we have facilities. Typically,however, professional corporations owned and controlled by licensed professionals are exempt from corporate practice restrictions and may employ therapists to furnish professional services. Thoseprofessional corporations may be managed by business corporations, such as the Company.Some states also prohibit entities from engaging in certain financial arrangements, such as fee-splitting, with physicians or therapists. The laws relating to fee-splitting also vary from state to state andare not fully developed. Generally, these laws restrict business arrangements that involve a physician or therapist sharing medical fees with a referral source, but in some states, these laws have beeninterpreted to extend to management agreements between physicians or therapists and business entities under some circumstances.We believe that our current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws. However, there can be noassurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices. If a court or regulatory body determines that wehave violated these laws or if new laws are introduced that would render our arrangements illegal, we could be subject to civil or criminal penalties, our contracts could be found legally invalid andunenforceable (in whole or in part), or we could be required to restructure our contractual arrangements with our affiliated physicians and other licensed providers.We may be adversely affected by a security breach, such as a cyber-attack, which may cause a violation of HIPAA or HITECH and subject us to potential legal and reputational harm.In the normal course of business, our information technology systems hold sensitive patient information including patient demographic data and other protected health information, which is subject toHIPAA and HITECH. We also contract with third-party vendors to maintain and store our patients’ individually identifiable health information. Numerous state and federal laws and regulations addressprivacy and information security concerns resulting from our access to our patient’s and employee’s personal information.Our information technology systems and those of our vendors that process, maintain, and transmit such data are subject to computer viruses, cyber-attacks, or breaches. We adhere to policies andprocedures designed to ensure compliance with HIPAA and other privacy and information security laws and require our third-party vendors to do so as well. If, however, we or our third-party vendorsexperience a breach, loss, or other compromise of unsecured protected health information or other personal information, such an event could result in significant civil and criminal penalties, lawsuits,reputational harm, and increased costs to us, any of which could have a material adverse effect on our financial condition and results of operations.Furthermore, while our information technology systems, and those of our third-party vendors, are maintained with safeguards protecting against cyber-attacks. A cyber-attack that bypasses ourinformation technology security systems, or those of our third-party vendors, could result in a material adverse effect on our business, financial condition, results of operations, or cash flows. In addition,our future results could be adversely affected due to the theft, destruction, loss, misappropriation, or release of protected health information, other confidential data or proprietary business information,operational or business delays resulting from the disruption of information technology systems and subsequent mitigation activities, or regulatory action taken as a result of such incident. We provide ouremployees training and regular reminders on important measures they can take to prevent breaches. We routinely identify attempts to gain unauthorized access to our systems. However, given the rapidlyevolving nature and proliferation of cyber threats, there can be no assurance our training and network security measures or other controls will detect, prevent, or remediate security or data breaches in atimely manner or otherwise prevent unauthorized access to, damage to, or interruption of our systems and operations. Accordingly, we may be vulnerable to losses associated with the improperfunctioning, security breach, or unavailability of our information systems as well as any systems used in acquired operations.We depend upon the cultivation and maintenance of relationships with the physicians in our markets.Our success is dependent upon referrals from physicians in the communities our clinics serve and our ability to maintain good relations with these physicians and other referral sources. Physiciansreferring patients to our clinics are free to refer their patients to other therapy providers or to their own physician owned therapy practice. If we are unable to successfully cultivate and maintain strongrelationships with physicians and other referral sources, our business may decrease and our net operating revenues may decline.16Table of ContentsWe depend upon our ability to recruit and retain experienced physical therapists.Our revenue generation is dependent upon referrals from physicians in the communities our clinics serve, and our ability to maintain good relations with these physicians. Our therapists are the frontline for generating these referrals and we are dependent on their talents and skills to successfully cultivate and maintain strong relationships with these physicians. If we cannot recruit and retain our baseof experienced and clinically skilled therapists, our business may decrease and our net operating revenues may decline. Periodically, we have clinics in isolated communities that are temporarily unable tooperate due to the unavailability of a therapist who satisfies our standards.We may also experience increases in our labor costs, primarily due to higher wages and greater benefits required to attract and retain qualified healthcare personnel, and such increases may adverselyaffect our profitability. Furthermore, while we attempt to manage overall labor costs in the most efficient way, our efforts to manage them may have limited effectiveness and may lead to increased turnoverand other challenges.Failure to maintain effective internal control over our financial reporting could have an adverse effect on our ability to report our financial results on a timely and accurate basis.We are required to produce our consolidated financial statements in accordance with the requirements of accounting principles generally accepted in the United States of America. Effective internalcontrol over financial reporting is necessary for us to provide reliable financial reports, to help mitigate the risk of fraud and to operate successfully. We are required by federal securities laws to documentand test our internal control procedures in order to satisfy the requirements of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controlover financial reporting.Testing and maintaining our internal control over financial reporting can be expensive and divert our management’s attention from other matters that are important to our business. We may not be ableto conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with applicable law, or our independent registered public accounting firm may not be able toissue an unqualified attestation report if we conclude that our internal control over financial reporting is not effective. If we fail to maintain effective internal control over financial reporting, or ourindependent registered public accounting firm is unable to provide us with an unqualified attestation report on our internal control, we could be required to take costly and time-consuming correctivemeasures, be required to restate the affected historical financial statements, be subjected to investigations and/or sanctions by federal and state securities regulators, and be subjected to civil lawsuits bysecurity holders. Any of the foregoing could also cause investors to lose confidence in our reported financial information and in us and would likely result in a decline in the market price of our stock andin our ability to raise additional financing if needed in the future.Our revenues may fluctuate due to weather.We have a significant number of clinics in states that normally experience snow and ice during the winter months. Also, a significant number of our clinics are located in states along the Gulf Coastand Atlantic Coast which are subject to periodic winter storms, hurricanes and other severe storm systems. Periods of severe weather may cause physical damage to our facilities or prevent our staff orpatients from traveling to our clinics, which may cause a decrease in our net operating revenues.We operate in a highly competitive industry.We encounter competition from local, regional or national entities, some of which have superior resources or other competitive advantages. Intense competition may adversely affect our business,financial condition or results of operations. For a more complete description of this competitive environment, see “Business—Competition” in Item 1. An adverse effect on our business, financial conditionor results of operations may require us to write down goodwill.We may incur closure costs and losses.The competitive, economic or reimbursement conditions in our markets in which we operate may require us to reorganize or to close certain clinics. In the event a clinic is reorganized or closed, we mayincur losses and closure costs. The closure costs and losses may include, but are not limited to, lease obligations, severance, and write-down or write-off of goodwill and other intangible assets.17Table of ContentsFuture acquisitions may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities.As part of our growth strategy, we intend to continue pursuing acquisitions of outpatient physical therapy clinics and industrial injury prevention services businesses. Acquisitions may involvesignificant cash expenditures, potential debt incurrence and operational losses, dilutive issuances of equity securities and expenses that could have an adverse effect on our financial condition and resultsof operations. Acquisitions involve numerous risks, including: •the difficulty and expense of integrating acquired personnel into our business; •the diversion of management’s time from existing operations; •the potential loss of key employees of acquired companies; •the difficulty of assignment and/or procurement of managed care contractual arrangements; and •the assumption of the liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities for failure to comply with healthcare regulations.Employer and other contracted customers may terminate their relationship with us which could adversely affect the business.In our industrial injury prevention services business, we perform services for large employers and their employees pursuant to contracts and other services agreement. These contracts and otherservices agreements are able to be terminated by the employer-clients on little or short notice, and either a breach or termination of those contractual arrangements by such clients could cause operatingresults to be less than expected. Similarly, in our rehabilitation business, we have management and other services agreements with hospitals, physician groups and other ancillary providers; either a breachor termination of those contractual arrangements by such clients could cause operating results to be less than expected.Risks related to our common stockIssuance of shares in connection with financing transactions or under stock incentive plans will dilute current stockholders.Pursuant to our stock incentive plans, our Compensation Committee of the Board, consisting solely of independent directors, is authorized to grant stock awards to our employees, directors andconsultants. Shareholders will incur dilution upon the exercise of any outstanding stock awards or the grant of any restricted stock. In addition, if we raise additional funds by issuing additional commonstock, or securities convertible into or exchangeable or exercisable for common stock, further dilution to our existing stockholders will result, and new investors could have rights superior to existingstockholders.The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock.At December 31, 2021, we had reserved approximately 172,600 shares for future equity grants. We may issue additional restricted securities or register additional shares of common stock under theSecurities Act of 1933, as amended (the “Securities Act”), in the future. The issuance of a significant number of shares of common stock upon the exercise of stock options or the availability for sale, orsale, of a substantial number of the shares of common stock eligible for future sale under effective registration statements, under Rule 144 or otherwise, could adversely affect the market price of thecommon stock.Provisions in our articles of incorporation and bylaws could delay or prevent a change in control of our company, even if that change would be beneficial to our stockholders.Certain provisions of our articles of incorporation and bylaws may delay, discourage, prevent or render more difficult an attempt to obtain control of our company, whether through a tender offer,business combination, proxy contest or otherwise. These provisions include the charter authorization of “blank check” preferred stock and a restriction on the ability of stockholders to call a specialmeeting. ITEM 1B.UNRESOLVED STAFF COMMENTS.None ITEM 2.PROPERTIES.We lease the properties used for our clinics under non-cancelable operating leases with terms ranging from one to five years, with the exception of the property for one clinic which we own. We intendto lease the premises for any new clinic locations except in rare instances where leasing is not a cost-effective alternative. Our typical clinic occupies 1,000 to 7,000 square feet. There are 17 clinicsoccupying space in the range of over 7,000 square feet to 13,500 square feet.18Table of ContentsWe also lease our executive offices located in Houston, Texas, under a non-cancelable operating lease expiring in February 2028. We currently lease approximately 44,000 square feet of space(including allocations for common areas) at our executive offices.ITEM 3.LEGAL PROCEEDINGS.We are a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of ourbusiness. We cannot predict the ultimate outcome of pending litigation, proceedings, and regulatory and other governmental audits and investigations. These matters could potentially subject us tosanctions, damages, recoupments, fines, and other penalties. The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations relatedto our businesses in the future that may, either individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations, and liquidity.Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal for some time while the government decideswhether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and awardbounties to private plaintiffs who successfully bring the suits. We have been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future.Settlement of a Legal MatterOn August 19, 2019, we received notice of a qui tam lawsuit (“the Complaint”) filed by a relator on behalf of the United States, titled U.S. ex rel. Bonnie Elsdon, v. U.S. Physical Therapy, Inc., U.S.Physical Therapy, Ltd., Rehab Partners #2, Inc., The Hale Hand Center, Limited Partnership (the “Hale Partnership”), and Suzanne Hale. This whistleblower lawsuit was filed in the U.S. District Court forthe Southern District of Texas, seeking damages and civil penalties under the federal False Claim Act. This lawsuit was originally filed under seal by a former employee of The Hale Hand Center, LimitedPartnership (“Hale Partnership”), a majority-owned subsidiary of the Company, on May 25, 2018. The U.S Government declined to intervene in the case and unsealed the Complaint on July 17, 2019.The Complaint alleged that the Hale Partnership engaged in conduct to purposely “upcode” its billings for services provided to Medicare patients. The plaintiff - relator also claimed that similar falseclaims occurred on other days and at other Company-owned partnerships.On October 3, 2019, we filed Motions to Dismiss based on numerous grounds on behalf of each of the named defendants. On October 29, 2019, the plaintiff-relator dismissed three of the nameddefendants, Rehab Partners #2, Inc., U.S. Physical Therapy, Ltd., and Suzanne Hale. The Motions to Dismiss were denied on November 30, 2020.In January 2022, to avoid the legal fees and discovery costs in defending this matter and the uncertainty of protracted litigation, the Company entered into a settlement agreement with the plaintiff-relator. In the settlement agreement, the plaintiff-relator released all defendants from liability for all conduct alleged in the Complaint, and the Company admitted no liability or wrongdoing. In connectionwith the settlement, the Office of the United States Attorney for the Southern District of Texas agreed to a dismissal of the claims against the Hale Partnership and the Company. Under the terms of thesettlement, the Company agreed to make payments to the government, the plaintiff-relator and her counsel. Such payments, in the aggregate, amounted to $2.75 million of which $2.6 million was recordedas an expense in 2021. ITEM 4.MINE SAFETY DISCLOSURES.Not Applicable.PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock has traded on the New York Stock Exchange (“NYSE”) since August 14, 2012 under the symbol “USPH.” Prior to that, our common stock was traded on the Nasdaq Global SelectMarket under the symbol “USPH”. As of March 1, 2022, there were 88 holders of record of our outstanding common stock.19Table of ContentsDIVIDENDSOn February 22, 2022, our Board of Directors declared a dividend of $0.41 per share which will be paid on April 8, 2022 to shareholders of record as of March 14, 2022. During 2021, we paid a quarterlydividend of $0.35 for the first and second quarters and $0.38 per share for each of the third and fourth quarters, totaling $1.46 per share for the year, which amounted to total aggregate cash payments ofdividends to holders of our common stock in 2021 of approximately $18.8 million. During 2020, we paid a cash dividend for the first quarter of 2020 of $0.32 per share on all shares of common stock issuedand outstanding as of April 17, 2020 which amounted to $4.1 million. In March 2020, our Board of Directors announced the suspension of any further dividends in 2020. During 2019, we paid a quarterlydividend of $0.27 for the first and second quarters and $0.30 per share for the third and fourth quarters, totaling $1.14 per share for the year, which amounted to total aggregate cash payments of dividendsto holders of our common stock in 2019 of approximately $14.5 million. We are currently restricted from paying dividends on our common stock in excess of $50,000,000 in any fiscal year on our commonstock under the Credit Agreement (as defined in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”).20Table of ContentsFIVE YEAR PERFORMANCE GRAPH The performance graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act or under the Exchange Act, except to the extent that wespecifically incorporate this information by reference. In addition, the performance graph and the related description shall not be deemed “soliciting material” or “filed” with the SEC or subject toRegulation 14A or 14C.On August 14, 2012, our common stock began trading on NYSE. The following performance graph compares the cumulative total stockholder return of our common stock to The NYSE CompositeIndex and the NYSE Health Care Index for the period from December 31, 2016 through December 31, 2021. The graph assumes that $100 was invested in our common stock and the common stock of each ofthe companies listed on The NYSE Composite Index and The NYSE Health Care Index on December 31, 2016 and that any dividends were reinvested.Comparison of Five Years Cumulative Total Return for the Year Ended December 31, 2021  12/16 12/17 12/18 12/19 12/20 12/21 U.S Physical Therapy. Incs.100 103 146 156 171 136 NYSE Composite100 116 103 123 131 155 NYSE Healthcare Index100 119 127 151 168 203 21Table of ContentsITEM 6.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.EXECUTIVE SUMMARYOur Business.Our reportable segments include the physical therapy operations segment and the industrial injury prevention services segment. Through our subsidiaries, we operate outpatient physical therapyclinics that provide pre-and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurological-related injuries and rehabilitation of injured workers. Wealso have majority interests in companies which are leading providers of industrial injury prevention services. Services provided in these businesses include onsite injury prevention and rehabilitation,performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of these services are contracted with and paid for directly byemployers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors. These services are performed through Industrial Sports Medicine Professionals,consisting of both physical therapists and specialized certified athletic trainers (ATCs).During the last three years we completed the acquisitions of seven multi-clinic practices and three industrial injury prevention services businesses as detailed below:Acquisition Date % InterestAcquired Number ofClinics December 2021 Acquisition December 31, 2021 75% 3 November 2021 Acquisition November 30, 2021 70% * September 2021 Acquisition September 30, 2021 100% * June 2021 Acquisition June 30, 2021 65% 8 March 2021 Acquisition March 31, 2021 70% 6 November 2020 Acquisition November 30, 2020 75% 3 September 2020 Acquisition September 30, 2020 70% ** February 2020 Acquisition February 27, 2020 65% *** 4 September 2019 Acquisition September 30, 2019 67% 11 April 2019 Acquisition April 11, 2019 100% * *Industrial injury prevention business**The business includes six management and services contracts which have been in place for a number of years. As of the date acquired, the contracts had a remaining term of five years.***The four clinics are in four separate partnerships. The Company's interest in the four partnershipsrange from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction.Besides the multi-clinic acquisitions referenced in the table above, during 2021 and 2020, we purchased the assets and business of three physical therapy clinics in separate transactions. The clinicsoperate as satellite clinics of three of our existing clinic partnerships. During the year ended December 31, 2021, we sold two clinics. The aggregate sales price was $0.1 million. During the year ended December 31, 2020, we sold 14 previously closed clinics. Theaggregate sales price was $1.1 million, of which $0.7 million was paid in cash and $0.4 million in a note receivable, payable in two equal installments of principal and any accrued interest. The first paymentwas received in June 2021 and the next payment is due on June 15, 2022. 22Table of ContentsWe intend to continue to pursue additional acquisition opportunities, develop new clinics and open satellite clinics.Impact of COVID-19As previously disclosed in a series of filings with the SEC and further described in detail in our Quarterly Reports on Form 10-Q for the first three quarters of 2020 and our Annual Report on Form 10-Kfor the year ended December 31, 2020, our results were negatively impacted by the effects of the COVID-19 pandemic in 2020. For the 2021 period as compared to the 2020 period, the increase in revenuesand expenses are primarily due to our business returning to and now exceeding pre-pandemic results.We have put preparedness plans in place at our facilities to maintain continuity of operations, while also taking steps to keep employees and patients safe. In line with recommendations to reducelarge gatherings and increase social distancing, we continue to allow a large number of office-based employees to work remotely. We are monitoring the situation and will adjust work environmentsaccordingly.In March 2020 in response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provides numeroustax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interestdeductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualifiedimprovement property, and the creation of certain payroll tax credits associated with the retention of employees.We have received a number of benefits under the CARES Act including, but not limited to: •The CARES Act allowed for qualified healthcare providers to receive advanced payments under the existing Medicare Accelerated and Advance Payments Program (“MAAPP funds”) during theCOVID-19 pandemic. Under this program, healthcare providers could choose to receive advanced payments for future Medicare services provided. We applied for and received approval to receiveMAAP funds from Centers for Medicare & Medicaid Services (“CMS”) in April 2020. We recorded the $14.1 million in advance payments received as a liability. During the quarter ended March 31,2021, we repaid the MAAPP funds of $14.1 million rather than applying them to future services performed.•We elected to defer depositing the employer’s share of Social Security taxes for payments due from March 27, 2020, through December 31, 2020, interest-free and penalty-free. In December 2021,we paid $4.1 million related to these deferred payments. As of December 31, 2021, $4.2 million related to these deferred payments is included in accrued liabilities.•The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in appropriations forthe Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursingeligible health care providers for lost revenues and health care related expenses that are attributable to COVID-19. For the years ended December 31, 2021, and December 31, 2020, the Company’sconsolidated subsidiaries recorded income of approximately $4.6 million and $13.5 million, respectively, of payments under the CARES Act (“Relief Funds”). Under the Company’s accountingpolicy, these payments were recorded as Other income – Relief Funds. These funds are not required to be repaid upon attestation and compliance with certain terms and conditions, which couldchange materially based on evolving grant compliance provisions and guidance provided by the U.S. Department of Health and Human Services. Currently, the Company can attest and complywith the terms and conditions. We will continue to monitor the evolving guidelines and may record adjustments as additional information is released. CRITICAL ACCOUNTING POLICIES Critical accounting policies are those that have a significant impact on our results of operations and financial position involving significant estimates requiring our judgment. Our critical accountingpolicies are:23Table of ContentsRevenue Recognition.Revenues are recognized in the period in which services are rendered. Net patient revenue consists of revenues for physical therapy and occupational 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. Net patient revenue (patientrevenues less estimated contractual adjustments) is recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligationsunder the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as we provide physical and occupational therapyservices, as each service provided is distinct and future services rendered are not dependent on previously rendered services. We have agreements with third-party payors that provide for payments to usat amounts different from our established rates. The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience.Management contract revenue, which is included in other revenue in the consolidated statements of net income, is derived from contractual arrangements whereby we manage a clinic owned by a thirdparty. We do not have any ownership interest in these clinics. Typically, revenues are determined based on the number of visits conducted at the clinic and recognized at the point in time when services areperformed. Costs, typically salaries for our employees, are recorded when incurred.Revenues from the industrial injury prevention services business, which are also included in other revenues in the consolidated statements of net income, are derived from onsite services we provideto clients’ employees including injury prevention, rehabilitation, ergonomic assessments and performance optimization. Revenue from the industrial injury prevention services business is recognized whenobligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration we expect to receive in exchange for providing injury prevention services to ourclients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period.Additionally, other revenue includes services we provide on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gymmembership fees. Contract terms and rates are agreed to in advance between us and the third parties. Services are typically performed over the contract period and revenue is recorded at the point ofservice. If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time when the services are performed.We implemented ASC 606 beginning January 1, 2018, using a modified retrospective transition method. The principal change relates to how the new standard requires healthcare providers to estimatethe amount of variable consideration to be included in the transaction price up to an amount which is probable that a significant reversal will not occur. The most common forms of variable considerationwe experience are amounts for services provided that are ultimately not realizable from a customer. There were no changes to revenues or other revenues upon implementation. Under the new standards,our estimate for unrealizable amounts will continue to be recognized as a reduction to revenue. The bad debt expense historically reported will not materially change.For ASC 606, there is an implied contract between us and the patient upon each patient visit. Separate contractual arrangements exist between us and third-party payors (e.g. insurers, managed careprograms, government programs, and workers' compensation programs which establish the amounts the third parties pay on behalf of the patients for covered services rendered. While these agreementsare not considered contracts with the customer, they are used for determining the transaction price for services provided to the patients covered by the third-party payors. The payor contracts do notindicate performance obligations for us but indicate reimbursement rates for patients who are covered by those payors when the services are provided. At that time, we are obligated to provide services forthe reimbursement rates stipulated in the payor contracts. The execution of the contract alone does not indicate a performance obligation. For self-paying customers, the performance obligation existswhen we provide the services at established rates. The difference between our established rate and the anticipated reimbursement rate is accounted for as an offset to revenue—contractual allowance.We determine allowances for credit losses based on the specific agings of receivables and payor classifications at each clinic. The provision for credit losses is included in clinic operating costs in thestatements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for credit losses, includes only thoseamounts we estimate to be collectible.The following table details the revenue related to the various categories (in thousands): Year Ended December 31, 2021 December 31, 2020 December 31, 2019 Net patient revenue $438,330 $373,340 $433,345 Other revenue 2,939 2,020 2,486 Physical therapy operations 441,269 375,360 435,831 Management contract revenue 9,853 8,410 8,676 Industrial injury prevention services revenue 43,900 39,199 37,462 $495,022 $422,969 $481,969 24Table of ContentsContractual Allowances. Contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both insurance companies andgovernment sponsored healthcare programs for such services. Medicare regulations and the various third party payors and managed care contracts are often complex and may include multiplereimbursement mechanisms payable for the services provided in our clinics. We estimate contractual allowances based on our interpretation of the applicable regulations, payor contracts and historicalcalculations. Each month we estimate our contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and apply an appropriate contractual allowancereserve percentage to the gross accounts receivable balances for each payor of the clinic. Based on our historical experience, calculating the contractual allowance reserve percentage at the payor level issufficient to allow us to provide the necessary detail and accuracy with our collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretationthat could result in payments that differ from our estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. Our billing systemsmay not capture the exact change in our contractual allowance reserve estimate from period to period. Therefore, in order to assess the accuracy of our revenues and hence our contractual allowancereserves, our management regularly compares our cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, the historical differencebetween net revenues and corresponding cash collections in any given fiscal year has generally reflected a difference within approximately 1.0% to 1.5% of net revenues. Additionally, analysis ofsubsequent period’s contractual write-offs on a payor basis reflects a difference within approximately 1.0% to 1.5% between the actual aggregate contractual reserve percentage as compared to theestimated contractual allowance reserve percentage associated with the same period end balance. As a result, we believe that a reasonable likely change in the contractual allowance reserve estimate wouldnot be more than 1% to 1.5% of gross billings in accounts receivable at December 31, 2021. For purposes of demonstrating the sensitivity of this estimate on our Company’s financial condition, a 1% to1.5% increase or decrease in our aggregate contractual allowance reserve percentage would decrease or increase, respectively, net patient revenue by approximately $1.3 million to $1.9 million for the yearended December 31, 2021. Management believes the changes in the estimate of the contractual allowance reserve for the periods ended December 31, 2021, 2020 and 2019 have not been material to thestatement of income.The following table sets forth information regarding our patient accounts receivable as of the dates indicated (in thousands): December 31, 2021 2020 Gross patient accounts receivable $129,524 $119,180 Less contractual allowances 80,484 75,266 Subtotal - accounts receivable 49,040 43,914 Less allowance for credit losses 2,768 2,008 Net patient accounts receivable $46,272 $41,906 The following table presents our patient accounts receivable aging by payor class as of the dates indicated (in thousands): December 31, 2021 December 31, 2020 Payor Current to120 Days 120+ Days Total Current to120 Days 120+ Days Total Managed Care/ Commercial Plans $13,985 $2,381 $16,366 $13,053 $1,774 $14,827 Medicare/Medicaid 13,442 1,636 15,078 10,707 1,196 11,903 Workers Compensation* 5,600 1,312 6,912 6,576 926 7,502 Self-pay 4,371 3,316 7,687 4,086 3,146 7,232 Other** 1,168 1,829 2,997 1,108 1,342 2,450 Totals $38,566 $10,474 $49,040 $35,530 $8,384 $43,914 *Workers compensation is paid by state administrators or their designated agents. **Other includes primarily litigation claims and, to a lesser extent, vehicular insurance claims.Reimbursement for Medicare beneficiaries is based upon a fee schedule published by HHS. For a more complete description of our third-party revenue sources, see “Business—Sources of Revenue”in Item 1. Goodwill. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditionsand are written down to fair value if considered impaired. These events or conditions include but are not limited to: a significant adverse change in the business environment, regulatory environment, orlegal factors; a current period operating or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. Theoccurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. We evaluate indefinite-lived tradenames in conjunction with ourannual goodwill impairment test.25Table of ContentsWe operate a two segment business which is made up of various clinics within partnerships, and the other is an industrial injury prevention services business. The partnerships are components ofregions and are aggregated to the operating segment level for the purpose of determining our reporting units when performing our annual goodwill impairment test. In 2021, 2020 and 2019, there were sixregions. In addition to the six regions, in 2021 and 2020, the impairment analysis included a separate analysis for the industrial injury prevention services business, as a separate reporting unit. As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, we arethen required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unitis less than its carrying amount, we consider relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. We consider both the income and market approach indetermining the fair value of its reporting units when performing a quantitative analysis. An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimatedfair value of the reporting unit. The evaluation of goodwill in 2021, 2020 and 2019 did not result in any goodwill amounts that were deemed impaired.For our annual assessment of goodwill, we evaluated whether events or circumstances indicated that it was more likely than not that the fair value of the reporting units were reduced below theircarrying value as of December 31, 2021. As a result of the assessment, we determined that it was not more likely than not that goodwill and tradenames of the reporting units were impaired as of December31, 2021.Redeemable Non-Controlling Interest—The non-controlling interests that are reflected as redeemable non-controlling interest in our consolidated financial statements consist of those owners,including us, that have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that we purchase or the owner sell the non-controlling interest held bythe owner, if certain conditions are met and the owners request the purchase (“Put Right”). We also have a call right (“Call Right”). The Put Right or Call Right may be triggered by the owner or us,respectively, at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number ofyears after the closing of the transaction, typically three to five years, as defined in the limited partnership agreement. The Put Rights and Call Rights are not automatic (even upon death) and require eitherthe owner or us to exercise our rights when the conditions triggering the Put or Call Rights have been satisfied. The purchase price is derived at a predetermined formula based on a multiple of trailingtwelve months earnings performance as defined in the respective limited partnership agreements.On the date we acquire a controlling interest in a partnership and the limited partnership agreement for such partnerships contains redemption rights not under our control, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption—Redeemable non-controlling interest. Then, in each reporting period thereafter until it is purchased by us, theredeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial value, based on the predetermined formula defined in the respective limited partnershipagreement. As a result, the value of the non-controlling interest is not adjusted below its initial value. We record any adjustment in the redemption value, net of tax, directly to retained earnings and not inthe consolidated statements of income. Although the adjustments are not reflected in the consolidated statements of income, current accounting rules require that we reflect the adjustments, net of tax, inthe earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statement ofincome. We believe the redemption value (i.e. the carrying amount) and fair value are the same.Effective December 31, 2017, we entered into amendments to our limited partnership agreements for our acquired partnerships replacing the mandatory redemption feature. No monetary considerationwas paid to the partners to amend the agreements. The amended limited partnership agreements provide that, upon the triggering events, we have a Call Right and the selling entity or individual has a PutRight for the purchase and sale of the limited partnership interest held by the partner. Once triggered, the Put Right and the Call Right do not expire, even upon an individual partner’s death, and contain nomandatory redemption feature. The purchase price of the partner’s limited partnership interest upon the exercise of either the Put Right or the Call Right is calculated per the terms of the respectiveagreements. We accounted for the amendment of the limited partnership agreements as an extinguishment of the outstanding mandatorily redeemable non-controlling interests, which were classified asliabilities, through the issuance of new redeemable non-controlling interests classified in temporary equity. Pursuant to Accounting Standards Codification (“ASC”) 470-50-40-2, we removed theoutstanding liabilities at their carrying amounts, recognized the new temporary equities at their fair value, and recorded no gain or loss on extinguishment as management believes the redemption value (i.e.the carrying amount) and fair value are the same. In summary, the redemption values of the mandatorily redeemable non-controlling interest (previously classified as liabilities) were reclassified asredeemable non-controlling interest (temporary equity) at fair value on the December 31, 2017, consolidated balance sheet.Non-Controlling Interest—We recognize non-controlling interests, in which we have no obligation but the right to purchase the non-controlling interests, as equity in the consolidated financialstatements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the consolidated statements ofincome. Operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner. When we purchase a non-controlling interestand the purchase differs from the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.26Table of ContentsSELECTED OPERATING AND FINANCIAL DATAThe following table and discussion relate to continuing operations unless otherwise noted. The defined terms with their respective description used in the following discussion are listed below:2021Year ended December 31, 20212020Year ended December 31, 20202021 AdditionsClinics opened or acquired during the year ended December 31, 20212020 AdditionsClinics opened or acquired during the year ended December 31, 2020Clinics AdditionsClinics opened or acquired during the year ended December 31, 2021 and 2020Mature ClinicsClinics opened or acquired prior to January 1, 2020 and are still operatingThe following table presents selected operating and financial data, used by management as key indicators of our operating performance: For the Years Ended December 31, 2021 2020 Number of clinics, at the end of period 591 554 Working Days 254 256 Average visits per day per clinic 29.1 24.6 Total patient visits 4,219,576 3,533,371 Net patient revenue per visit $103.88 $105.66 RESULTS OF OPERATIONS2021 COMPARED TO 2020For 2021, the net income attributable to our shareholders was $40.8 million compared to $35.2 million for 2020 and $40.0 million for the year ended December 31, 2019 (“2019”). Inclusive of thecharge or credit for revaluation of non-controlling interest, net of taxes, used to compute earnings per diluted share in accordance with GAAP, the amount was $31.1 million, or $2.41 per diluted share,for 2021 as compared to $31.8 million, or $2.48 per diluted share, for 2020, and $31.3 million, or $2.45 per diluted share, for 2019. For both 2021 and 2020, in accordance with current accounting guidance,the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but rather charged directly to retained earnings; however, the charge for this change is included in theearnings per basic and diluted share calculation. See table below (in thousands, except per share data): For the Year Ended December 31, 2021 2020 Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $40,831 $35,194 (Charges) credit to retained earnings: Revaluation of redeemable non-controlling interest (13,011) (4,632)Tax effect at statutory rate (federal and state) of 25.55% and 26.25%, respectively 3,324 1,216 $31,144 $31,778 Earnings per share (basic and diluted) $2.41 $2.48 For 2021, our Operating Results, inclusive of Relief Funds, were $43.8 million, or $3.39 per diluted share, an increase of 13.8%, as compared to $38.4 million, or $2.99 per diluted share, for 2020. For 2021,our Operating Results, excluding Relief Funds (as defined below), were $40.9 million, or $3.17 per diluted share, an increase of 33.5%, as compared to $30.6 million, or $2.39 per diluted share, for 2020. Operating Results, a non-Generally Accepted Accounting Principles (“non-GAAP”) measure, equals net income attributable to diluted shareholders per the consolidated statements of income less gain onsale of partnership interests and clinics plus charges incurred for clinic closure costs and expenses related to executive officer transitions and settlement of a legal matter, all net of taxes. Operating Resultsper diluted share also excludes the impact of the revaluation of redeemable non-controlling interest and the associated tax impact. See table below for a detailed computation (in thousands, except per sharedata): 27Table of Contents For the Year Ended December 31, 2021 2020 Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $40,831 $35,194 Credit (charges) to retained earnings: Revaluation of redeemable non-controlling interest (13,011) (4,632)Tax effect at statutory rate (federal and state) of 25.55% and 26.25%, respectively 3,324 1,216 $31,144 $31,778 Earnings per share (basic and diluted) $2.41 $2.48 Adjustments: Closure costs 30 3,931 Expenses related to executive officers transition 1,301 1,331 Gain on sale of partnership interest and clinics - (1,091)Relief Funds (4,597) (13,500)Settlement of a liability 2,635 - Allocation to non-controlling interest 676 3,116 Revaluation of redeemable non-controlling interest 13,011 4,632 Tax effect at statutory rate (federal and state) of 25.55% and 26.25%, respectively (3,336) 415 Operating Results (excluding Relief Funds) (a non-GAAP measure) $40,864 $30,612 Relief Funds $4,597 $13,500 Allocation to non-controlling interest (715) (2,893)Tax effect at statutory rate (federal and state) of 25.55% and 26.25%, respectively (992) (2,784)Operating Results (including Relief Funds) (a non-GAAP measure) $43,754 $38,435 Basic and diluted Operating Results per share (excluding Relief Funds) (a non-GAAP measure) $3.17 $2.39 Basic and diluted Operating Results per share (including Relief Funds) (a non-GAAP measure) $3.39 $2.99 Shares used in computation - basic and diluted 12,898 12,835 The above table reconciles net income attributable to our shareholders calculated in accordance with GAAP to Operating Results, a non-GAAP measure defined above. We believe that OperatingResults, which eliminates certain items described above that can be subject to volatility and unusual costs, is one of the principal measures to evaluate and monitor financial performance period overperiod. We also believe that Operating Results is useful information for investors to use in comparing the Company's period-to-period results as well as for comparing with other similar businesses.Operating Results is not a measure of financial performance under GAAP and, therefore, should not be considered in isolation or as an alternative to, or substitute for, net income attributable to ourshareholders presented in the consolidated financial statements.Reported total revenueReported total revenue for 2021 increased $72.1 million, or 17.0% to $495.0 million as compared to $423.0 million for 2020. See table below for a detail of reported total revenue (in thousands):28Table of Contents Year Ended December 31, 2021 December 31, 2020 Revenue related to Mature Clinics $402,744 $358,103 Revenue related to 2021 Clinic Additions 13,802 - Revenue related to 2020 Clinic Additions 21,283 9,664 Revenue from clinics sold or closed in 2021 455 1,242 Revenue from clinics sold or closed in 2020 46 4,331 Net patient revenue from physical therapy operations 438,330 373,340 Other revenue 2,939 2,020 Revenue from physical therapy operations 441,269 375,360 Management contract revenue 9,853 8,410 Industrial injury prevention services 43,900 39,199 Net Revenue $495,022 $422,969 Net patient revenue from physical therapy operationsNet patient revenue from physical therapy operations increased $65.0 million, or 17.4%, to $438.3 million for 2021 from $373.3 million in 2020. Included in net patient revenue from physical therapyoperations are revenues related to clinics sold or closed of $0.5 million for 2021 and $5.5 million for 2020. During 2021, the Company sold its interest in two clinics and closed three clinics. During 2020, theCompany sold its interest in 14 clinics and closed 34 clinics. For comparison purposes, excluding revenue from the clinics sold or closed, net patient revenue from physical therapy operations wasapproximately $437.8 million for 2021 and $367.8 million for 2020, an increase of 19.1%. Revenue related to Mature Clinics increased $44.6 million, or 12.5%, for 2021 compared to 2020.The average net patient revenue per visit was $103.88 for 2021 as compared to $105.66 for 2020, including all clinics operational during such periods. Total patient visits were 4,219,576 for 2021 and3,533,371 for 2020, an increase of 19.4%. Net patient revenues are based on established billing rates less allowances and discounts for patients covered by contractual programs and workers’ compensation. Net patient revenues reflectcontractual and other adjustments, which we evaluate monthly, relating to patient discounts from certain payors. Payments received under these contractual programs and workers’ compensation arebased on predetermined rates and are generally less than the established billing rates of the clinics. Other revenue from physical therapy operations, management contracts and industrial injury prevention servicesOther revenue was $2.9 million in 2021 and $2.0 million in 2020. Revenues from management contracts were $9.9 million in 2021 as compared to $8.4 million in 2020. Revenue from our industrial injuryprevention services business increased 12.0% to $43.9 million in 2021 compared to $39.2 million in 2020, with $2.2 million of the increase related to the acquisition of an industrial injury prevention servicesbusiness on November 30, 2021.Operating costTotal operating cost, excluding closure costs, a non-GAAP measure, was $377.8 million in 2021, as compared to $324.6 million in 2020. Total operating cost, excluding closure costs, was 76.3% as apercentage of net revenue in 2021 and 76.7% in 2020. On a cost per visit basis, total operating cost, excluding closure costs, was $79.70 per visit in 2021 as compared to $81.74 per visit in 2020, a decrease of2.5%. Included in operating cost for 2021 was $30.6 million related to Clinic Additions, of which $19.6 million was associated with the 2020 Clinic Additions. Included in operating cost for 2020 was $8.4million related to 2020 Clinic Additions. Operating cost related to Mature Clinics increased by $31.7 million for 2021 compared to 2020. Operating cost related to management contracts increased by $1.7million in 2021 compared to 2020. In addition, operating cost related to the industrial injury prevention services business increased by $4.1 million for the comparable periods. See table below for a detail ofoperating cost, excluding closure costs (a non-GAAP measure) (in thousands):29Table of Contents Year Ended December 31, 2021 December 31, 2020 Operating cost related to Mature Clinics $305,148 $273,476 Operating cost related to 2021 Clinic Additions 11,080 - Operating cost related to 2020 Clinic Additions 19,561 8,416 Operating cost related to clinics sold or closed in 2021 484 1,345 Operating cost related to clinics sold or closed in 2020 25 5,583 Closure costs 30 3,931 Physical therapy operations 336,328 292,751 Physical therapy management contracts 8,306 6,655 Industrial injury prevention services 33,206 29,113 Total operating cost $377,840 $328,519 Less: Physical therapy operations - closure costs (30) (3,931)Total operating cost excluding closure costs (a non-GAAP measure) $377,810 $324,588 Closure costs in 2020 were $3.9 million, which includes estimates of remaining lease obligations, derecognition of goodwill and other costs related to closed and sold clinics. Each component of clinicoperating costs is discussed below:Operating Cost—Salaries and Related CostsSalaries and related costs increased to $278.5 million for 2021 from $235.6 million in 2020, an increase of $42.8 million, or 18.2%. Included in salaries and related costs for 2021 was $7.3 million related to2021 Clinic Additions. Salaries and related costs for clinics sold or closed in 2021 and 2020 were $0.3 million and $3.8 million in 2021 and 2020, respectively. Salaries and related costs for Mature Clinicsincreased $26.5 million in 2021 compared to 2020. Salaries and related costs for management contracts increased $1.4 million for 2021 compared to 2020. Salaries and related costs for the industrial injuryprevention services business increased $2.8 million for the comparable periods. Salaries and related costs as a percentage of net revenues were 56.3% for 2021 and 55.7% for 2020. Salaries and related costsfor physical therapy operations were $57.81 per visit in 2021 as compared to $58.10 per visit in 2020, a decrease of 0.5%. See table below for a detail of salaries and related costs (in thousands): Year Ended December 31, 2021 December 31, 2020 Physical therapy operations Salaries and related costs related to Mature Clinics $222,431 $195,962 Salaries and related costs related to 2021 Clinic Additions 7,258 - Salaries and related costs related to 2020 Clinic Additions 13,940 5,495 Salaries and related costs related to clinics sold or closed in 2021 293 805 Salaries and related costs related to clinics sold or closed in 2020 18 3,009 Total Physical therapy operations 243,940 205,271 Physical therapy management contracts 7,316 5,921 Industrial injury prevention services 27,213 24,437 Total salaries and related costs $278,469 $235,629 Operating Cost—Rent, Supplies, Contract Labor and OtherRent, supplies, contract labor and other costs increased to $94.0 million for 2021 from $84.3 million for 2020, an increase of $9.7 million, or 11.5%. Included in rent, supplies, contract labor and othercosts for 2021 and 2020 related to Clinic Additions was $9.0 million. Rent, supplies, contract labor and other costs for clinics related to partnership interests closed or sold in 2021 and 2020 were $0.2 millionand $2.8 million in 2020, respectively. Rent, supplies, contract labor and other costs related to Mature Clinics increased $4.4 million. Rent, supplies, contract labor and other costs as a percent of netrevenues was 19.0% for 2021 and 19.9% for 2020. Rent, supplies, contract labor and other costs for physical therapy operations were $20.63 per visit in 2021 as compared to $22.37 per visit in 2020, adecrease of 7.8%. See table below for a detail of rent, supplies, contract labor and other costs (in thousands):30Table of Contents Year Ended December 31, 2021 December 31, 2020 Physical therapy operations Rent, supplies, contract labor and other costs related to Mature Clinics $77,770 $73,348 Rent, supplies, contract labor and other costs related to 2021 Clinic Additions 3,653 - Rent, supplies, contract labor and other costs related to 2020 Clinic Additions 5,436 2,846 Rent, supplies, contract labor and other costs related to clinics sold or closed in 2021 187 528 Rent, supplies, contract labor and other costs related to clinics sold or closed in 2020 8 2,328 Total Physical therapy operations 87,054 79,050 Physical therapy management contracts 989 734 Industrial injury prevention services 5,993 4,552 Total rent, supplies, contract labor and other costs $94,036 $84,336 Operating Cost—Provision for Credit LossesThe provision for credit losses for net patient receivables was $5.3 million for 2021 and $4.6 million for 2020. As a percentage of net patient revenues, the provision for credit losses was 1.1% for both2021 and 2020. The provision for credit losses at the end of each period is based on a detailed, clinic-by-clinic review of overdue accounts and is regularly reviewed in the aggregate in light of historicalexperience.Our provision for credit losses as a percentage of total patient accounts receivable was 5.64% at December 31, 2021 and 4.57% at December 31, 2020.The average accounts receivable days outstanding were 32 days at December 31, 2021 and December 31, 2020. Net patient receivables in the amounts of $4.6 million and $4.5 million were written-off in2021 and 2020, respectively.Gross ProfitGross profit, excluding closure costs, a non-GAAP measure, was $117.2 million for 2021, an increase of $18.8 million, or 19.1% as compared to $98.4 million for 2020. The gross profit percentage, lessclosure costs, was 23.7% of total revenue for 2021, an increase of 40 basis points, as compared to 23.3% for 2020. The gross profit percentage for the Company’s physical therapy operations, excludingclosure costs, was 23.8% for 2021, an increase of 70 basis points as compared to 23.1% for 2020. The gross profit percentage on management contracts revenue was 15.7% for 2021 as compared to 20.9%for 2020. The gross profit percentage for the industrial injury prevention services business was 24.4% for 2021 as compared to 25.7% for 2020. See table below for details on gross profit, excluding closurecosts (a non-GAAP measure) (in thousands) and a reconciliation against Gross Profit (in thousands): Year Ended December 31, 2021 December 31, 2020 Physical therapy operations $104,971 $86,540 Management contracts 1,547 1,755 Industrial injury prevention services 10,694 10,086 Physical therapy operations - closure costs (30) (3,931)Gross profit $117,182 $94,450 Physical therapy operations - closure costs 30 3,931 Gross profit, excluding closure costs (a non-GAAP measure) $117,212 $98,381 Corporate Office CostsCorporate office costs were $46.5 million for 2021 compared to $42.0 million for 2020. Corporate office costs were 9.4% of total revenue for 2021 as compared to 9.9% for 2020. For 2020, corporate officescosts included temporary salary reductions and furloughs related to the pandemic. Also, in both 2021 and 2020, corporate office costs included $1.3 million in equity compensation expense related to theaccelerated vesting of restricted stock previously granted to two executive officers upon their retirement in July 2021 and November 2020. Excluding the equity compensation related to the acceleratedvesting of restricted stock, corporate office costs was 9.1% of total revenue for 2021 and 9.6% for 2020.31Table of ContentsOperating IncomeOperating income for 2021 was $70.6 million, an increase of $18.2 million, or 34.8%, as compared to $52.4 million for 2020. Operating income as a percentage of total revenue increased 190 basis pointsfrom 12.4% for 2020 to 14.3% for 2021.Other Income—Relief FundsRelief Funds recognized in other income were $4.6 million for 2021 and $13.5 million for 2020. See discussion related to Relief Funds for more information.Other Income - Resolution of a Payor Matter and Other Expense – Settlement of a Legal Matter Other income for the 2021 Year includes $1.2 million of income related to the positive resolution of a payor matter and other expense includes a $2.6 million increase in a reserve related to a settlement ofa legal matter. In January 2022, the Company paid $2.75 million related to this matter.Interest Expense—Debt and OtherInterest expense—debt and other was $0.9 million for 2021 and $1.6 million for 2020. At December 31, 2021, $114.0 million was outstanding under our Amended Credit Agreement (as defined belowunder “—Liquidity and Capital Resources”). See “—Liquidity and Capital Resources” below for a discussion of the terms of our Amended Credit Agreement.Provision for Income TaxesThe provision for income tax was $15.3 million for 2021 and $13.0 million for 2020. The provision for income tax as a percentage of income before taxes less net income attributable to non-controllinginterest (effective tax rate) was 27.2% for 2021 and 27.0% for 2020. See table below ($ in thousands): Year Ended December 31, 2021 December 31, 2020 Income before taxes $73,196 $65,513 Less: net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity (11,358) (11,175)Non-controlling interest - permanent equity (5,735) (6,122) $(17,093) $(17,297) Income before taxes less net income attributable to non-controlling interest $56,103 $48,216 Provision for income taxes $15,272 $13,022 Effective tax rate 27.2% 27.0%Net Income Attributable to Non-controlling InterestNet income attributable to redeemable non-controlling interest (temporary equity) was $11.4 million for 2021 and $11.2 million for 2020. Net income attributable to non-controlling interest (permanentequity) was $5.7 million for 2021 and $6.1 million for 2020.LIQUIDITY AND CAPITAL RESOURCESWe believe that our business is generating sufficient cash flow from operating activities to allow us to meet our short-term and long-term cash requirements, other than those with respect to futuresignificant acquisitions. At December 31, 2021, we had $28.5 million in cash and cash equivalents compared to $32.9 million at December 31, 2020. Although the start-up costs associated with opening newclinics and our planned capital expenditures are significant, we believe that our cash and cash equivalents and the availability under our Amended Credit Agreement are sufficient to fund the workingcapital needs of our operating subsidiaries, future clinic development and acquisitions and investments through at least December 2022. Significant acquisitions would likely require financing under ourAmended Credit Agreement.Effective December 5, 2013, we entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility. This agreement was amended in August 2015,January 2016, March 2017, November 2017, January 2021, and November 2021 (hereafter is referred to as “Amended Credit Agreement”). In November 2021, we exercised the accordion feature in theAmended Credit Agreement to increase to limit on our facility from $125.0 million to $150.0 million, with an updated accordion feature providing for an additional capacity of $25.0 million, thereforeincreasing the availability up to $175.0 million.32Table of ContentsThe 2021 amendment to the Amended Credit Agreement allows for cash and noncash consideration for acquisitions permitted under the Amended Credit Agreement of up to $50,000,000 for any fiscalyear, and allows for payments in cash dividends to shareholders in an aggregate amount not to exceed $50,000,000 in any fiscal year. The Amended Credit Agreement is unsecured and includes certainfinancial covenants which include a consolidated fixed charge coverage ratio and a consolidated leverage ratio, as defined in the agreement. The Amended Credit Agreement is unsecured and has loancovenants, including requirements that we comply with a consolidated fixed charge coverage ratio and consolidated leverage ratio. Proceeds from the Amended Credit Agreement may be used for workingcapital, acquisitions, purchases of our common stock, dividend payments to our common stockholders, capital expenditures and other corporate purposes. The pricing grid is based on our consolidatedleverage ratio with the applicable spread over LIBOR ranging from 1.25% to 2.0% or the applicable spread over the Base Rate ranging from 0.1% to 1%. Fees under the Amended Credit Agreement includean unused commitment fee ranging from 0.25% to 0.3% depending on our consolidated leverage ratio and the amount of funds outstanding under the Amended Credit Agreement.On December 31, 2021, $114.0 million was outstanding on the Amended Credit Agreement resulting in $61.0 million of availability. As of the date of this report, we were in compliance with all of thecovenants thereunder.Cash provided by operations was $76.4 million and net proceeds from our Amended Credit Agreement amounted to $98.0 million. The major uses of cash for investing and financing activitiesincluded: purchase of interests in businesses ($86.8 million), purchases of redeemable non-controlling interest, temporary equity ($28.5 million), purchases of fixed assets ($8.2 million), proceeds on sale ofpartnership interest ($0.3 million), distributions to non-controlling interests ($16.9 million), payments of cash dividends to our shareholders ($18.8 million), and payments on notes payable ($4.9 million).On December 31, 2021, we acquired a 75% interest in a three-clinic physical therapy practice with the practice founder retaining 25%. The purchase price for the 75% interest was approximately $3.7million, of which $3.5 million was paid in cash and $0.2 million in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest is payable on December 31, 2023.On November 30, 2021, we acquired an approximate 70% interest in a leading provider of industrial injury prevention services. The previous owners retained the remaining interest. The initialpurchase price for the 70% equity interest, not inclusive of the $2.0 million contingent payment in conjunction with the acquisition if specified future operational objectives are met, was approximately$63.2 million, of which $62.2 million was paid in cash, and $1.0 million is in the form of a note payable. The note accrues interest at 3.25% and the principal and interest is payable on November 30, 2023.The business generates approximately $27.0 million in annual revenue at a margin of approximately 20%. As part of the transaction, we also agreed to the potential future purchase of a separatecompany under the same ownership that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area. The current owners have the right toput this transaction to us in approximately five years, with such right having a $3.5 million fair value at December 31, 2021, as reflected on the Company’s consolidated balance sheet in Other long-termliabilities. The value of this right will be adjusted in future periods, as appropriate, with any change in fair value reflected in the Company’s consolidated statement of income.On September 30, 2021, we acquired a company that specializes in return-to-work and ergonomic services, among other offerings. The business generates more than $2.0 million in annual revenue. Weacquired the company’s assets at a purchase price of approximately $3.3 million (which includes the obligation to pay an amount up to $0.6 million in contingent payment consideration in conjunction withthe acquisition if specified future operational objectives are met) and contributed those assets to our industrial injury prevention services subsidiary. The initial purchase price, not inclusive of the $0.6million contingent payment, was approximately $2.7 million, of which $2.4 million was paid in cash, and $0.3 million is in the form of a note payable. The note accrues interest at 3.25% per annum and theprincipal and interest is payable on September 30, 2023.On June 30, 2021, we acquired a 65% interest in an eight-clinic physical therapy practice with the previous owners retaining 35%. The purchase price was approximately $10.3 million, of which $9.0million was paid in cash, $1.0 million is payable based on the achievement of certain business criteria and $0.3 million is in the form of a note payable. The note accrues interest at 3.25% per annum and theprincipal and interest is payable on June 30, 2023. Additionally, we have an obligation to pay an additional amount up to $0.8 million in contingent payment consideration in conjunction with theacquisition if specified future operational objectives are met. We recorded acquisition-date fair value of this contingent liability based on the likelihood of the contingent earn-out payment. The earn-outpayment will subsequently be remeasured to fair value each reporting date.On March 31, 2021, we acquired a 70% interest in a five-clinic physical therapy practice with the previous owners retaining 30%. When acquired, the practice was developing a sixth clinic which hasbeen completed. The purchase price for the 70% interest was approximately $12.0 million, of which $11.7 million was paid in cash and $0.3 million in the form of a note payable. The note accrues interest at3.25% per annum and the principal and interest is payable on March 31, 2023.33Table of ContentsOn November 30, 2020, we acquired a 75% interest in a three-clinic physical therapy practice with the previous owners retaining 25%. The purchase price for the 75% interest was $8.9 million (net ofcash acquired), of which $8.6 million was paid in cash and $0.3 million in the form of a note payable that is payable in two principal installments totaling $162,500 each. The first principal payment plusaccrued interest was paid in November 2021 with the second installment to be paid in November 2022. The note accrues interest at 3.25% per annum.On September 30, 2020, we acquired a 70% interest in an entity which holds six management contracts that have been in place for a number of years and had five years remaining on their term as of theacquisition date. The previous owners retained the remaining 30%. The purchase price for the 70% interest was approximately $4.2 million, with $3.7 million payable in cash and $0.5 million in notespayable. One of the notes payable of $0.2 million was paid in September 2021 and the note of $0.3 million was paid in November 2020.On February 27, 2020, we acquired interests in a four-clinic physical therapy practice. The four clinics are operated in four separate partnerships. The Company’s interests in the four partnershipsrange from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction. The aggregate purchase price was $11.9 million, of which $11.6 million was paid in cash and $0.3 million in theform of a seller note. The note accrues interest at 4.75% per annum and the principal and interest was paid in February 2022.On September 30, 2019, we acquired a 67% interest in an eleven-clinic physical therapy practice with the previous owners retaining 33%. The purchase price for the 67% interest was $12.4 million, ofwhich $12.1 million was paid in cash and $0.3 million in the form of a seller note that is payable in two principal installments totaling $150,000 each. The first principal payment plus accrued interest was paidin September 2020 and the second installment was paid in September 2021. The note accrues interest at 5.0% per annum.On April 11, 2019, we acquired a company that is a provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offer employmenttesting, functional capacity evaluations and return-to-work services. It performs these services across a network of 45 states including onsite at eleven client locations. The business was then combinedwith Briotix Health, the Company’s industrial injury prevention services operation, increasing the Company’s ownership position in the Briotix Health partnership to approximately 76.0%. The purchaseprice for the acquired company was $22.9 million ($23.6 million less cash acquired of $0.7 million), which consisted of $18.9 million in cash, (of which $0.5 million will be paid to certain shareholders), and a$4.0 million seller note. The note was paid in April 2021.Historically, we have generated sufficient cash from operations to fund our development activities and to cover operational needs. We plan to continue developing new clinics and making additionalacquisitions. We have from time to time purchased the non-controlling interests of limited partners in our Clinic Partnerships. We may purchase additional non-controlling interests in the future. Generally,any acquisition or purchase of non-controlling interests is expected to be accomplished using a combination of cash and financing. Any large acquisition would likely require financing.We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly inaccordance with our policy or payor’s requirements. When possible, we submit our claims electronically. The collection process is time consuming and typically involves the submission of claims tomultiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect. Medicare and otherpayor claims relating to new clinics awaiting CMS approval initially may not be submitted for six months or more. When all reasonable internal collection efforts have been exhausted, accounts are writtenoff prior to sending them to outside collection firms. With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the account receivable has beenoutstanding for 120 days or longer.We have future obligations for debt repayments, employment agreements and future minimum rentals under operating leases. The obligations as of December 31, 2021 are summarized as follows (inthousands): Total 2022 2023 2024 2025 2026 Thereafter Credit Agreement $114,000 $- $- $- $114,000 $- $- Notes Payable 4,417 830 3,587 - - - - Interest Payable 292 74 218 - - - - Employee Agreements 61,278 52,837 8,321 120 - - - Operating Leases 136,992 41,270 33,637 25,527 17,111 10,575 8,872 $316,979 $95,011 $45,763 $25,647 $131,111 $10,575 $8,872 We generally enter into various notes payable as a means of financing our acquisitions. Our present outstanding notes payable primarily relate to the acquisitions of a business or acquisitions ofmajority interests in businesses. At December 31, 2021, our remaining outstanding balance on these notes aggregated $4.4 million. The notes payable for the acquisition of businesses of $4.4 million are payable in 2022 and 2023. Notes are generally payable in equal annual installments of principal over two years plus any accruedand unpaid interest. See above table for a detail of future principal payments. Interest accrues at various interest rates ranging from 3.25% to 4.75% per annum.34Table of ContentsThe limited partnership agreements, as amended, provide that, upon the triggering events, we have a Call Right and the selling entity or individual has a Put Right for the purchase and sale of thelimited partnership interest held by the partner. Once triggered, the Put Right and the Call Right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature. Thepurchase price of the partner’s limited partnership interest upon the exercise of either the Put Right or the Call Right is calculated per the terms of the respective agreements and classified as redeemablenon-controlling interest (temporary equity) in our consolidated balance sheets. The fair value of the redeemable non-controlling interest at December 31, 2021 was $154.4 million.As of December 31, 2021, we have accrued $6.6 million related to credit balances and overpayments due to patients and payors. This amount is expected to be paid in 2022.From September 2001 through December 31, 2008, our Board of Directors (“Board”) authorized us to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of ourcommon stock. In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of our common stock (“March 2009 Authorization”). Our Amended Credit Agreementpermits share repurchases of up to $15,000,000 in the aggregate, subject to compliance with covenants. We are required to retire shares purchased under the March 2009 Authorization.There is no expiration date for the share repurchase program. As of December 31, 2021, there are currently an additional estimated 156,986 shares (based on the closing price of $95.55 on December 31,2021) that may be purchased from time to time in the open market or private transactions depending on price, availability and our cash position. We did not purchase any shares of our common stockduring the years ended December 31, 2021 and 2020.We have an investment in a joint venture that is accounted for using the equity method of accounting.35Table of ContentsFACTORS AFFECTING FUTURE RESULTS The risks related to our business and operations include: •the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19 and its variants, for which the total financial magnitude cannot becurrently estimated;•changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;•revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction;•changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients;•compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for failure to comply;•competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs including thepossible write-down or write-off of goodwill and other intangible assets;•the impact of COVID-19 related vaccination and/or testing mandates at the federal, state and/or local level, which could have an adverse impact on staffing, revenue, costs and the results ofoperations:•changes as the result of government enacted national healthcare reform;•business and regulatory conditions including federal and state regulations;•governmental and other third party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs;•revenue and earnings expectations;•legal actions, which could subject us to increased operating costs and uninsured liabilities;•general economic conditions;•availability and cost of qualified physical therapists;•personnel productivity and retaining key personnel;•competitive environment in the industrial injury prevention services business, which could result in the termination or non-renewal of contractual service arrangements and other adversefinancial consequences for that service line;•acquisitions, and the successful integration of the operations of the acquired businesses;•impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interest (minority interests);•maintaining our information technology systems with adequate safeguards to protect against cyber-attacks;•a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of the HealthInsurance Portability and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act;•maintaining clients for which we perform management and other services, as a breach or termination of those contractual arrangements by such clients could cause operating results to be lessthan expected;•maintaining adequate internal controls;•maintaining necessary insurance coverage;•availability, terms, and use of capital; and•weather and other seasonal factors.See also Risk Factors in Item 1A of this Annual Report on Form 10-K. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.We do not maintain any derivative instruments such as interest rate swap arrangements, hedging contracts, futures contracts or the like. Our only indebtedness as of December 31, 2021 was theoutstanding balance of seller notes from our acquisitions of $4.4 million and an outstanding balance on our Amended Credit Agreement of $114.0 million. The outstanding balance under our AmendedCredit Agreement is subject to fluctuating interest rates. A 1% change in the interest rate would yield an additional $1.1 million of interest expense. See Note 9 to our consolidated financial statementsincluded in Item 8.36Table of ContentsITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND RELATED INFORMATIONReports of Independent Registered Public Accounting Firm—Grant Thornton LLP (PCAOB ID Number 248)38 Audited Financial Statements: Consolidated Balance Sheets as of December 31, 2021 and 202040 Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 201941 Consolidated Statements of Changes in Equity for the years ended December 31, 2021, 2020 and 201942 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 202143 Notes to Consolidated Financial Statements4437Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and ShareholdersU.S. Physical Therapy, Inc.Opinion on the financial statementsWe have audited the accompanying consolidated balance sheets of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the relatedconsolidated statements of income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule includedunder Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in theUnited States of America.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as ofDecember 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), andour report dated March 1, 2022 expressed an unqualified opinion.Basis for opinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a publicaccounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations ofthe Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether dueto error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion.Critical audit mattersThe critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committeeand that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical auditmatters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the criticalaudit matters or on the accounts or disclosures to which they relate.Measurement of Patient Revenue Net of Contractual AdjustmentsAs discussed in Note 2 to the consolidated financial statements, revenues are recognized in the period in which services are rendered. Net patient revenues (patient revenues less estimated contractualadjustments) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract aresatisfied. The Company has agreements with third-party payors that provides for payments at amounts different from its established rates. Each month the Company estimates its contractual adjustmentfor each clinic based on the terms of third-party payor contracts and the historical collection and write-off experience of the clinic and applies a contractual adjustment reserve percentage to the grossaccounts receivable balances. The Company then performs a comparison of cash collections to corresponding net revenues for the prior twelve months. We identified the measurement of contractualadjustments as a critical audit matter.The principal consideration for our determination that the measurement of contractual adjustments is a critical audit matter is that the estimate requires a high degree of auditor subjectivity in evaluatingmanagement’s assumptions related to developing future collection patterns across the various clinic locations.Our audit procedures related to the Company’s measurement of contractual adjustments included the following, among others. •We tested the design and operating effectiveness of controls relating to billing and cash collection, net rate trend analysis by clinic and cash collection versus net revenue trend analysis. •For a sample of patient visits, we inspected and compared underlying documents for each transaction, which included gross billing rates and cash collected (net revenue).• •For a sample of patient visits, we traced gross billings and net revenue to net revenue recorded in the general ledger and to each report used in determining and assessing the contractualadjustment calculation. •We compared cash collections to recorded net revenue over a twelve month period ending December 31, 2021 and again for the twelve month period ending in the first month subsequent toperiod end, to identify whether there were unusual trends that would indicate that the usage of historical collection patterns would no longer be reasonable to predict future collection patterns./s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2004. Houston, TexasMarch 1, 202238Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and ShareholdersU.S. Physical Therapy, Inc.Opinion on internal control over financial reportingWe have audited the internal control over financial reporting of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria establishedin the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of andfor the year ended December 31, 2021, and our report dated March 1, 2022 expressed an unqualified opinion on those financial statements.Basis for opinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, includedin the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based onour audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicablerules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internalcontrol over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of the acquisition made in November 2021 (“AcquiredEntity”), whose financial statements reflect total assets and revenues constituting 13.3% and 0.4%, respectively, of the related consolidated financial statement amounts as of and for the year endedDecember 31, 2021. As indicated in Management’s Report on Internal Control over Financial Reporting, the Acquired Entity was acquired on November 30, 2021. Management’s assertion of theeffectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of the Acquired Entity.Definition and limitations of internal control over financial reportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to therisk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ GRANT THORNTON LLP Houston, TexasMarch 1, 202239Table of ContentsU.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share data) December 31, 2021 December 31, 2020 ASSETS (audited) (audited) Current assets: Cash and cash equivalents $28,567 $32,918 Patient accounts receivable, less allowance for credit losses of $2,768 and $2,008, respectively 46,272 41,906 Accounts receivable - other 16,144 9,039 Other current assets 4,183 3,773 Total current assets 95,166 87,636 Fixed assets: Furniture and equipment 58,743 55,426 Leasehold improvements 39,194 35,320 Fixed assets, gross 97,937 90,746 Less accumulated depreciation and amortization 74,958 69,081 Fixed assets, net 22,979 21,665 Operating lease right-of-use assets 96,427 81,595 Investment in unconsolidated affiliate 12,215 - Goodwill 434,679 345,646 Other identifiable intangible assets, net 86,382 56,280 Other assets 1,578 1,539 Total assets $749,426 $594,361 LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPHSHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST Current liabilities: Accounts payable - trade $3,268 $1,335 Accounts payable - due to seller of acquired business 3,203 - Accrued expenses 45,705 59,746 Current portion of operating lease liabilities 30,475 27,512 Current portion of notes payable 830 4,899 Total current liabilities 83,481 93,492 Notes payable, net of current portion 3,587 596 Revolving line of credit 114,000 16,000 Deferred taxes 14,385 7,779 Operating lease liabilities, net of current portion 74,185 61,985 Other long-term liabilities 7,345 4,539 Total liabilities 296,983 184,391 Redeemable non-controlling interest - temporary equity 155,262 132,340 Commitments and Contingencies U.S. Physical Therapy, Inc. (“USPH”) shareholders’ equity: Preferred stock, $0.01 par value, 500,000 shares authorized, no shares issued and outstanding - - Common stock, $0.01 par value, 20,000,000 shares authorized, 15,126,160 and 15,066,282 shares issued, respectively 151 151 Additional paid-in capital 102,688 95,622 Retained earnings 224,395 212,015 Treasury stock at cost, 2,214,737 shares (31,628) (31,628)Total USPH shareholders’ equity 295,606 276,160 Non-controlling interest - permanent equity 1,575 1,470 Total USPH shareholders' equity and non-controlling interest - permanent equity 297,181 277,630 Total liabilities, redeemable non-controlling interest, USPH shareholders' equity and non-controlling interest - permanent equity $749,426 $594,361 See notes to consolidated financial statements.40Table of ContentsU.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share data) Year Ended December 31, 2021 December 31, 2020 December 31, 2019 Net patient revenue $438,330 $373,340 $433,345 Other revenue 56,692 49,629 48,624 Net revenue 495,022 422,969 481,969 Operating cost: Salaries and related costs 278,469 235,629 274,233 Rent, supplies, contract labor and other 94,036 84,336 90,379 Provision for credit losses 5,305 4,623 4,858 Closure costs - lease and other 30 2,072 25 Closure costs - derecognition of goodwill - 1,859 - Total operating cost 377,840 328,519 369,495 Gross profit 117,182 94,450 112,474 Corporate office costs 46,533 42,037 45,049 Operating income 70,649 52,413 67,425 Other income and expense Relief Funds 4,597 13,501 - Gain on sale of partnership interest and clinics - 1,091 5,514 Settlement of a legal matter (2,635) - - Resolution of a payor matter 1,216 - - Equity in earnings of unconsolidated affiliate 112 - - Interest and other income, net 199 142 46 Interest expense - debt and other (942) (1,634) (2,079)Total other income and expense 2,547 13,100 3,481 Income and equity in earnings of unconsolidated affiliates before taxes 73,196 65,513 70,906 Provision for income taxes 15,272 13,022 13,647 Net income 57,924 52,491 57,259 Less: net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity (11,358) (11,175) (10,659)Non-controlling interest - permanent equity (5,735) (6,122) (6,561) (17,093) (17,297) (17,220) Net income attributable to USPH shareholders $40,831 $35,194 $40,039 Basic and diluted earnings per share attributable to USPH shareholders $2.41 $2.48 $2.45 Shares used in computation - basic and diluted 12,898 12,835 12,756 Dividends declared per common share $1.46 $0.32 $1.14 See notes to consolidated financial statements.41Table of ContentsU.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(In thousands) U.S. Physical Therapy, Inc. Common Stock AdditionalPaid-In Capital RetainedEarnings Treasury Stock Total Shareholders’Equity Non-Controlling Interests Total Shares Amount Shares Amount Balance January 1, 2019 14,899 $149 $80,028 $167,396 (2,215) $(31,628) $215,945 $930 $216,875 Issuance of restricted stock, net ofcancellations 90 1 - - - - 1 - 1 Revaluation of redeemable non-controlling interest, net of tax - - - (8,771) - - (8,771) - (8,771)Compensation expense - equity-based awards - - 6,985 - - - 6,985 - 6,985 Transfer of compensation liability forcertain stock issued pursuant tolong-term incentive plans - - 636 - - - 636 - 636 Purchase of partnership interests - non-controlling interest - - (266) - - - (266) (26) (292)Sale of non-controlling interest, netof purchases and tax - - - 196 - - 196 - 196 Dividends paid to USPT shareholders - - - (14,555) - - (14,555) - (14,555)Distributions to non-controllinginterest partners - permanentequity - - - - - - - (6,014) (6,014)Other - - - 47 - - 47 (7) 40 Net income attributable to non-controlling interest - permanentequity - - - - - - - 6,561 6,561 Net income attributable to USPHshareholders - - - 40,039 - - 40,039 - 40,039 Balance December 31, 2019 14,989 $150 $87,383 $184,352 (2,215) $(31,628) $240,257 $1,444 $241,701 U.S. Physical Therapy, Inc. Common Stock AdditionalPaid-In Capital RetainedEarnings Treasury Stock Total Shareholders’Equity Non-Controlling Interests Total Shares Amount Shares Amount Issuance of restricted stock, net ofcancellations 77 $ 1 $ - $ - - $ - $ 1 $ - $ 1 Revaluation of redeemable non-controlling interest, net of tax - - - (3,415) - - (3,415) - (3,415)Compensation expense - equity-based awards - - 7,917 - - - 7,917 - 7,917 Transfer of compensation liability forcertain stock issued pursuant tolong-term incentive plans - - 486 - - - 486 - 486 Purchase of partnership interests - non-controlling interest - - - - - - - (168) (168)Sale of non-controlling interest, netof purchases and tax - - (164) - - - (164) - (164)Dividends paid to USPT shareholders - - - (4,110) - - (4,110) - (4,110)Distributions to non-controllinginterest partners - permanentequity - - - - - - - (5,928) (5,928)Other - - - (6) - - (6) - (6)Net income attributable to non-controlling interest - permanentequity - - - - - - - 6,122 6,122 Net income attributable to USPHshareholders - - - 35,194 - - 35,194 - 35,194 Balance December 31, 2020 15,066 $ 151 $ 95,622 $ 212,015 (2,215) $ (31,628) $ 276,160 $ 1,470 $ 277,630 U.S. Physical Therapy, Inc. Common Stock AdditionalPaid-In Capital RetainedEarnings Treasury Stock Total Shareholders’Equity Non-Controlling Interests Total Shares Amount Shares Amount Issuance of restricted stock, net ofcancellations 60 $ - $ - $ - - $ - $ - $ - $ - Revaluation of redeemable non-controlling interest, net of tax - - - (9,686) - - (9,686) - (9,686)Compensation expense - equity-based awards - - 7,867 - - - 7,867 - 7,867 Purchase of partnership interests - non-controlling interest - - (918) - - - (918) (60) (978)Sale of non-controlling interest, netof purchases and tax - - 96 - - - 96 2 98 Dividends paid to USPT shareholders - - - (18,765) - - (18,765) - (18,765)Distributions to non-controllinginterest partners - permanentequity - - - - - - - (5,572) (5,572)Short swing profit settlement - - 20 - - - 20 - 20 Other - - 1 - - - 1 - 1 Net income attributable to non-controlling interest - permanentequity - - - - - - - 5,735 5,735 Net income attributable to USPHshareholders - - - 40,831 - - 40,831 - 40,831 Balance December 31, 2021 15,126 $ 151 $ 102,688 $ 224,395 (2,215) $ (31,628) $ 295,606 $ 1,575 $ 297,181 See notes to consolidated financial statements.42Table of ContentsU.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Year Ended December 31, 2021 December 31, 2020 December 31, 2019 OPERATING ACTIVITIES Net income including non-controlling interest and earnings from unconsolidated affiliates, net $57,924 $52,491 $57,259 Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: Depreciation and amortization 11,591 10,533 10,095 Provision for credit losses 5,305 4,623 4,858 Equity-based awards compensation expense 7,867 7,917 6,985 Deferred income taxes 5,688 (258) 4,651 Gain on sale of partnership interest - (1,091) (5,514)Derecognition (write-off) of goodwill - closed clinics - 1,859 - Earnings in unconsolidated affiliate (112) - - Other (134) 281 96 Changes in operating assets and liabilities: (Increase) decrease in patient accounts receivable (9,417) 899 (6,376)(Increase) decrease in accounts receivable - other (1,538) 1,661 (2,499)(Increase) decrease in other assets (633) 4,161 (1,878)Increase (decrease) in accounts payable and accrued expenses 4,657 12,427 (4,209)Increase (decrease) in other long-term liabilities (4,792) 4,492 (1,020)Net cash provided by operating activities 76,406 99,995 62,448 INVESTING ACTIVITIES Purchase of fixed assets (8,201) (7,639) (10,189)Purchase of majority interest in businesses, net of cash acquired (86,823) (23,907) (30,597)Purchase of redeemable non-controlling interest, temporary equity (28,465) (20,385) (8,651)Purchase of non-controlling interest, permanent equity (1,274) (238) (428)Proceeds on sale of redeemable non-controlling interest, temporary equity 69 127 207 Proceeds on sales of partnership interest, clinics and fixed assets 275 839 11,665 Distributions from unconsolidated affiliate 152 - - Sales of non-controlling interest-permanent 131 - - Net cash used in investing activities (124,136) (51,203) (37,993) FINANCING ACTIVITIES Distributions to non-controlling interest, permanent and temporary equity (16,931) (18,331) (16,235)Cash dividends paid to shareholders (18,765) (4,110) (14,555)Proceeds from revolving line of credit 316,000 214,000 145,000 Payments on revolving line of credit (218,000) (244,000) (137,000)Principal payments on notes payable (4,899) (1,037) (1,433)(Payment) receipt of Medicare Accelerated and Advance Funds (14,054) 14,054 - Other 28 2 (52)Net cash provided by (used in) financing activities 43,379 (39,422) (24,275) Net (decrease) increase in cash and cash equivalents (4,351) 9,370 180 Cash and cash equivalents - beginning of period 32,918 23,548 23,368 Cash and cash equivalents - end of period $28,567 $32,918 $23,548 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Income taxes $12,214 $7,677 $9,856 Interest $1,352 $1,202 $1,890 Non-cash investing and financing transactions during the period: Purchase of businesses - seller financing portion $3,050 $1,121 $4,300 Purchase of business - payable to common shareholders of acquired business $- $- $502 Notes payable related to purchase of redeemable non-controlling interest, temporary equity $1,759 $136 $283 Notes payable due to purchase of non-controlling interest, permanent equity $- $699 $103 Notes receivable related to sale of partnership interest - redeemable non-controlling interest $914 $- $2,870 Note receivables related to sale of partnership interest $- $994 $- See notes to consolidated financial statements.43Table of ContentsU.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2021, 2020 and 20191. Organization, Nature of Operations and Basis of PresentationThe consolidated financial statements include the accounts of U.S. Physical Therapy, Inc. and its subsidiaries (the “Company”). All significant intercompany transactions and balances have beeneliminated.The Company operates its business through two reportable business segments. The Company’s reportable segments include the physical therapy operations segment and the industrial injuryprevention services segment. The Company’s physical therapy operations consist of physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment fororthopedic-related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries. Services provided by the industrial injury prevention services segmentinclude onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments. Prior to the second quarter of 2020, the Company operated as a single segment. All prior yearsegment information has been reclassified to conform to the current segment presentation. See Note 12 - Segment Information.During the last three years we completed the acquisitions of seven multi-clinic practices and three industrial injury prevention businesses as detailed below.Acquisition Date % InterestAcquired Number ofClinicsDecember 2021 Acquisition December 31, 2021 75% 3November 2021 Acquisition November 30, 2021 70% *September 2021 Acquisition September 30, 2021 100% *June 2021 Acquisition June 30, 2021 65% 8March 2021 Acquisition March 31, 2021 70% 6November 2020 Acquisition November 30, 2020 75% 3September 2020 Acquisition September 30, 2020 70% **February 2020 Acquisition February 27, 2020 65% *** 4September 2019 Acquisition September 30, 2019 67% 11April 2019 Acquisition April 11, 2019 100% **Industrial injury prevention business**The business includes six management and services contracts which have been in place for a number of years. As of the date acquired, the contracts had a remaining term of five years.***The four clinics are in four separate partnerships. The Company's interest in the four partnerships range from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction.Physical Therapy OperationsThe physical therapy operations segment primarily operates through subsidiary clinic partnerships, in which the Company generally owns a 1% general partnership interest in all the ClinicPartnerships. Our limited partnership interests typically range from 10% to 99% in the Clinic Partnerships. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnershipinterest in most of the clinics (hereinafter referred to as “Clinic Partnerships”). To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries, under profit sharing arrangementswith therapists (hereinafter referred to as “Wholly-Owned Facilities”).The Company continues to seek to attract for employment physical therapists who have established relationships with physicians and other referral sources, by offering these therapists a competitivesalary and incentives based on the profitability of the clinic that they manage. For multi-site clinic practices in which a controlling interest is acquired by the Company, the prior owners typically continueon as employees to manage the clinic operations, retain a non-controlling ownership interest in the clinics and receive a competitive salary for managing the clinic operations. In addition, the Company hasdeveloped satellite clinic facilities as part of existing Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operatemore than one clinic location.Besides the multi-clinic acquisitions referenced in the table above, during 2021and 2020, we purchased the assets and business of five and three physical therapy clinics, respectively, in separatetransactions. 44Table of ContentsDuring the year ended December 31, 2021, the Company sold two clinics. The aggregate sales price was $0.1 million. During the year ended December 31, 2020, we sold 14 previously closed clinics.The aggregate sales price was $1.1 million, of which $0.7 million was paid in cash and $0.4 million in a note receivable due in two equal installments of principal and any accrued interest. The first paymentwas received in June 2021 and the next payment is due on June 15, 2022.Clinic PartnershipsFor non-acquired Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interests, typically owned by the managing therapist, directly or indirectly, are recorded within thebalance sheets and income statements as non-controlling interest—permanent equity. For acquired Clinic Partnerships with redeemable non-controlling interests, the earnings attributable to theredeemable non-controlling interests are recorded within the consolidated balance sheets and income statements as redeemable non-controlling interest—temporary equity.Wholly-Owned FacilitiesFor 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 ascompensation and included in clinic operating costs—salaries and related costs. The respective liability is included in current liabilities—accrued expenses on the consolidated balance sheets.Industrial Injury Prevention ServicesServices provided in the industrial injury prevention services segment include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacityevaluations, and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include largeinsurers and their contractors. The Company performs these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and specialized certified athletic trainers(ATCs).Impact of COVID-19As previously disclosed in a series of filings with the SEC and further described in detail in the Company’s Quarterly Reports on Form 10-Q for the first three quarters of 2020 and our Annual Reporton Form 10-K for the year ended December 31, 2020, the Company’s results were negatively impacted by the effects of the COVID-19 pandemic in 2020. For 2021 periods as compared to 2020 periods, theincrease in revenues and expenses are primarily due to the Company returning to and now exceeding pre-pandemic results.The Company has put preparedness plans in place at our facilities to maintain continuity of operations, while also taking steps to keep employees and patients safe. In line with recommendations toreduce large gatherings and increase social distancing, the Company has continued to allow a large number of office-based employees to work remotely. The Company is continuing to monitor thesituation and will adjust work environments accordingly.In March 2020 in response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provides numeroustax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interestdeductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualifiedimprovement property, and the creation of certain payroll tax credits associated with the retention of employees.Medicare Accelerated and Advance Payment Program (“MAAPP Funds”) In response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act allowed for qualified healthcareproviders to receive advanced payments under the MAAPP Funds during the COVID-19 pandemic. Under this program, healthcare providers could choose to receive advanced payments for futureMedicare services provided. The Company applied for and received approval from Centers for Medicare & Medicaid Services (“CMS”) in April 2020. The Company recorded the $14.1 million in advancepayments received as a liability. During the first quarter of 2021, the Company repaid the MAAPP Funds of $14.1 million rather than applying them to future services performed.Relief FundsOn March 27, 2020, the CARES Act was enacted. The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic,including $100.0 billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to thecoronavirus, and for reimbursing eligible health care providers for lost revenues and health care related expenses that are attributable to COVID-19.For the years ended December 31, 2021 and December 31, 2020, the Company’s consolidated subsidiaries recorded income of approximately $4.6 million and $13.5 million, respectively, from paymentsunder the CARES Act (“Relief Funds”). Under the Company’s accounting policy, these payments were recorded as Other income – Relief Funds. These funds are not required to be repaid upon attestationand compliance with certain terms and conditions, which could change materially based on evolving grant compliance provisions and guidance provided by the U.S. Department of Health and HumanServices. Currently, the Company can attest and comply with the terms and conditions. The Company will continue to monitor the evolving guidelines and may record adjustments as additionalinformation is released.2. Significant Accounting PoliciesCash EquivalentsThe Company maintains its cash and cash equivalents at financial institutions. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cashequivalents. 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 creditrisk related to amounts on deposit in excess of FDIC insurance coverage. Management believes that this risk is not significant.45Table of ContentsLong-Lived AssetsFixed 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 fromthree 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 isgenerally three to five years.Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed OfThe 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 beimpaired. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.Investment in unconsolidated affiliateInvestments in unconsolidated joint ventures in which the Company has less than a controlling interest, are accounted for under the equity method of accounting and, accordingly, are adjusted forcapital contributions, distributions and the Company’s equity in net earnings or loss of the respective joint venture.GoodwillGoodwill represents the excess of the amount paid and fair value of the non-controlling interests over the fair value of the acquired business assets, which include certain identifiable intangible assets.Historically, goodwill has been derived from acquisitions and, prior to 2009, from the purchase of some or all of a particular local management’s equity interest in an existing clinic. Effective January 1, 2009,if the purchase price of a non-controlling interest 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-incapital.Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets withindefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair value if considered impaired. These events or conditionsinclude but are not limited to: a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating or cash flow loss combined with a history ofsuch losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact animpairment assessment, necessitating an impairment charge. The Company evaluates indefinite lived tradenames in conjunction with its annual goodwill impairment test.The Company operates a two segment business which is made up of various clinics within partnerships, and an industrial injury prevention services business. The partnerships are components ofregions and are aggregated to the operating segment level for the purpose of determining the Company’s reporting units when performing its annual goodwill impairment test. In 2021, 2020 and 2019, therewere six regions. In addition to the six regions, the impairment analysis included a separate analysis for the industrial injury prevention services business, as a separate reporting unit.As part of the impairment analysis, the Company is first required to assess qualitatively if it can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired,the Company is then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value ofa reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. The Company considers both theincome and market approach in determining the fair value of its reporting units when performing a quantitative analysis.An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimatedfair value of the reporting unit. The evaluation of goodwill in 2021, 2020 and 2019 did not result in any goodwill amounts that were deemed impaired.As part of the annual assessment, the Company evaluated whether events or circumstances indicated that it was more likely than not that the fair value of the reporting units were reduced below theircarrying value as of December 31, 2021. As a result of the assessment, the Company determined that it was not more likely than not that goodwill and tradenames of the reporting units were impaired as ofDecember 31, 2021.The Company will continue to monitor for any triggering events or other indicators of impairment.Redeemable Non-Controlling InterestThe non-controlling interest that is reflected as redeemable non-controlling interest in the consolidated financial statements consists of those in which the owners and the Company have certainredemption rights, whether currently exercisable or not, and which currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certainconditions are met. The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements.The redemption rights can be triggered by the owner or the Company at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason forsuch termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to five years, as defined in the limited partnership agreement. The redemption rights arenot automatic or mandatory (even upon death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been satisfied.46Table of ContentsOn the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under the control of the Company,the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption—Redeemable non-controlling interests. Then, in each reporting period thereafter until it ispurchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined inthe respective limited partnership agreement. As a result, the value of the non-controlling interest is not adjusted below its initial carrying value. The Company records any adjustment in the redemptionvalue, net of tax, directly to retained earnings and are not reflected in the consolidated statements of income. Although the adjustments are not reflected in the consolidated statements of income, currentaccounting rules require that the Company reflects the adjustments, net of tax, in the earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners isincluded in consolidated net income on the face of the consolidated statements of net income. Management believes the redemption value (i.e. the carrying amount) and fair value are the same.Non-Controlling InterestThe Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent equity in the consolidated financialstatements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the statements of net income.Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. TheCompany 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 deconsolidationdate.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-incapital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.Revenue RecognitionIn May 2014, March 2016, April 2016, and December 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts withCustomers, ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations, ASU 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations andLicensing, ASU 2016-12, Revenue from Contracts with Customers, Narrow Scope Improvements and Practical Expedients, and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenuefrom Contracts with Customer (collectively the “standards”), respectively, which supersede most of the current revenue recognition requirements (“ASC 606”). The core principle of the new guidance isthat an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchangefor those goods or services.The Company implemented the new standards beginning January 1, 2018 using a modified retrospective transition method. The principal change relates to how the new standard requires healthcareproviders to estimate the amount of variable consideration to be included in the transaction price up to an amount which is probable that a significant reversal will not occur. The most common forms ofvariable consideration the Company experiences are amounts for services provided that are ultimately not realizable from a customer. There were no changes to revenues or other revenues uponimplementation. Under the new standards, the Company’s estimate for unrealizable amounts will continue to be recognized as a reduction to revenue. The bad debt expense historically reported will notmaterially change.For ASC 606, there is an implied contract between us and the patient upon each patient visit. Separate contractual arrangements exist between us and third-party payors (e.g. insurers, managed careprograms, government programs, workers' compensation) which establish the amounts the third parties pay on behalf of the patients for covered services rendered. While these agreements are notconsidered contracts with the customer, they are used for determining the transaction price for services provided to the patients covered by the third party payors. The payor contracts do not indicateperformance obligations for us, but indicate reimbursement rates for patients who are covered by those payors when the services are provided. At that time, the Company is obligated to provide servicesfor the reimbursement rates stipulated in the payor contracts. The execution of the contract alone does not indicate a performance obligation. For self-paying customers, the performance obligation existswhen we provide the services at established rates. The difference between the Company’s established rate and the anticipated reimbursement rate is accounted for as an offset to revenue—contractualallowance.47Table of ContentsThe following table details the revenue related to the various categories (in thousands). Year Ended December 31, 2021 December 31, 2020 December 31, 2019 Net patient revenue $438,330 $373,340 $433,345 Other patient revenue 2,939 2,020 2,486 Physical therapy operations $ 441,269 $375,360 $ 435,831 Physical therapy management contracts 9,853 8,410 8,676 Industrial injury prevention services 43,900 39,199 37,462 $495,022 $422,969 $481,969 Patient revenueRevenues are recognized in the period in which services are rendered. Net patient revenue consists of revenues for physical therapy and occupational 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. Net patient revenues (patientrevenues less estimated contractual adjustments) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligationsunder the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as the Company provides physical and occupationaltherapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that providefor payments to the Company at amounts different from its established rates.Medicare ReimbursementThe Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). For services provided in 2017 through 2019, a 0.5% increase wasapplied to the fee schedule payment rates before applying the mandatory budget neutrality adjustment. For services provided in 2020 through 2025 no adjustment is expected to be applied each year to thefee schedule payment rates, before applying the mandatory budget neutrality adjustment.In the 2020 MPFS Final Rule, CMS revised coding, documentation guidelines, and increased the code values for office/outpatient evaluation and management (E/M) codes and cuts to other codes tomaintain budget neutrality of the MPFS beginning in 2021. Under the 2021 MPFS Final Rule, CMS increased the values for the E/M office visit codes and cuts to other specialty codes to maintain budgetneutrality. As a result, CMS projected a 9% decrease in fee schedule payment rates for therapy services set to take effect in 2021. However, Congress intervened with passage of the ConsolidatedAppropriations Act, 2021 and reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics received an estimated 3.5% decrease in the aggregate in paymentfrom Medicare in calendar year 2021 as compared to 2020.In the 2022 MPFS Final Rule published on November 2, 2021, there was to be an approximately 3.75% reduction to Medicare payments for physical/occupational therapy services. This was due to theexpiration of the additional funding to the conversion factor provided by Congress in 2021 under the Consolidated Appropriations Act, 2021. However, this reduction was addressed in the ProtectingMedicare and American Farmers from Sequester Cuts Act (“2021 Act”) signed into law on December 10, 2021. Based on various provisions in the 2021 Act, the Company now estimates that the Medicarerate reduction for the full year of 2022 will be approximately 0.75%. The 2021 Act did not address the 15% reduction in Medicare payments for services performed by a physical or occupational therapistassistant, which began on January 1, 2022.In addition, the Consolidated Appropriations Act, 2021 includes reductions in Medicare payment rates of approximately 3% in each of calendar years 2023 and 2024, unless regulatory orCongressional action results in modifications to such rates as has occurred in 2021 and 2022.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. TheBipartisan Budget Act of 2015, enacted on November 2, 2015, extended the 2% reductions to Medicare payments through fiscal year 2025. The Bipartisan Budget Act of 2018, enacted on February 9, 2018,extends the 2% reductions to Medicare payments through fiscal year 2027. The CARES Act suspended the 2% payment reduction to Medicare payments for dates of service from May 1, 2020, throughDecember 31, 2020. The Consolidated Appropriations Act, 2021 further suspended the 2% payment reduction until March 31, 2021. On April 14, 2021, additional legislation was enacted that waived the 2%payment reduction for the remainder of calendar 2021. The 2021 Act, which was signed into law on December 10, 2021, included a three-month extension of the 2% sequester relief applied to all Medicarepayments through March 31, 2022, followed by three months of 1% sequester relief through June 30, 2022. Sequester relief is scheduled to then end on June 30, 2022.48Table of ContentsBeginning in 2021, payments to individual therapists (Physical/Occupational Therapist in Private Practice) paid under the fee schedule may be subject to adjustment based on performance in the MeritBased Incentive Payment System (“MIPS”), which measures performance based on certain quality metrics, resource use, and meaningful use of electronic health records. Therapists eligible to participate inMIPS include only those therapists who are enrolled with Medicare as private practice providers, and does not include therapists in facility-based providers, such as our clinics enrolled as certifiedrehabilitation agencies. Less than 3% of the Company’s therapist providers currently participate in MIPS. Under the MIPS requirements, a provider’s performance is assessed according to establishedperformance standards each year and then is used to determine an adjustment factor that is applied to the professional’s payment for the corresponding payment year. The provider’s MIPS performance in2019 will determine the payment adjustment in 2021. For those therapist providers who actually participated in MIPS during 2019, the resulting average payment adjustment was an increase of 1%.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 beensubject 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 MACRA directed CMS to modify the manual medical review process such that those reviews will no longer apply to all claims exceeding the$3,700 threshold and instead will be determined on a targeted basis based on a variety of factors that CMS considers appropriate. The Bipartisan Budget Act of 2018 extends the targeted medical reviewindefinitely but reduces the threshold to $3,000 through December 31, 2027. For 2028, the threshold amount will be increased by the percentage increase in the Medicare Economic Index (“MEI”) for 2028and in subsequent years the threshold amount will increase based on the corresponding percentage increase in the MEI for such subsequent year.CMS adopted a multiple procedure payment reduction (“MPPR”) for therapy services in the final update to the MPFS for calendar year 2011. The MPPR applied to all outpatient therapy services paidunder 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 RelativeValue 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 orunits of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate sessions. In 2013, the practice expense component for thesecond and subsequent therapy service furnished during the same day for the same patient was reduced by 50%.Medicare claims for outpatient therapy services furnished by therapist assistants on or after January 1, 2020 must include a modifier indicating the service was furnished by a therapist assistant.Outpatient therapy services furnished on or after January 1, 2022, in whole or part by a therapist assistant will be paid at an amount equal to 85% of the payment amount otherwise applicable for theservice.Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation. We believe that we are in compliance, in allmaterial respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect onour financial statements as of December 31, 2021. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory actionincluding fines, penalties, and exclusion from the Medicare program. For the years ended December 31, 2021, and 2020, respectively, net patient revenue from Medicare was approximately $134.4 million and$101.6 million, respectively.Management Contract RevenueManagement contract revenue, which is included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for third party owners. The Company does nothave any ownership interest in these clinics. Typically, revenue is determined based on the number of visits conducted at the clinic and recognized at a point in time when services are performed. Costs,typically salaries for the Company’s employees, are recorded when incurred.Industrial Injury Prevention Services RevenueRevenue from the industrial injury prevention services business, which is also included in other revenue in the consolidated statements of net income, is derived from onsite services the Companyprovides to clients’ employees including injury prevention, rehabilitation, ergonomic assessments, post-offer employment testing and performance optimization. Revenue from the Company’s industrialinjury prevention services business is recognized when obligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration the company expects toreceive in exchange for providing injury prevention services to its clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a givenperiod.Other RevenueAdditionally, other revenue includes services the Company provides on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers andgym membership fees. Contract terms and rates are agreed to in advance between the Company and the third parties. Services are typically performed over the contract period and revenue is recorded atthe point of service. If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time, when the services are performed.49Table of ContentsContractual AllowancesThe allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience. Contractual allowances result from the differences betweenthe rates charged for services performed and expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and thevarious 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 Companyestimates contractual allowances based on its interpretation of the applicable regulations, payor contracts and historical calculations. Each month the Company estimates its contractual allowance for eachclinic 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 eachpayor of the clinic. Based on the Company’s historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow the Company to provide the necessarydetail and accuracy with its collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from theCompany’s estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. The Company’s billing system does not capture the exactchange 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 itscash 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 cashcollections for any fiscal year has generally reflected a difference within approximately 1% to 1.5% of net revenues. Additionally, analysis of subsequent periods’ contractual write-offs on a payor basisreflects a difference within approximately 1% to 1.5% between the actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated withthe 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% to 1.5% of gross billings included in accountsreceivable at December 31, 2021.Allowance for Credit LossesThe Company determines allowances for credit losses based on the specific agings and payor classifications at each clinic. The provision for credit losses is included in operating costs in thestatements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for credit losses, includes only thoseamounts the Company estimates to be collectible.Income TaxesIncome 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 financialstatement 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 taxrates 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 isrecognized 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 taxpositions 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 uponultimate settlement with the relevant tax authority.The CARES Act includes changes to certain tax law related to net operating losses and the deductibility of interest expense and depreciation. ASC 740, Income Taxes requires the effects of changes intax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. The legislation had no effect on the Company’s deferred income taxes and current income taxespayable during the year ended December 31, 2021.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 31,2021, 2020 and 2019. The Company will book any interest or penalties, if required, in interest and other expense, as appropriate.Fair Values of Financial InstrumentsThe carrying amounts reported in the balance sheets for cash and cash equivalents, contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fairvalues due to the short-term maturity of these financial instruments. The carrying amount under the Amended Credit Agreement approximates the fair value. The interest rate on the Amended CreditAgreement is tied to the London Interbank Offered Rate (“LIBOR”). Provisions within the agreement currently provide the Company with the ability to replace LIBOR with a different reference rate in theevent LIBOR ceases to exist.The Redeemable non-controlling interest included on the consolidated balance sheets and the put right associated with the potential future purchase of the separate company in the November 2021acquisition are both marked to fair value on a recurring basis using level 3 inputs. The redemption value of Redeemable non-controlling interests approximates the fair value. The put right associated withthe potential future purchase of the separate company in the November 2021 acquisition is determined using a Monte Carlo simulation model utilizing unobservable inputs such as asset volatility anddiscount rates. The unobservable inputs in the valuation include asset volatility of 25% and a discount rate of 8.96%. See Note 5 for the changes in the fair value of Redeemable non-controlling interest. There were no changes in the fair value of put right associated with the potential future purchase of the separate company in the November 2021 acquisition for the year ended December 31, 2021.50Table of ContentsSegment ReportingOperating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by chief operating decision makers in determining the allocation ofresources and in assessing performance. The Company currently operates through two segments: physical therapy operations and industrial injury prevention services.Use of EstimatesIn preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames,allocations of purchase price, allowance for receivables, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and related disclosures. Actualresults may differ from these estimates.Self-Insurance ProgramThe Company utilizes a self-insurance plan for its employee group health and dental insurance coverage administered by a third party. Predetermined loss limits have been arranged with the insurancecompany to minimize the Company’s 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, 2021.Restricted StockRestricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock granted to employees lapsein equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year afterthe date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant. Compensation expense for grants of restricted stockis recognized based on the fair value per share on the date of grant amortized over the vesting period. The Company recognizes any forfeitures as they occur. The restricted stock issued is included inbasic and diluted shares for the earnings per share computation.Recently Adopted Accounting PronouncementsIn June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which added a new impairment model (known as the current expected credit loss (CECL) model) that is based onexpected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments,including trade receivables. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low riskof loss. The standard is required to be applied using the modified retrospective approach with a cumulative-effect adjustment to retained earnings, if any, upon adoption.The Company completed the adoption of the standard on January 1, 2020. The financial instruments subject to ASU 2016-13 are the Company’s accounts receivable derived from contracts withcustomers. A significant portion of the Company’s accounts receivable are from highly-solvent, creditworthy payors including governmental programs such as Medicare and Medicaid, and highlyregulated commercial insurers. The Company’s estimate of expected credit losses as of January 1, 2020, using its expected credit loss evaluation process, resulted in no adjustments to the allowance forcredit losses and no cumulative-effect adjustment to retained earnings on the adoption date of the standard.In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), which eliminates the requirement to calculate the implied fair value of goodwill to measure agoodwill impairment charge. ASU 2017-04 is effective prospectively for fiscal years, and the interim periods within those years, beginning after December 15, 2019. The Company completed the adoption ofthe standard effective January 1, 2020 and there was no impact to goodwill from the Company’s adoption of this change.In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The objective of ASU 2019-12 is to simplify theaccounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. Theamendments in this ASU are effective for fiscal years beginning after December 15, 2020, and early adoption was permitted. The adoption of ASU 2020-06 did not have a material impact on the Company’sfinancial statements.In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity,including convertible instruments and contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method,rather than the treasury stock method. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per shareon an if-converted basis if the effect is dilutive, regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebuttedbased on past experience or a stated policy.51Table of ContentsThis pronouncement was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021.The Board specified that an entity should adopt the guidance atthe beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The use of either the modified retrospective or fully retrospective method of transition is permitted.The Company has determined that the adoption of ASU 2020-06 will not have a material impact on the Company’s financial statements.Recently Issued Accounting GuidanceIn March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporaryoptional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and otherinterbank offered rates to alternative reference rates. The new guidance was effective upon issuance, and the Company is allowed to elect to apply the amendments prospectively through December 31,2022. Borrowings under the Amended Credit Agreement (as defined in Note 9) bear interest based on LIBOR or an alternate base rate. Provisions within the agreement currently provide the Company withthe ability to replace LIBOR with a different reference rate in the event LIBOR ceases to exist.52Table of Contents3. Acquisitions of BusinessesDuring 2021, 2020 and 2019, the Company acquired a majority interest in the following businesses:Acquisition Date % InterestAcquired Number ofClinicsDecember 2021 Acquisition December 31, 2021 75% 3November 2021 Acquisition November 30, 2021 70% IIPS*September 2021 Acquisition September 30, 2021 100% IIPS*June 2021 Acquisition June 30, 2021 65% 8March 2021 Acquisition March 31, 2021 70% 6November 2020 Acquisition November 30, 2020 75% 3September 2020 Acquisition September 30, 2020 70% **February 2020 Acquisition February 27, 2020 65%***4September 2019 Acquisition September 30, 2019 67% 11April 2019 Acquisition April 11, 2019 100% **Industrial injury prevention business**The business includes six management and services contracts which have been in place for a number of years. As of the date acquired, the contracts had a remaining term of five years.***The four clinics are in four separate partnerships. The Company's interest in the four partnerships range from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction.On December 31, 2021, the Company acquired a 75% in three-clinic physical therapy practice with the practice founder retaining 25%. The purchase price for the 75% interest was approximately $3.7million, of which $3.5 million was paid in cash and $0.2 million in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest is payable on December 31, 2023.On November 30, 2021, the Company acquired an approximate 70% interest in a leading provider of industrial injury prevention services. In each case, the previous owners retained the remaininginterest. The purchase price for the approximate 70% equity interest, not inclusive of a $2.0 million contingent payment, was approximately $63.2 million of which $60.7 million was paid in cash and $1.0million in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest is payable on November 30, 2023. As part of the transaction, the Company also agreed tothe potential future purchase of a separate company under the same ownership that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.The current owners have the right to put this transaction to the Company in approximately five years, with such right having a $3.5 million value at December 31, 2021, as reflected on the Company’sconsolidated balance sheet in Other long-term liabilities. The value of this right will be adjusted in future periods, as appropriate, with any change in value reflected in the Company’s consolidatedstatement of income. The Company does not currently possess more than 50% of the controlling interests in this separate company, does not control this company through contract or governance rightsand currently does not exercise significant influence over this separate company. Due to the aforementioned reasons, and based on current accounting guidance, the Company did not consolidate theseparate company through the variable interest or voting interest model.On September 30, 2021, the Company acquired a company that specializes in return-to-work and ergonomic services, among other offerings. The Company acquired the company’s assets at a purchaseprice of approximately $3.3 million (which includes the obligation to pay an amount up to $0.6 million in contingent payment consideration in conjunction with the acquisition if specified future operationalobjectives are met), and contributed those assets to Briotix Health. The initial purchase price, not inclusive of the $0.6 million contingent payment, was approximately $2.7 million, of which $2.4 million waspaid in cash, and $0.3 million is in the form of a note payable. The note accrues interest at 3.25% per annum and the principal and interest is payable on September 30, 2023.On June 30, 2021, the Company acquired a 65% interest in an eight-clinic physical therapy with the previous owners retaining 35%. The purchase price was approximately $10.3 million, of which $9.0million was paid in cash, $1.0 million is payable based on the achievement of certain business criteria and $0.3 million is in the form of a note payable. The note accrues interest at 3.25% per annum and theprincipal and interest is payable on June 30, 2023. Additionally, the Company has an obligation to pay an additional amount up to $0.8 million in contingent payment consideration in conjunction with theacquisition if specified future operational objectives are met. The Company recorded acquisition-date fair value of this contingent liability based on the likelihood of the contingent earn-out payment. Theearn-out payment will subsequently be remeasured to fair value each reporting date.On March 31, 2021, the Company acquired a 70% interest in a five-clinic physical therapy practice with the previous owners retaining 30%. When acquired, the practice was developing a sixth clinicwhich has been completed. The purchase price for the 70% interest was approximately $12.0 million, of which $11.7 million was paid in cash and $0.3 million in the form of a note payable. The note accruesinterest at 3.25% per annum and the principal and interest is payable on March 31, 2023.53Table of ContentsThe purchase price for the 2021 acquisitions has been preliminarily allocated as follows (in thousands): IIPS* Physical TherapyOperations Total Cash paid, net of cash acquired $63,193 $23,630 $86,823 Seller notes 1,250 800 2,050 Contingent payments 2,520 837 3,357 Other payable - 1,000 1,000 Seller put right 3,522 3,522 Total consideration $70,485 $26,267 $96,752 Estimated fair value of net tangible assets acquired: Total current assets $5,589 $1,046 $6,635 Total non-current assets 12,620 6,462 19,082 Total liabilities (4,842) (6,832) (11,674)Net tangible assets acquired $13,367 $676 $14,043 Customer and referral relationships 21,126 3,729 24,855 Non-compete agreements 500 574 1,074 Tradenames 5,141 1,755 6,896 Goodwill 58,257 31,489 89,746 Fair value of non-controlling interest (classified as redeemable non-controlling interest) (27,906) (11,956) (39,862) $70,485 $26,267 $96,752 *Industrial injury prevention services On November 30, 2020, the Company acquired a 75% interest in a three-clinic physical therapy practice with the previous owners retaining 25%. The purchase price for the 75% interest was $8.9 million(net of cash acquired), of which $8.6 million was paid in cash and $0.3 million in the form of a note payable that is payable in two principal installments totaling $162,500 each. The first principal paymentplus accrued interest was paid in November 2021 with the second installment to be paid in November 2022 totaling $162,500. The note accrues interest at 3.25% per annum.On September 30, 2020, the Company acquired a 70% interest in an entity which holds six-management contracts that have been in place for a number of years. The purchase price for the 70% interestwas approximately $4.2 million, of which $3.7 million was paid in cash and $0.5 million in the form of two notes payable. One of the notes payable of $0.3 million was paid in November 2020. The remainingnote payable of $0.2 million was paid on September 30, 2021.On February 27, 2020, the Company acquired interests in a four-clinic physical therapy practice. The four clinics are in four separate partnerships. The Company’s interests in the four partnershipsrange from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction. The aggregate purchase price was $11.9 million, of which $11.6 million was paid in cash and $0.3 million in theform of a note payable. The note accrues interest at 4.75% per annum and the principal and interest was paid on February 2022.The purchase price for the 2020 physical therapy operations acquisitions has been allocated as follows (in thousands):Cash paid, net of cash acquired $23,912 Seller note 1,121 Total consideration $25,033 Estimated fair value of net tangible assets acquired: Total current assets $1,049 Total non-current assets 196 Total liabilities (562)Net tangible assets acquired $683 Referral relationships 5,520 Non-compete 500 Tradename 1,890 Goodwill 27,738 Fair value of non-controlling interest (classified as redeemable non-controlling interest) (11,298) $25,033 54Table of ContentsOn September 30, 2019, the Company acquired a 67% interest in an eleven-clinic physical therapy practice. The purchase price for the 67% interest was $12.4 million ($12.6 million less cash acquired of$0.2 million), of which $12.3 million was paid in cash and $0.3 million in a seller note payable in two principal installments totaling $150,000 each, plus accrued interest. A payment of $150,000 plus accruedinterest was paid in September 2020 and a second payment of $150,000 was paid in September 2021. The note accrues interest at 5.0% per annum.On April 11, 2019, the Company acquired a company that is a provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offeremployment testing, functional capacity evaluations and return-to-work services. It performs these services across a network of 45 states including onsite at eleven client locations. The acquired businesswas then combined with Briotix Health, the Company’s industrial injury prevention services operation, increasing the Company’s ownership position in the Briotix Health partnership to approximately76.0%. The purchase price for the acquired company was $22.9 million ($23.6 million less cash acquired of $0.7 million), which consisted of $18.9 million in cash, (of which $0.5 million will be paid to certainshareholders), and a $4.0 million seller note. The note accrues interest at 5.5% and the principal and accrued interest was paid on April 9, 2021.The results of operations of the acquired clinics have been included in the Company’s consolidated financial statements since the date of their respective acquisition. The Company intends tocontinue to pursue additional acquisition opportunities, develop new clinics and open satellite clinics.The purchase price for the 2019 acquisitions was allocated as follows (in thousands): IIPS* Physical TherapyOperations Total Cash paid, net of cash acquired ($890) $18,428 $12,170 $30,598 Payable to shareholders of seller 485 - 485 Seller note 4,000 300 4,300 Total consideration $22,913 $12,470 $35,383 Estimated fair value of net tangible assets acquired: Total current assets $1,641 $650 $2,291 Total non-current assets 848 394 1,242 Total liabilities (2,978) (191) (3,169)Net tangible assets acquired $(489) $853 $364 Referral relationships 3,400 2,600 6,000 Non-compete 250 270 520 Tradename 1,300 740 2,040 Goodwill 18,452 14,237 32,689 Fair value of non-controlling interest (classified as redeemable non-controlling interest) - (6,230) (6,230) $22,913 $12,470 $35,383 * Industrial injury prevention servicesThe finalized purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2020 and 2019 were allocated to the fair value of the assets acquired, inclusive of identifiableintangible assets, i.e. trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair valuesbeing recorded as goodwill. For some of the acquisitions in 2021, the Company is in the process of completing its formal valuation analysis to identify and determine the fair value of tangible andidentifiable 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, 2021 based on additionalinformation 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 identifiableintangible 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, willlikely result in adjustments to goodwill. The Company does not expect the adjustments to be material.For the acquisitions in 2021, the values assigned to the customer and referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. Forcustomer and referral relationships, the weighted-average amortization period is 13.8 years. For non-compete agreements, the weighted-average amortization period is 5.6 years. The values assigned totradenames are tested annually for impairment.For the acquisitions in 2020 and 2019, the values assigned to the referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. Forreferral relationships, the weighted average amortization period was 10.54 and 10.10 years at December 31, 2020 and December 31, 2019, respectively. For non-compete agreements, the weighted averageamortization period was 6.00 years and 5.16 years at December 31, 2020 and December 31, 2019, respectively. Generally, the values assigned to tradenames are tested annually for impairment.For the 2021, 2020 and 2019 acquisitions, total current assets primarily represent 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 arm’s length negotiations. Funding for the cash portions was derived from proceeds from the Company’s revolving creditfacility. The results of operations of the acquisitions have been included in the Company’s consolidated financial statements since their respective date of acquisition. Unaudited proforma consolidatedfinancial information for the acquisitions in 2021, 2020 and 2019, have not been included as the results are immaterial individually and in the aggregate.55Table of Contents4. Acquisitions and Sale of Non-Controlling InterestsDuring 2021, the Company acquired additional interests in five partnerships which are included in non-controlling interest. The additional interests purchased in each of the partnerships ranged from5% to 35%. The aggregated purchase price for these acquired interests was $1.3 million. The Company also sold an interest in a partnership for $0.1 million.During 2020, the Company acquired additional interests in five partnerships which are included in non-controlling interest. The additional interests purchased in each of the partnerships ranged from20% to 35%. The aggregated purchase price for these acquired interests was $0.3 million. The Company also sold an interest in a partnership for $0.1 million. Also during 2020, the Company sold 14previously closed clinics. The aggregate sales price was $1.1 million, of which $0.7 million was paid in cash and $0.4 million in a note receivable payable in two equal installments of principal and anyaccrued interest. The first payment was received in June 2021 and the next payment is due on June 15, 2022.During 2019, the Company acquired additional interests in four partnerships which are included in non-controlling interest. The additional interests purchased in each of the partnerships ranged from1% to 20%. Also in 2019, the Company sold a 1% interest in a partnership. The net after-tax difference between the payments and the portion of undistributed earnings of $196,000 was credited toadditional paid-in capital.5. Redeemable Non-Controlling InterestTherapy Practice AcquisitionsSince October 2017, when the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic Therapy Practice (referred to as “Therapy Practice”), these Therapy Practicetransactions occur in a series of steps which are described below.1.Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals (the “Selling Shareholders”) most of whomare physical therapists that work in the Acquired Therapy Practice and provide physical therapy services to patients.2.In conjunction with the Acquisition, the Seller Entity contributes the Acquired Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one hundred percent (100%)of the limited and general partnership interests in NewCo. Therefore, in this step, NewCo becomes a wholly-owned subsidiary of the Seller Entity.3.The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from 50% to 90%) of the limited partnership interest and in all cases 100%of the general partnership interest in NewCo. The Company does not purchase 100% of the limited partnership interest because the Selling Shareholders, through the Seller Entity, want tomaintain an ownership percentage. The consideration for the Acquisition is primarily payable in the form of cash at closing and a small two-year note in lieu of an escrow (the “Purchase Price”).The Purchase Agreement usually does not contain any future earn-out or other contingent consideration that is payable to the Seller Entity or the Selling Shareholders.4.The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the limited and general partners ofNewCo. After the Acquisition, the Company is the general partner of NewCo.5.As noted above, the Company does not purchase 100% of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“SellerEntity Interest”).6.In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that ranges from three to five years (the“Employment Term”), with automatic one-year renewals, unless employment is terminated prior to the end of the Employment Term. As a result, a Selling Shareholder becomes an employee(“Employed Selling Shareholder”) of NewCo. The employment of an Employed Selling Shareholder can be terminated by the Employed Selling Shareholder or NewCo, with or without cause, at anytime. In a few situations, a Selling Shareholder does not become employed by NewCo and is not involved with NewCo following the closing; in those situations, such Selling Shareholders selltheir entire ownership interest in the Seller Entity as of the closing of the Acquisition.7.The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities based on other employeesin similar capacities within NewCo, the Company and the industry.8.The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing Therapy Practice activities for a specified period of time (the “Non-Compete Term”). A Non-CompeteAgreement is executed with the Selling Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restrictedfrom engaging in a competing Therapy Practice during the Non-Compete Term.56Table of Contents9.The Non-Compete Term commences as of the date of the Acquisition and expires on the later of:a.Two years after the date an Employed Selling Shareholders’ employment is terminated (if the Selling Shareholder becomes an Employed Selling Shareholder) orb.Five to six years from the date of the Acquisition, as defined in the Non-Compete Agreement, regardless of whether the Selling Shareholder is employed by NewCo.10.The Non-Compete Agreement applies to a restricted region which is defined as a mileage radius from the Acquired Therapy Practice. That is, an Employed Selling Shareholder is permitted toengage in competing Therapy Practicees or activities outside the designated geography (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholderwho is not employed by NewCo immediately is permitted to engage in the competing Therapy Practice or activities outside the designated geography.The Partnership Agreement contains provisions for the redemption of the Seller Entity Interest, either at the option of the Company (the “Call Right”) or at the option of the Seller Entity (the “PutRight”) as follows:1.Put Righta.In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to the fifth anniversary of the Closing Date, the Seller Entity thereafter may have anirrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in“3” below.b.In the event that any Selling Shareholder is not employed by NewCo as of the fifth anniversary of the Closing Date and the Company has not exercised its Call Right with respect to theTerminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter has the Put Right to cause the Company to purchase from Seller Entity the TerminatedSelling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below. c.In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Seller Entity has the Put Right, andupon the exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in“3” below.2.Call Righta.If any Selling Shareholder’s employment by NewCo is terminated prior to the fifth anniversary of the Closing Date, the Company thereafter has an irrevocable right to purchase from SellerEntity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below.b.In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Company has the Call Right, andupon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in“3” below.3.For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes, depreciation,amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributedmonthly based on available cash within NewCo; therefore, the undistributed earnings amount is small, if any.4.The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and theCall Right noted above.5.The Put Right and the Call Right do not have an expiration date.6.The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entireownership interest in the Seller Entity at the closing of the Acquisition.An Employed Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the Company’s purchase of its partnership interest in NewCo. TheEmployment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling Shareholder, nor theSeller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms. More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, suchEmployed Selling Shareholder does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest. TheCompany’s only recourse against the Employed Selling Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies undersuch agreements. There are no conditions in any of the arrangements with an Employed Selling Shareholder that would result in a forfeiture of the equity interest held in the Seller Entity or of the SellerEntity Interest.57Table of ContentsProgressiveHealth AcquisitionOn November 30, 2021, the Company acquired a majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest in certain subsidiaries (“ProgressiveSubsidiaries”) that operate in the industrial injury prevention and therapy services businesses. The Progressive transaction was completed in a series of steps which are described below.1.Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual owners (the “Selling Shareholders”), who work in and managethe Progressive business.2.In conjunction with the acquisition, the Selling Shareholders caused the Progressive Parent to transfer its ownership of the Progressive Subsidiaries into a newly-formed limited liability company(“NewCo”), in exchange for one hundred percent (100%) of the membership interests in NewCo. Therefore, in this step, NewCo became wholly-owned by the Selling Shareholders.3.The Company entered into an agreement (the “Purchase Agreement”) to acquire from the Selling Shareholders a majority of the membership interest in NewCo. The consideration for theacquisition is primarily payable in the form of cash at closing, a relatively small portion paid in cash after the closing contingent on certain performance criteria, and a small note in lieu of anescrow (the “Purchase Price”).4.The Company and the Selling Shareholders also executed an operating agreement (the “Operating Agreement”) for NewCo that sets forth the rights and obligations of the members of NewCo.5.As noted above, the Company did not purchase 100% of the membership interests in NewCo and the Selling Shareholders retained a portion of the membership interest in NewCo (“SellingShareholders’ Interest”).6.The Company and the Selling Shareholders executed a non-compete agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholders from competing for a specified period oftime (the “Non-Compete Term”).7.The Non-Compete Term commences as of the date of the Acquisition and expires on the later of:a.Two years after the date a Selling Shareholder no longer is involved in the management of NewCo orb.Seven years from the date of the acquisition.8.The Non-Compete Agreement applies to the entire United States.9.The Put Right and the Call Right do not have an expiration date.The Operating Agreement contains provisions for the redemption of the Selling Shareholder’s Interest, either at the option of the Company (the “Call Right”) or at the option of the Selling Shareholder(the “Put Right”) as follows: 1.Put Righta.Each of the Selling Shareholders has the right to sell 30% of their respective residual interests on each of the 4th and 5th anniversaries of the acquisition closing, and then 10% on each of the6th and 7th anniversaries.b.In the event that any Selling Shareholder terminates his management relationship with NewCo for any reason on or after the seventh anniversary of the Closing Date, the Selling Shareholderhas the Put Right, and upon the exercise of the Put Right, the Selling Shareholder’s Interest shall be redeemed by the Company at the purchase price described in “3” below.2.Call Righta.If any Selling Shareholder’s ceases to perform management services on behalf of NewCo, the Company thereafter shall have an irrevocable right to purchase from such Selling Shareholder hisInterest, in each case at the purchase price described in “3” below.3.For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes, depreciation,amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributedmonthly based on available cash within NewCo; therefore, the undistributed earnings amount is small, if any.58Table of Contents4.The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and theCall Right noted above.5.The Put Right and the Call Right do not have an expiration date.Neither the Operating Agreement nor the Non-Compete Agreement contain any provision to escrow or “claw back” the equity interest in NewCo held by the Selling Shareholders, in the event of abreach of the operating agreement or non-compete terms, or the management services agreement pursuant to which the Selling Shareholders perform services on behalf of NewCo. The Company’s onlyrecourse against the Selling Shareholder for breach of any of these agreements is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements witha Selling Shareholder that would result in a forfeiture of the equity interest in NewCo held by a Selling Shareholder.An Employed Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the Company’s purchase of its partnership interest in NewCo. TheEmployment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling Shareholder, nor theSeller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms. More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, suchEmployed Selling Shareholder does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest. TheCompany’s only recourse against the Employed Selling Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies undersuch agreements. There are no conditions in any of the arrangements with an Employed Selling Shareholder that would result in a forfeiture of the equity interest held in the Seller Entity or of the SellerEntity Interest.For the years ended December 31, 2021, 2020 and 2019, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests (in thousands): Year Ended December 31, 2021 December 31, 2020 December 31, 2019 Beginning balance $132,340 $137,750 $133,943 Operating results allocated to redeemable non-controlling interest partners 11,358 11,175 10,659 Distributions to redeemable non-controlling interest partners (11,359) (12,403) (10,221)Changes in the fair value of redeemable non-controlling interest 13,011 4,632 11,893 Purchases of redeemable non-controlling interest (30,204) (20,521) (8,934)Acquired interest 39,862 11,297 6,230 Reduction of non-controlling interest due to sale of USPH partnership interest - (6,132)Sales of redeemable non-controlling interest - temporary equity 982 1,133 3,120 Notes receivable related to sales of redeemable non-controlling interest - temporary equity (914) (1,006) (2,870)Adjustments in notes receivable related to the the sales of redeemable non-controlling interest - temporary equity 186 283 - Other - - 62 Ending balance $155,262 $132,340 $137,750 The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests (in thousands): December 31, 2021 December 31, 2020 December 31, 2019 Contractual time period has lapsed but holder's employment has not terminated $80,781 $62,390 $51,921 Contractual time period has not lapsed and holder's employment has not terminated 74,481 69,950 85,829 Holder's employment has terminated and contractual time period has expired - - - Holder's employment has terminated and contractual time period has not expired - - - $155,262 $132,340 $137,750 59Table of Contents6. GoodwillThe changes in the carrying amount of goodwill as of December 31, 2021 and 2020 consisted of the following (in thousands): Year EndedDecember 31, 2021 Year EndedDecember 31, 2020 Beginning balance $345,646 $317,676 Goodwill acquired 89,746 28,540 Goodwill derecognition (write-off) related to closed clinics - (1,859)Goodwill adjustments for purchase price allocation of businesses acquired in prior year (713) 1,289 Ending balance $434,679 $345,646 During the year ended December 31, 2020, the Company derecognized (wrote off) goodwill in the amount of $1.9 million related to closed clinics due to COVID-19.7. Intangible Assets, netIntangible assets, net as of December 31, 2021, and 2020 consisted of the following (in thousands): December 31, 2021 December 31, 2020 Tradenames $38,790 $32,317 Customer and referral relationships, net of accumulated amortization of $17,762 and $14,522, respectively 45,643 22,119 Non-compete agreements, net of accumulated amortization of $6,450 and $5,993, respectively 1,949 1,844 $86,382 $56,280 Tradenames, customer and referral relationships and non-compete agreements are related to the businesses acquired. The value assigned to tradenames has an indefinite life and is tested at leastannually for impairment using the relief from royalty method in conjunction with the Company’s annual goodwill impairment test. The value assigned to customer and referral relationships is beingamortized over their respective estimated useful lives which range from 6 to 16 years. Non-compete agreements are amortized over the respective term of the agreements which range from 5 to 6 years.The following table details the amount of amortization expense recorded for intangible assets for the years ended December 31, 2021, 2020 and 2019 (in thousands): December 31, 2021 December 31, 2020 December 31, 2019 Customer and referral relationships $3,240 $2,845 $2,307 Non-compete agreements 458 569 708 $3,698 $3,414 $3,015 For one acquisition, the value assigned to tradename was being amortized over the term of the six year agreement in which the Company had acquired the right to use the specific tradename.The remaining balances of the customer and referral relationships and non-compete agreements are expected to be amortized as follows (in thousands):Customer and Referral Relationships Non-Compete Agreements Years Annual Amount Years Annual Amount Ending December 31, Ending December 31, 2022$4,798 2022$512 2023$4,691 2023$443 2024$4,526 2024$387 2025$4,382 2025$322 2026$3,914 2026$236 Thereafter$23,332 Thereafter$49 60Table of Contents8. Accrued ExpensesAccrued expenses as of December 31, 2021 and 2020 consisted of the following (in thousands): December 31, 2021 December 31, 2020 Salaries and related costs $23,569 $24,646 Credit balances due to patients and payors 6,649 5,756 Group health insurance claims 1,984 2,113 Closure costs 498 1,333 Federal taxes payable 2,716 9,885 MAAPP funds payable - 14,054 Contingent payment related to acquisition 1,000 - Settlement of a legal matter 2,750 - Other 6,539 1,959 Total $45,705 $59,746 Federal taxes payable includes $4.2 million related to deferred employer payroll taxes pursuant to the CARES ACT offset by a federal income tax receivable of $1.5 million.9. Notes PayableNotes payable as of December 31, 2021, and 2020 consisted of the following (in thousands): December 31, 2021 December 31, 2020 Credit Agreement average effective interest rate of 2.1% for December 31, 2021 and December 31, 2020, (inclusive of unused fee) $114,000 $16,000 Various notes payable with $830 plus accrued interest due in the next year, interest accrues in the range of 3.25% through 4.75% per annum 4,417 5,495 $118,417 $21,495 Less current portion (830) (4,899)Long term portion $117,587 $16,596 Effective December 5, 2013, the Company entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility. This agreement was amended inAugust 2015, January 2016, March 2017, November 2017, January 2021, and November 2021 (hereafter is referred to as “Amended Credit Agreement”). In November 2021, the Company exercised theaccordion feature in the Amended Credit Agreement to increase the limit on the facility from $125.0 million to $150.0 million, with an updated accordion feature providing for additional capacity of $25.0million, therefore increasing the availability up to $175.0 million.The Amended Credit Agreement is unsecured and has loan covenants, including requirements that we comply with a consolidated fixed charge coverage ratio and consolidated leverage ratio.Proceeds from the Amended Credit Agreement may be used for working capital, acquisitions, purchases of our common stock, dividend payments to our common stockholders, capital expenditures andother corporate purposes. The pricing grid is based on our consolidated leverage ratio with the applicable spread over LIBOR ranging from 1.25% to 2.0% or the applicable spread over the Base Rateranging from 0.1% to 1%. Fees under the Amended Credit Agreement include an unused commitment fee of 0.3% of the amount of funds outstanding under the Amended Credit Agreement.The 2021 amendment to the Amended Credit Agreement allows for cash and noncash consideration for acquisitions permitted under the Amended Credit Agreement of up to $50,000,000 for any fiscalyear, and allows for payments in cash dividends to shareholders in an aggregate amount not to exceed $50,000,000 in any fiscal year. The Amended Credit Agreement is unsecured and includes certainfinancial covenants which include a consolidated fixed charge coverage ratio and a consolidated leverage ratio, as defined in the agreement.On December 31, 2021, $114.0 million was outstanding on the Amended Credit Agreement resulting in $61.0 million of availability. As of December 31, 2021, the Company was in compliance with all ofthe covenants thereunder.The Company generally enters into various notes payable as a means of financing a portion of its acquisitions and purchasing of non-controlling interests. In conjunction with these transactions in2021, the Company entered into notes payable in the aggregate amount of $4.4 million of which an aggregate principal payment of $0.8 million was due in 2021 and $3.6 million is due in 2022. Interestaccrues in the range of 3.25% to 4.75% per annum and is payable with each principal installment. The balance of the various notes payable entered into prior to 2021 was $3.6 million which will be paid in2022 and 2023.61Table of Contents10. LeasesThe Company has operating leases for its corporate offices and operating facilities. The Company determines if an arrangement is a lease at the inception of a contract. Effective January 1, 2019, right-of-use assets and operating lease liabilities are included in the consolidated balance sheet. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term andoperating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized atcommencement date based on the net present value of the fixed lease payments over the lease term. The Company’s operating lease terms are generally five years or less. The Company’s lease termsinclude options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company usesits incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-linebasis over the lease term.In accordance with ASC 842, the Company records on its consolidated balance sheet leases with a term greater than 12 months. The Company has elected, in compliance with current accountingstandards, not to record leases with an initial term of 12 months or less in the consolidated balance sheet. ASC 842 requires the separation of the fixed lease components from the variable leasecomponents. The Company has elected the practical expedient to account for separate lease components of a contract as a single lease cost thus causing all fixed payments to be capitalized. Non-lease andvariable cost components are not included in the measurement of the right-of-use assets or operating lease liabilities. The Company also elected the package of practical expedients permitted within ASC842, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such asincreases in lease payments based on changes in index rates or usage are not included in the right-of-use assets or operating lease liabilities. These are expensed as incurred and recorded as variable leaseexpense.For the years ended December 31, 2021 and 2020, the components of lease expense were as follows (in thousands): Year Ended December 31, 2021 2020 Operating lease cost $32,021 $30,710 Short-term lease cost 1,160 1,454 Variable lease cost 7,057 5,752 Total lease cost* $40,238 $37,916 *Sublease income was immaterialLease costs are reflected in the consolidated statements of net income in the line item—rent, supplies, contract labor and other.For the years ended December 31, 2021 and 2020, supplemental cash flow information related to leases was as follows (in thousands): Year Ended December 31, 2021 2020 Cash paid for amounts included in the measurement of operating lease liabilities (in thousands) $33,192 $30,307 Right-of-use assets obtained in exchange for new operating lease liabilities (in thousands) $46,088 $32,710 The aggregate future lease payments for operating leases as of December 31, 2021 were as follows (in thousands):Fiscal Year Amount 2022 $32,945 2023 27,467 2024 20,876 2025 14,000 2026 8,492 2027 and therafter 7,055 Total lease payments $110,835 Less: imputed interest 6,175 Total operating lease liabilities $104,660 62Table of ContentsAverage lease terms and discount rates were as follows: Year Ended December 31, 2021 2020 Weighted-average remaining lease term - Operating leases 4.17 Years 4.05 Years Weighted-average discount rate - Operating leases 2.77% 3.1%11. Income TaxesSignificant components of deferred tax assets and liabilities included in the consolidated balance sheets at December 31, 2021 and 2020 were as follows (in thousands): December 31, 2021 December 31, 2020 Deferred tax assets: Compensation $2,817 $1,865 Allowance for credit losses 573 396 Acquired net operating losses - 558 Lease obligations - including closed clinics 26,856 23,819 Deferred tax assets $30,246 $26,638 Deferred tax liabilities: Depreciation and amortization $(19,607) $(12,650)Operating lease right-of-use assets (24,637) (21,419)Other (387) (348)Deferred tax liabilities (44,631) (34,417)Net deferred tax liability $(14,385) $(7,779)The deferred tax assets and liabilities related to purchased interests not yet finalized may result in an immaterial adjustment.During 2021, the Company recorded net deferred tax assets of $0.8 million related to the revaluation of redeemable non-controlling interests and acquisitions of non-controlling interests. In addition,during 2021, the Company recorded an adjustment to the deferred tax assets of $3.0 million as a result of a detailed reconciliation of its federal and state taxes payable and receivable accounts along with itsfederal and state deferred tax asset and liability accounts with its federal and state tax returns for 2020. The offset of this adjustment was a decrease to the previously reported state income tax receivableand a decrease to the federal income tax payable. As of December 31, 2021, the Company has a federal tax payable of $2.7 million and state tax receivables of $0.6 million. The federal income tax payable isincluded in accrued liabilities and the tax receivable is included in other current assets on the accompanying consolidated balance sheets.The differences between the federal tax rate and the Company’s effective tax rate for the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands): December 31, 2021 December 31, 2020 December 31, 2019 U. S. tax at statutory rate $11,782 21.0% $10,125 21.0% $11,274 21.0%State income taxes, net of federal benefit 2,478 4.4% 1,956 3.9% 2,059 3.8%Excess equity compensation deduction (246) -0.4% (99) 0.0%% (871) -1.6%Non-deductible expenses 1,258 2.2% 1,040 2.1% 1,185 2.2% $15,272 27.2% $13,022 27.0% $13,647 25.4%Significant components of the provision for income taxes for the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands): December 31, 2021 December 31, 2020 December 31, 2019 Current: Federal $7,477 $10,506 $6,523 State 2,107 2,774 2,473 Total current 9,584 13,280 8,996 Deferred: Federal 4,866 (38) 3,730 State 822 (220) 921 Total deferred 5,688 (258) 4,651 Total income tax provision $15,272 $13,022 $13,647 63Table of ContentsFor 2021, 2020 and 2019, 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 liabilityaccounts. The adjustments were immaterial. 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 taxassets 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 becomedeductible. 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 futuretaxable 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 operationswill generate sufficient taxable income to realize the deferred tax assets.The Company’s U.S. federal returns remain open to examination for 2018 through 2020 and U.S. state jurisdictions are open for periods ranging from 2017 through 2020.The Company does not believe that it has any significant uncertain tax positions at December 31, 2021 and December 31, 2020, nor is this expected to change within the next twelve months due to thesettlement 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, 2021, 2020and 2019.12. Segment InformationThe Company’s reportable segments include the physical therapy operations segment and the industrial injury prevention services segment. Also included in the physical therapy operations segmentare revenues from management contract services and other services which include services the Company provides on-site, such as schools for athletic trainers.The Company evaluates performance of the segments based on gross profit. The Company has provided additional information regarding its reportable segments which contributes to theunderstanding of the Company and provides useful information.The following table summarizes selected financial data for the Company’s reportable segments. Prior year results presented herein have been changed to conform to the current presentation. Year Ended December 31, 2021 2020 2019 Net operating revenue: Physical therapy operations $451,122 $383,770 $444,507 Industrial injury prevention services 43,900 39,199 37,462 Total Company $495,022 $422,969 $481,969 Gross profit: Physical therapy operations (excluding closure costs) (a non-GAAP measure) $106,518 $88,295 $104,120 Industrial injury prevention services 10,694 10,086 8,379 $117,212 $98,381 $112,499 Physical therapy operations - closure costs 30 3,931 25 Gross profit $117,182 $94,450 $112,474 Total Assets: Physical therapy operations $587,801 $499,911 $518,027 Industrial injury prevention services 161,625 94,450 112,474 Total Company $749,426 $594,361 $630,501 13. Investment in Unconsolidated AffiliateThrough one of the subsidiaries, the Company has a 49% joint venture interest in a company which provides physical therapy services for patients at hospitals. Since the Company is deemed to nothave a controlling interest in the company, the Company’s investment is accounted for using the equity method of accounting. The investment balance of this joint venture as of December 31, 2021, is$12.2 million, of which $12.3 million related to the fair value on the date of acquisition. The $12.2 million includes earnings of $112 thousand less a distribution received of $153 thousand.64Table of Contents14. Equity Based PlansThe 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 exerciseprices 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 CompensationCommittee. 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-qualifiedoptions and shares of restricted stock covering up to 2,100,000 shares of common stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions).The material terms of the Amended 2003 Plan was reapproved by the shareholders of the Company at the 2015 Shareholders Meeting on May 19, 2015 and an increase in the number of shares authorizedfor issuance from 1,750,000 to 2,100,000 was approved at the 2016 Shareholders Meeting on March 17, 2016.A cumulative summary of equity plans as of December 31, 2021 follows: Authorized RestrictedStock Issued OutstandingStock Options Stock OptionsExercised Stock OptionsExercisable Shares Availablefor Grant Equity Plans Amended 1999 Plan 600,000 416,402 - 139,791 - 7,775 Amended 2003 Plan 2,100,000 1,166,855 - 778,300 - 164,882 2,700,000 1,583,257 - 918,091 - 172,657 During 2021, 2020 and 2019, the Company granted the following shares of restricted stock to directors, officers and employees pursuant to its equity plans as follows:Year Granted Number of Shares Weighted Average FairValue Per Share 2021 60,317 $131.29 2020 86,982 $104.69 2019 91,682 $104.85 During 2021, 2020 and 2019, the following shares were cancelled due to employee terminations prior to restrictions lapsing:Year Cancelled Number of Shares Weighted Average FairValue Per Share 2021 439 $113.80 2020 10,037 $102.52 2019 1,578 $87.88 Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, therestrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four yearsfollowing the date of grant.There were 102,682 and 127,562 shares outstanding as of December 31, 2021 and December 31, 2020, respectively, for which restrictions had not lapsed. The restrictions will lapse in 2022 through 2025.Compensation expense for grants of restricted stock is recognized based on the fair value on the date of grant. Compensation expense for restricted stock grants was $7.8 million, $7.9 million, and $7.0million, respectively, for 2021, 2020 and 2019. As of December 31, 2021, the remaining $8.9 million of compensation expense will be recognized from 2022 through 2025.65Table of Contents15. Preferred StockThe 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 suchseries and the rights, powers, preferences and limitations of each series. There are no provisions in the Company’s Articles of Incorporation specifying the vote required by the holders of preferred stockto 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 anymeeting, 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 adifferent vote is required by law or the Company’s 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.16. Common StockFrom 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 Company’scommon 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”). The Amended Credit Agreementpermits share repurchases of up to $15,000,000, subject to compliance with covenants. 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. There are currently an additional estimated156,986 shares (based on the closing price of $95.55 on December 31, 2021, the last business day in 2021) that may be purchased from time to time in the open market or private transactions depending onprice, availability and the Company’s cash position. The Company did not purchase any shares of its common stock during 2021 or 2020.17. Defined Contribution PlanThe Company has several 401(k) profit sharing plans covering all employees with three months of service. For certain plans, the Company makes matching contributions. The Company may also makediscretionary contributions of up to 50% of employee contributions. The Company did not make any discretionary contributions for the years ended December 31, 2021, 2020 and 2019. The Companymatching contributions totaled $1.9 million, $1.9 million and $2.0 million, respectively, for the years ended December 31, 2021, 2020 and 2019.18. Commitments and ContingenciesEmployment AgreementsAt December 31, 2021, the Company had outstanding employment agreements with four of its executive officers. The agreements have terms that expire November 8, 2022, July 1, 2023, December 31,2023, and February 28, 2024; however, each of these agreements provide for an automatic two-year renewal at the conclusion of the expiring term or renewal term. In addition, the Company has outstanding employment agreements with most of the managing physical therapist partners of the Company’s physical therapy clinics and with certain other clinicemployees which obligate subsidiaries of the Company to pay compensation of $52.8 million in 2022 and $8.4 million in the aggregate from 2023 through 2024. In addition, many of the employmentagreements with the managing physical therapists provide for monthly bonus payments calculated as a percentage of each clinic’s net revenues (not in excess of operating profits) or operating profits. LitigationSettlement of a Legal MatterOn August 19, 2019, we received notice of a qui tam lawsuit (“the Complaint”) filed by a relator on behalf of the United States, titled U.S. ex rel. Bonnie Elsdon, v. U.S. Physical Therapy, Inc., U.S.Physical Therapy, Ltd., Rehab Partners #2, Inc., The Hale Hand Center, Limited Partnership (the “Hale Partnership”), and Suzanne Hale. This whistleblower lawsuit was filed in the U.S. District Court forthe Southern District of Texas, seeking damages and civil penalties under the federal False Claim Act. This lawsuit was originally filed under seal by a former employee of The Hale Hand Center, LimitedPartnership (“Hale Partnership”), a majority-owned subsidiary of the Company, on May 25, 2018. The U.S Government declined to intervene in the case and unsealed the Complaint on July 17, 2019.66Table of ContentsThe Complaint alleged that the Hale Partnership engaged in conduct to purposely “upcode” its billings for services provided to Medicare patients. The plaintiff - relator also claimed that similar falseclaims occurred on other days and at other Company-owned partnerships.On October 3, 2019, we filed Motions to Dismiss based on numerous grounds on behalf of each of the named defendants. On October 29, 2019, the plaintiff-relator dismissed three of the nameddefendants, Rehab Partners #2, Inc., U.S. Physical Therapy, Ltd., and Suzanne Hale. The Motions to Dismiss were denied on November 30, 2020.In January 2022, to avoid the legal fees and discovery costs in defending this matter and the uncertainty of protracted litigation, the Company entered into a settlement agreement with the plaintiff-relator. In the settlement agreement, the plaintiff-relator released all defendants from liability for all conduct alleged in the Complaint, and the Company admitted no liability or wrongdoing. In connectionwith the settlement, the Office of the United States Attorney for the Southern District of Texas agreed to a dismissal of the claims against the Hale Partnership and the Company. Under the terms of thesettlement, the Company agreed to make payments to the government, the plaintiff-relator and her counsel. Such payments, in the aggregate, amounted to $2.75 million of which $2.6 million was recordedas an expense in 2021. 19. Earnings Per ShareThe computations of basic and diluted earnings per share for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands, except per share data): Year Ended December 31, 2021 December 31, 2020 December 31, 2019 Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $40,831 $35,194 $40,039 (Charges) credit to retained earnings: Revaluation of redeemable non-controlling interest (13,011) (4,632) (11,893)Tax effect at statutory rate (federal and state) of 25.55% and 26.25%, respectively 3,324 1,216 3,121 $31,144 $31,778 $31,267 Earnings per share (basic and diluted) $2.41 $2.48 $2.45 Shares used in computation: Basic and diluted earnings per share - weighted-average shares 12,898 12,835 12,756 20. Related Party TransactionsSettlement of Short Swing Profit Claim For the year ended December 31, 2021, the Company recorded approximately $20,000 related to the short swing profit settlement remitted by a shareholder of our company under Section 16(b) of theSecurities Exchange Act of 1934, as amended. The Company recognized the proceeds as an increase to additional paid-in capital in the consolidated balance sheets as of December 31, 2021 andconsolidated statements of stockholders’ equity, as well as in cash provided by financing activities included in Other, in the consolidated statements of cash flows, for the year ended December 31, 2021.21. Reclassification of Prior Period PresentationCertain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable.ITEM 9A.CONTROLS AND PROCEDURES.Evaluation of Disclosure Controls and ProceduresOur management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of the end of the fiscal period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded thatour disclosure controls and procedures are effective in ensuring that the information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarizedand reported, within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer andChief Financial Officer, as appropriate to allow timely decisions regarding disclosure.Management’s Report on Internal Control over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. U.S. PhysicalTherapy, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles.Internal control over financial reporting includes those policies and procedures that: •Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; 67Table of Contents•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that ourreceipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and •Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financialstatements.Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is aprocess that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also becircumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal controlover financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into theprocess safeguards to reduce, though not eliminate, the risk.Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria describedin Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In accordance with guidance issued by the SEC, recently acquiredbusinesses may be excluded from management’s assessment of the effectiveness of the Company’s internal control over financial reporting in the year of acquisition. Accordingly, management excludedthe November 2021 Acquisition from management’s assessment of the effectiveness of the Company’s internal control over financial reporting from the November 30, 2021, acquisition date, which excludedtotal assets and total net revenues representing approximately 13.3% and 0.4%, respectively, of the Company’s related consolidated financial statement amounts as of and for the year ended December 31,2021.Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2021.The Company’s internal control over financial reporting has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report included on page 39.Changes in Internal Control over Financial ReportingIn November 2021, we completed an acquisition of a leading provider of industrial injury prevention services. As part of our ongoing integration activities, we are currently in the process ofimplementing internal controls and procedures at the newly acquired entity. Except for the integration of the newly acquired entity noted above, there were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that materiallyaffected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B.OTHER INFORMATION.Not applicable.PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders to be filed with the SECpursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report. ITEM 11.EXECUTIVE COMPENSATION.The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders to be filed with the SECpursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders to be filed with the SECpursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report.68Table of ContentsITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders to be filed with the SECpursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement relating to our 2022 Annual Meeting of Stockholders to be filed with the SECpursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report.PART IV ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a)Documents filed as a part of this report: 1.Financial Statements. Reference is made to the Index to Financial Statements and Related Information under Item 8 in Part II hereof, where these documents are listed. 2.Financial Statement Schedules. See page 85 for Schedule II — Valuation and Qualifying Accounts. All other schedules are omitted because of the absence of conditions under which theyare required or because the required information is shown in the financial statements or notes thereto. 3.Exhibits. The exhibits listed in List of Exhibits on the next page are filed or incorporated by reference as part of this report. ITEM 16.Form 10-K SummaryNone.69Table of ContentsEXHIBIT INDEXLIST OF EXHIBITSNumberDescription3.1Articles of Incorporation of the Company [filed as an exhibit to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 and incorporated herein by reference]. 3.2Amendment to the Articles of Incorporation of the Company [filed as an exhibit to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 and incorporated herein byreference]. 3.3Bylaws of the Company, as amended [filed as an exhibit to the Company’s Form 10-KSB for the year ended December 31, 1993 and incorporated herein by reference—Commission FileNumber—1-11151]. 4.1*Description of Company Securities [filed herewith the Company’s Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020.] 10.1+1999 Employee Stock Option Plan (as amended and restated May 20, 2008) [incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A,filed with the SEC on April 17, 2008]. 10.2+U.S. Physical Therapy, Inc. 2003 Stock Incentive Plan, (as amended and restated effective March 26, 2016) [incorporated herein by reference to Appendix A to the Company's DefinitiveProxy Statement on Schedule 14A filed with the SEC on April 7, 2016.] 10.3+U. S. Physical Therapy, Inc. Long-Term Incentive Plan for Senior Management for 2013, effective March 27, 2013 [incorporated by reference to Exhibit 99.1 to the Company CurrentReport on Form 8-K filed with the SEC on April 1, 2013]. 10.4+U. S. Physical Therapy, Inc. Objective Cash Bonus Plan for 2013, effective March 27, 2013 [incorporated by reference to Exhibit 99.2 to the Company Current Report on Form 8-K filedwith the SEC on April 1, 2013]. 10.5+U. S. Physical Therapy, Inc. Discretionary Cash Bonus Plan for 2013, effective March 27, 2013 [incorporated by reference to Exhibit 99.3 to the Company Current Report on Form 8-Kfiled with the SEC on April 1, 2013]. 10.6+U. S. Physical Therapy, Inc. Long-Term Incentive Plan for Senior Management for 2014, effective March 21, 2014 [incorporated by reference to Exhibit 99.1 to the Company CurrentReport on Form 8-K filed with the SEC on March 27, 2014]. 10.7+U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2014, effective March 21, 2014 [incorporated by reference to Exhibit 99.2 to theCompany Current Report on Form 8-K filed with the SEC on March 27, 2014]. 10.8+U. S. Physical Therapy, Inc. Objective Cash Bonus Plan for Senior Management for 2014, effective March 21, 2014 [incorporated by reference to Exhibit 99.3 to the Company CurrentReport on Form 8-K filed with the SEC on March 27, 2014]. 10.9+U. S. Physical Therapy, Inc. Discretionary Cash Bonus Plan for Senior Management for 2014, effective March 21, 2014 [incorporated by reference to Exhibit 99.4 to the CompanyCurrent Report on Form 8-K filed with the SEC on March 27, 2014]. 10.10+U. S. Physical Therapy, Inc. Long Term Incentive Plan for Senior Management for 2015, effective March 23, 2015 [incorporated by reference to Exhibit 99.1 to the Company’s CurrentReport on Form 8-K filed with the SEC on March 27, 2015.]70Table of ContentsNumberDescription10.11+U.S. Physical Therapy, Inc. Discretionary Long Term Incentive Plan for Senior Management for 2015, effective March 23, 2015 [incorporated by reference to Exhibit 99.2 to theCompany’s Current Report on Form 8-K filed with the SEC on March 27, 2015.] 10.12+U. S. Physical Therapy, Inc. Objective Cash Bonus Plan for Senior Management for 2015, effective March 23, 2015 [incorporated by reference to Exhibit 99.3 to the Company’s CurrentReport on Form 8-K filed with the SEC on March 27, 2015.] 10.13+U. S. Physical Therapy, Inc. Discretionary Cash Bonus Plan for Senior Management for 2015, effective March 23, 2015 [incorporated by reference to Exhibit 99.4 to the Company’sCurrent Report on Form 8-K filed with the SEC on March 27, 2015.] 10.14+U. S. Physical Therapy, Inc. Objective Long Term Incentive Plan for Senior Management for 2016, effective March 10, 2016 [incorporated by reference to Exhibit 10.1 to the Company’sCurrent Report on Form 8-K filed with the SEC on March 16, 2016]. 10.15+U. S. Physical Therapy, Inc. Discretionary Long Term Incentive Plan for Senior Management for 2016, effective March 10, 2016 [incorporated by reference to Exhibit 10.2 to theCompany’s Current Report on Form 8-K filed with the SEC on March 16, 2016]. 10.16+U. S. Physical Therapy, Inc. Objective Cash Bonus Plan for Senior Management for 2016, effective March 10, 2016 [incorporated by reference to Exhibit 10.3 to the Company’s CurrentReport on Form 8-K filed with the SEC on March 16, 2016]. 10.17+U. S. Physical Therapy, Inc. Discretionary Cash Bonus Plan for Senior Management for 2016, effective March 10, 2016 [incorporated by reference to Exhibit 10.4 to the Company’sCurrent Report on Form 8-K filed with the SEC on March 16, 2016]. 10.18+Form of Restricted Stock Agreement [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2016]. 10.19+U. S. Physical Therapy, Inc. Long-Term Incentive Plan for Senior Management for 2017, effective March 24, 2017 [incorporated by reference to Exhibit 99.1 to the Company’s CurrentReport on Form 8-K/A filed with the SEC on February 9, 2018.] 10.20+U. S. Physical Therapy, Inc. Discretionary Long –Term Incentive Plan for Senior Management for 2017, effective March 24, 2017 [incorporated by reference to Exhibit 99.2 to theCompany’s Current Report on Form 8-K filed with the SEC on March 30, 2017.] 10.21+U. S. Physical Therapy, Inc. Objective Cash Bonus Plan for Senior Management for 2017, effective March 24, 2017 [incorporated by reference to Exhibit 99.3 to the Company’s CurrentReport on Form 8-K filed with the SEC on March 30, 2017.] 10.22+U. S. Physical Therapy, Inc. Discretionary Cash Bonus Plan for Senior Management for 2017, effective March 24, 2017 [incorporated by reference to Exhibit 99.4 to the Company’sCurrent Report on Form 8-K filed with the SEC on March 30, 2017.] 10.23+U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2018, effective April 9, 2018 [incorporated by reference to Exhibit 99.1 to the Company’sCurrent Report on Form 8-K filed with the SEC on April 12, 2018.] 10.24+U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2018, effective April 9, 2018 [incorporated by reference to Exhibit 99.2 to the Company’sCurrent Report on Form 8-K filed with the SEC on April 12, 2018.]71Table of ContentsNumberDescription10.25+U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2018, effective April 9, 2018 [incorporated by reference to Exhibit 99.3 to the Company’sCurrent Report on Form 8-K filed with the SEC on April 12, 2018.] 10.26+U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2018, effective April 9, 2018 [incorporated by reference to Exhibit 99.4 to the Company’sCurrent Report on Form 8-K filed with the SEC on April 12, 2018.] 10.27+Second Amended and Restated Credit Agreement dated as of November 10, 2017 among the Company, as Borrower, Bank of America, N.A. as Administrative Agent and the LendersPatty (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 14, 2017). 10.28+Second Amended and Restated Employment Agreement by and between the Company and Christopher J. Reading dated effective February 9, 2016 [incorporated by reference toExhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 12, 2016]. 10.29+Second Amended and Restated Employment Agreement by and between the Company and Lawrance W. McAfee dated effective February 9, 2016 [incorporated by reference to Exhibit10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on February 12, 2016]. 10.30+Amended and Restated Employment Agreement by and between the Company and Glenn D. McDowell dated effective February 9, 2016 [incorporated by reference to Exhibit 10.3 tothe Company’s Current Report on Form 8-K, filed with the SEC on February 12, 2016]. 10.31+Employment Agreement commencing on March 1, 2018 by and between the Company and Graham Reeve [incorporated by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K filed with the SEC on March 7, 2018]. 10.32+Objective Long-Term Incentive Plan for Senior Management [incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 8,2019.] 10.33+Discretionary Long-Term Incentive Plan for Senior Management [incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 8,2019.] 10.34+Objective Cash/RSA Bonus Plan for Senior Management [incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2019.] 10.35+Discretionary Cash/RSA Bonus Plan for Senior Management [incorporated by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K filed with the SEC on March 8,2019.] 10.36+Third Amended and Restated Employment Agreement by and between the Company and Christopher J. Reading dated effective May 21, 2019 [incorporated by reference to Exhibit 10.1to the Company’s Current Report on Form 8-K filed with the SEC on May 22, 2019] 10.37+Third Amended and Restated Employment Agreement by and between the Company and Lawrance W. McAfee dated effective May 21, 2019 [incorporated by reference to Exhibit 10.2to the Company’s Current Report on Form 8-K filed with the SEC on May 22, 2019]72Table of ContentsNumberDescription10.38+Second Amended and Restated Employment Agreement by and between the Company and Glenn D. McDowell dated effective May 21, 2019 [incorporated by reference to Exhibit 10.3to the Company’s Current Report on Form 8-K filed with the SEC on March 22, 2019] 10.39+Amended & Restated Employment Agreement commencing by and between the Company and Graham Reeve dated effective May 21, 2019 [incorporated by reference to Exhibit 10.4 tothe Company’s Current Report on Form 8-K filed with the SEC on March 22, 2019] 10.40+Restricted Stock Agreement [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 22, 2019] 10.41+U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.1 to the CompanyCurrent Report on Form 8-K filed with the SEC on March 6, 2020]. 10.42+Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Christopher Reading [incorporated by reference to Exhibit 10.3 to theCompany Current Report on Form 8-K filed with the SEC on March 26, 2020]. 10.43+Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Lawrance McAfee [incorporated by reference to Exhibit 10.3 to theCompany Current Report on Form 8-K filed with the SEC on March 26, 2020]. 10.44+Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Glenn McDowell [incorporated by reference to Exhibit 10.3 to theCompany Current Report on Form 8-K filed with the SEC on March 26, 2020]. 10.45+Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Graham Reeve [incorporated by reference to Exhibit 10.4 to the CompanyCurrent Report on Form 8-K filed with the SEC on March 26, 2020]. 10.46+U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.1 to the CompanyCurrent Report on Form 8-K filed with the SEC on March 6, 2020]. 10.47+U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.2 to the CompanyCurrent Report on Form 8-K filed with the SEC on March 6, 2020]. 10.48+U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.3 to the CompanyCurrent Report on Form 8-K filed with the SEC on March 6, 2020]. 10.49+U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.4 to the CompanyCurrent Report on Form 8-K filed with the SEC on March 6, 2020]. 10.50+Employment Agreement entered into as of November 9, 2020 by and between U.S. Physical Therapy and Carey Hendrickson [incorporated by reference to Exhibit 10.1 to the CompanyCurrent Report on Form 8-K filed with the SEC on September 23, 2020.] 10.51+Consulting Agreement entered into as of September 22, 2020 by and between U.S. Physical Therapy and Lawrence McAfee [incorporated by reference to Exhibit 10.1 to the CompanyCurrent Report on Form 8-K filed with the SEC on September 23, 2020.] 10.52+Employment Agreement by and between the Company and Eric Williams entered into on December 3, 2020 and commencing as of July 1, 2021 [filed by reference to Exhibit 10.1 to theCompany Current Report on Form 8-K filed with the SEC on December 7, 2020.] 10.53+First Amendment to Second Amended and Restated Credit Agreement [filed by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on February 4,2021.] 10.54+ Second Amendment to Second Amended and Restated Credit Agreement. * 73Table of ContentsNumber Description21.1* Subsidiaries of the Registrant 23.1* Consent of Independent Registered Public Accounting Firm—Grant Thornton LLP 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended 31.3* Certification of Controller pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended 32.1* Certification of Periodic Report of the Chief Executive Officer, Chief Financial Officer and Controller pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document*Filed herewith+Management contract or compensatory plan or arrangement.74Table of ContentsFINANCIAL STATEMENT SCHEDULE*SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTSU.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES(In Thousands) Balance atBeginning of Period Additions Chargedto Costs and Expenses Additions Chargedto Other Accounts Deductions Balance atEnd of Period YEAR ENDED DECEMBER 31, 2021: Reserves and allowances deducted from asset accounts: Allowance for credit losses(1) $2,008 $5,305 - $4,545(2) $2,768 YEAR ENDED DECEMBER 31, 2020: Reserves and allowances deducted from asset accounts: Allowance for credit losses $2,698 $4,623 - $5,313(2) $2,008 YEAR ENDED DECEMBER 31, 2019: Reserves and allowances deducted from asset accounts: Allowance for credit losses $2,672 $4,858 - $4,832(2) $2,698 (1)Related to patient accounts receivable and accounts receivable-other.(2)Uncollectible accounts written off, net of recoveries.*All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial statements or notes thereto.75Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized. U.S. PHYSICAL THERAPY, INC. (Registrant) By:/s/ Carey Hendrickson Carey Hendrickson Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) By:/s/ Jon C. Bates Jon C. Bates Vice President/ControllerDate: March 1, 2022Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of thedate indicated above./s/ Chris J. ReadingChief Executive Officer, President and Director(Principal Executive Officer)March 1, 2022Chris J. Reading /s/ Edward L. KuntzChairman of the BoardMarch 1, 2022Edward L. Kuntz /s/ Mark J. BrooknerDirectorMarch 1, 2022Mark J. Brookner /s/ Harry S. ChapmanDirectorMarch 1, 2022Harry S. Chapman /s/ Bernard A. HarrisDirectorMarch 1, 2022Dr. Bernard A. Harris, Jr. 76Table of Contents/s/ Kathleen A. GilmartinDirectorMarch 1, 2022Kathleen A. Gilmartin /s/ Anne MotsenbockerDirectorMarch 1, 2022Anne Motsenbocker /s/ Reginald E. SwansonDirectorMarch 1, 2022Reginald E. Swanson /s/ Clayton K. TrierDirectorMarch 1, 2022Clayton K. Trier 77EXHIBIT 4.1The Company’s authorized capital stock consists of 500,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”), and 20,000,000 Common Stock.The following is a summary of the material provisions of the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”) and Amended and Restated By-laws (the “By-laws”),insofar as they relate to the material terms of the CommonStock. This description summarizes the material terms and provisions of the Common Stock, but it is not complete. This summary is qualified in its entirety by reference to the Certificate of Incorporationand By-laws, which are incorporated herein by reference.Each holder of the Common Stock is entitled to one vote for each share on all matters to be voted upon by the stockholders and there are no cumulative voting rights. In the event of a liquidation,dissolution or winding up of the Company, holders of the CommonStock would be entitled to share in the Company’s assets remaining after the payment of the Company’s debts and liabilities. Holders of the Common Stock have no preemptive or conversion rights orother subscription rights and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of the holders of the Common Stock are subject to,and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock that we may designate in the future.The Common Stock is not convertible into, or exchangeable for, any other class or series of the Company’s capital stock. Holders of the Common Stock do not have preemptive or other rights to subscribefor or purchase additional securities of the Company. Certain provisions of the Company’s articles of incorporation and bylaws may delay, discourage, prevent or render more difficult an attempt to obtaincontrol of the Company, whether through a tender offer, business combination, proxy contest or otherwise. These provisions include the charter authorization of “blank check” preferred stock (asdescribed above) and a restriction on the ability of stockholders to call a special meeting. EXHIBIT 10.54SECOND AMENDMENT AND CONSENTTO SECOND AMENDED AND RESTATED CREDIT AGREEMENTTHIS SECOND AMENDMENT AND CONSENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”), dated as of November 30, 2021, is by and among U.S. PHYSICALTHERAPY, INC., a Nevada corporation (the “Borrower”), the Lenders party hereto, and BANK OF AMERICA, N.A., as administrative agent (in such capacity, the “Administrative Agent”). Capitalizedterms used herein and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement.W I T N E S S E T HWHEREAS, the Borrower, certain banks and financial institutions from time to time party thereto (the “Lenders”), and the Administrative Agent are parties to that certain Second Amended and RestatedCredit Agreement, dated as of November 10, 2017 (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “Credit Agreement”);WHEREAS, pursuant to Section 7.03(f) of the Credit Agreement, the Borrower is permitted to make certain acquisitions upon and subject to certain terms and conditions, provided, among otherrestrictions, that the total cash and noncash consideration paid by or on behalf of the Borrower and its Subsidiaries for any such acquisition shall not exceed (a) $25,000,000 for any single acquisition, and(b) when aggregated with all other acquisitions made by the Borrower and its Subsidiaries in such fiscal year, $50,000,000 in any fiscal year (such restriction, the “Consideration Cap”);WHEREAS, it is now proposed that a Subsidiary of the Borrower, U.S. Physical Therapy, Ltd., a Texas limited partnership (“USPT”) acquire (a) 70% of the issued and outstanding capital stock ofProgressiveHealth Companies, LLC, a Delaware limited liability company, (b) 70% of the issued and outstanding capital stock of ProgressiveHealth Aviation Services, LLC, an Indiana limited liabilitycompany, and (c) 51% of the issued and outstanding capital stock of ProgressiveHealth HealthSpot, LLC, an Indiana limited liability company, for the aggregate purchase price of $63,161.800.00 at closing,with an additional $2,000,000.00 payable after closing only upon the satisfaction of certain terms and conditions (collectively, the “Progressive Acquisition”); andWHEREAS, the Borrower has requested (a) that the Administrative Agent and the Lenders consent to the Progressive Acquisition, (b) an Incremental Facility, in accordance with the terms of Section 2.16of the Credit Agreement, in the amount of $25,000,000.00, and (c) that the Lenders amend certain provisions of the Credit Agreement, and the Lenders are willing to consent to all of the foregoing, inaccordance with and subject to the terms and conditions set forth herein.NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the partieshereto agree as follows:ARTICLE IAMENDMENTS TO CREDIT AGREEMENT1.1. Amendments to Section 1.1. Section 1.1 of the Credit Agreement is hereby amended as follows:(a) The following definitions are hereby deleted from Section 1.1 of the Credit Agreement: “LIBOR Replacement Date”; “LIBOR Successor Rate”; “LIBOR Successor Rate Conforming Changes”; “Pre-Adjustment Successor Rate”; “Related Adjustment”; and “SOFR”.(b) The following definitions are hereby added to Section 1.1 of the Credit Agreement in the appropriate alphabetical order:“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then-current Benchmark is a term rate, any tenor for such Benchmark thatis or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreementas of such date.“Benchmark” means, initially, LIBOR; provided that if a replacement of the Benchmark has occurred pursuant to Section 3.03(c) then “Benchmark” means the applicable Benchmark Replacement to theextent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.“Benchmark Replacement” means:(1) For purposes of Section 3.03(c)(i), the first alternative set forth below that can be determined by the Administrative Agent:(a) the sum of: (i) Term SOFR and (ii) 0.11448% (11.448 basis points) for an Available Tenor of one-month’s duration, 0.26161% (26.161 basis points) for an Available Tenor of three-months’ duration, and0.42826% (42.826 basis points) for an Available Tenor of six-months’ duration, or(b) the sum of: (i) Daily Simple SOFR and (ii) 0.26161% (26.161 basis points);provided that, if initially LIBOR is replaced with the rate contained in clause (b) above (Daily Simple SOFR plus the applicable spread adjustment) and subsequent to such replacement, the AdministrativeAgent determines that Term SOFR has become available and is administratively feasible for the Administrative Agent in its sole discretion, and the Administrative Agent notifies the Borrower and eachLender of such availability, then from and after the beginning of the Interest Period, relevant interest payment date or payment period for interest calculated, in each case, commencing no less than thirty(30) days after the date of such notice, the Benchmark Replacement shall be as set forth in clause (a) above; and(2) For purposes of Section 3.03(c)(ii), the sum of (a) the alternate benchmark rate and(b) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Administrative Agent and the Borrower as the replacement Benchmark giving dueconsideration to any evolving or then prevailing market convention, including any applicable recommendations made by a Relevant Governmental Body, for U.S. dollar-denominated syndicated creditfacilities at such time; provided that, if the Benchmark Replacement as determined pursuant to clause (1) or 0 above would be less than 0.25%, the Benchmark Replacement will be deemed to be 0.25% forthe purposes of this Agreement and the other Loan Documents.Any Benchmark Replacement shall be applied in a manner consistent with market practice; provided that to the extent such market practice is not administratively feasible for the Administrative Agent,such Benchmark Replacement shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “BaseRate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment,conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that theAdministrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in amanner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the AdministrativeAgent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonablynecessary in connection with the administration of this Agreement and the other Loan Documents).“Benchmark Transition Event” means, with respect to any then-current Benchmark other than LIBOR, the occurrence of a public statement or publication of information by or on behalf of the administratorof the then-current Benchmark or a Governmental Authority with jurisdiction over such administrator announcing or stating that all Available Tenors are or will no longer be representative, or madeavailable, or used for determining the interest rate of loans, or shall or will otherwise cease, provided that, at the time of such statement or publication, there is no successor administrator that issatisfactory to the Administrative Agent, that will continue to provide any representative tenors of such Benchmark after such specific date.“Daily Simple SOFR” with respect to any applicable determination date means the secured overnight financing rate (“SOFR”) published on such date by the Federal Reserve Bank of New York, as theadministrator of the benchmark (or a successor administrator) on the Federal Reserve Bank of New York’s website (or any successor source).“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as theAdministrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice ofobjection to such Early Opt-in Election from Lenders comprising the Required Lenders.“Early Opt-in Election” means the occurrence of:(1) a determination by the Administrative Agent, or a notification by the Borrower to the Administrative Agent that the Borrower has made a determination, that U.S. dollar-denominated syndicated creditfacilities currently being executed, or that include language similar to that contained in Section 3.03(c), are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rateto replace LIBOR, and(2) the joint election by the Administrative Agent and the Borrower to replace LIBOR with a Benchmark Replacement and the provision by the Administrative Agent of written notice of such election to theLenders.“Other Rate Early Opt-in” means the Administrative Agent and the Borrower have elected to replace LIBOR with a Benchmark Replacement other than a SOFR-based rate pursuant to (1) an Early Opt-inElection and (2) Section 3.03(c)(ii) and paragraph (2) of the definition of “Benchmark Replacement”.“Rescindable Amount” has the meaning as defined in Section 2.12(b)(i).“Second Amendment Effective Date” means November 30, 2021.“SOFR Early Opt-in” means the Administrative Agent and the Borrower have elected to replace LIBOR pursuant to (1) an Early Opt-in Election and (2) Section 3.03(c)(i) and paragraph (1) of the definitionof “Benchmark Replacement”.(c) The following definitions set forth in Section 1.1 of the Credit Agreement are hereby amended and restated in their entirety to read as follows:“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board ofGovernors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.“Term SOFR” means, for the applicable corresponding tenor (or if any Available Tenor of a Benchmark does not correspond to an Available Tenor for the applicable Benchmark Replacement, the closestcorresponding Available Tenor and if such Available Tenor corresponds equally to two Available Tenors of the applicable Benchmark Replacement, the corresponding tenor of the shorter duration shall beapplied), the forward looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.(d) The last sentence of the definition of “Commitment” set forth in Section 1.1 of the Credit Agreement is hereby amended and restated to read in its entirety as follows: “As of the Second AmendmentEffective Date, the Commitment of all of the Lenders shall be $150,000,000.00.”(e) The definition of “Interest Period” set forth in Section 1.1 of the Credit Agreement is hereby amended to delete the reference to “two (2),” set forth therein.1.2. Amendment to Section 2.12(b)(i). Section 2.12(b)(i) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:(i) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to theAdministrative Agent for the account of the Lenders or the L/C Issuer hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made suchpayment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Appropriate Lenders or the L/C Issuer, as the case may be, the amount due. With respect to anypayment that the Administrative Agent makes for the account of the Lenders or the L/C Issuer hereunder as to which the Administrative Agent determines (which determination shall be conclusive absentmanifest error) that any of the following applies (such payment referred to as the “Rescindable Amount”) : (1) the Borrower has not in fact made such payment; (2) the Administrative Agent has made apayment in excess of the amount so paid by the Borrower (whether or not then owed); or (3) the Administrative agent has for any reason otherwise erroneously made such payment; then each of theLenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the Rescindable Amount so distributed to such Lender or the L/C Issuer, inimmediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greaterof the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.1.3. Amendment to Section 2.16(a). Section 2.16(a) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:(a) Request for Increase. Provided there exists no Default, upon notice to the Administrative Agent (which shall promptly notify the Lenders), the Borrower may from time to time after the SecondAmendment Effective Date request an increase in the Revolving Facility by an amount (for all such requests) not exceeding $25,000,000 (an “Incremental Facility”); provided that (i) any such request for anIncremental Facility shall be in a minimum amount of $5,000,000 or any whole multiple of $500,000 in excess thereof, and (ii) the Borrower may make a maximum of four (4) such requests. At the time ofsending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten(10) Business Days from the date of delivery of such notice to the Lenders).1.4. Amendments to Section 3.03. Sections 3.03(d) and 3.03(e) of the Credit Agreement are hereby deleted, and Section 3.03(c) of the Credit Agreement is hereby amended and restated to read in its entiretyas follows:(c) Notwithstanding anything to the contrary herein or in any other Loan Document:(i) On March 5, 2021 the Financial Conduct Authority (“FCA”), the regulatory supervisor of LIBOR’s administrator (“IBA”), announced in a public statement the future cessation or loss ofrepresentativeness of overnight/Spot Next, 1-week, 1-month, 2-month, 3-month, 6-month and 12- month U.S. dollar LIBOR tenor settings. On the earliest of (A) the date that all Available Tenors of U.Sdollar LIBOR have permanently or indefinitely ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative,(B) June 30, 2023 and (C) the Early Opt-in Effective Date in respect of a SOFR Early Opt-in, if the then-current Benchmark is LIBOR, the Benchmark Replacement will replace such Benchmark for allpurposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of anyother party to this Agreement or any other Loan Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a quarterly basis.(ii) (x) Upon (A) the occurrence of a Benchmark Transition Event or (B) a determination by the Administrative Agent that neither of the alternatives under clause (1) of the definition of BenchmarkReplacement are available, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after5:00 p.m. on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, thisAgreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising theRequired Lenders (and any such objection shall be conclusive and binding absent manifest error); provided that solely in the event that the then-current Benchmark at the time of such BenchmarkTransition Event is not a SOFR-based rate, the Benchmark Replacement therefor shall be determined in accordance with clause (1) of the definition of Benchmark Replacement unless the AdministrativeAgent determines that neither of such alternative rates is available.(y) On the Early Opt-in Effective Date in respect of an Other Rate Early Opt-in, the Benchmark Replacement will replace LIBOR for all purposes hereunder and under any Loan Document in respect of anysetting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document.(iii) At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatorysupervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that suchBenchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a borrowing of, conversion to or continuation of Loans to be made, convertedor continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Administrative Agent that a Benchmark Replacement has replaced such Benchmark,and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Loans. During the period referenced in the foregoingsentence, the component of Base Rate based upon the Benchmark will not be used in any determination of Base Rate.(iv) In connection with the implementation and administration of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time totime and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective withoutany further action or consent of any other party to this Agreement.(v) The Administrative Agent will promptly notify the Borrower and the Lenders of(A) the implementation of any Benchmark Replacement and (B) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by theAdministrative Agent pursuant to this Section 3.03(c), including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date andany decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its sole discretion and without consent from any other party hereto, except,in each case, as expressly required pursuant to this Section 3.03(c). At any time (including in connection with the implementation of a Benchmark Replacement),(A) if the then-current Benchmark is a term rate (including Term SOFR or LIBOR), then the Administrative Agent may remove any tenor of such Benchmark that is unavailable or nonrepresentativefor Benchmark (including Benchmark Replacement) settings and(B) theAdministrative Agent may reinstate any such previously removed tenor for Benchmark (including Benchmark Replacement) settings. 1.5. Addition of New Section 9.13. A new Section 9.13 is hereby added to the Credit Agreement, immediately following Section 9.12 thereof, to read in its entirety as follows:9.13 Recovery of Erroneous Payments.Without limitation of any other provision in this Agreement, if at any time the Administrative Agent makes a payment hereunder in error to any Lender or the L/C Issuer (the “Credit Party”), whether or notin respect of an Obligation due and owing by the Borrower at such time, where such payment is a Rescindable Amount, then in any such event, each Credit Party receiving a Rescindable Amount severallyagrees to repay to the Administrative Agent forthwith on demand the Rescindable Amount received by such Credit Party in immediately available funds in the currency so received, with interest thereon,for each day from and including the date such Rescindable Amount is received by it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a ratedetermined by the Administrative Agent in accordance with banking industry rules on interbank compensation. Each Credit Party irrevocably waives any and all defenses, including any “discharge forvalue” (under which a creditor might otherwise claim a right to retain funds mistakenly paid by a third party in respect of a debt owed by another) or similar defense to its obligation to return anyRescindable Amount. The Administrative Agent shall inform each Credit Party promptly upon determining that any payment made to such Credit Party comprised, in whole or in part, a RescindableAmount.1.6. Amendment to Schedule 1.01(a). Schedule 1.01(a) to the Credit Agreement is hereby replaced with the Schedule 1.01(a) attached hereto for all purposes under the Credit Agreement, and any referenceto Schedule 1.01(a) in any Loan Document shall refer to the Schedule 1.01(a) attached hereto.1.7. Amendment to Schedule 1.01(b). Schedule 1.01(b) to the Credit Agreement is hereby replaced with the Schedule 1.01(b) attached hereto for all purposes under the Credit Agreement, and any referenceto Schedule 1.01(b) in any Loan Document shall refer to the Schedule 1.01(b) attached hereto.ARTICLE IICONSENT2.1. Consent. Notwithstanding anything in the Credit Agreement to the contrary (including, without limitation, the Consideration Cap), and subject to the effectiveness of this Amendment, theAdministrative Agent and each Lender hereby consent to the Progressive Acquisition. Other than as expressly set forth herein, nothing contained herein shall be construed as a consent to or waiver ofany other term, covenant or provision of the Credit Agreement or any other Loan Document. Nothing contained herein shall affect or diminish the right of the Administrative Agent and the Lenders torequire strict performance by the Borrower of each provision of each Loan Document to which the Borrower is a party, except as expressly provided herein. All terms and provisions and all rights andremedies of the Administrative Agent and the Lenders under the Loan Documents shall continue in full force and effect and are hereby confirmed and ratified in all respects, except as expressly providedherein.ARTICLE IIICONDITIONS TO EFFECTIVENESS3.1. Closing Conditions. This Amendment shall become effective as of the day and year set forth above (the “Amendment Effective Date”) upon satisfaction of the following conditions (in each case, inform and substance reasonably acceptable to the Administrative Agent):(a) Executed Amendment. The Administrative Agent shall have received a copy of this Amendment duly executed by the Borrower, the Lenders, and the Administrative Agent.(b) Progressive Acquisition Deliverables. The Administrative Agent shall have received such certificates, documents, and other deliverables as required under Section 7.03(f) of the Credit Agreement withrespect to the Progressive Acquisition.(c) Incremental Facility Deliverables. The Administrative Agent shall have received such certificates, documents, and other deliverables as required under Section 2.16 of the Credit Agreement with respectto the Incremental Facility.(d) Miscellaneous. All other documents and legal matters in connection with the transactions contemplated by this Amendment shall be reasonably satisfactory in form and substance to theAdministrative Agent and its counsel.ARTICLE IVMISCELLANEOUS4.1. Amended Terms. On and after the Amendment Effective Date, all references to the Credit Agreement in each of the Loan Documents shall hereafter mean the Credit Agreement as amended by thisAmendment. Except as specifically amended hereby or otherwise agreed, the Credit Agreement is hereby ratified and confirmed and shall remain in full force and effect according to its terms.4.2. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:(a) It has taken all necessary action to authorize the execution, delivery and performance of this Amendment.(b) This Amendment has been duly executed and delivered by the Borrower and constitutes the Borrower’s legal, valid and binding obligation, enforceable in accordance with its terms.(c) No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is required in connection with the execution, delivery orperformance by, or enforcement against, the Borrower of this Amendment.(d) The representations and warranties set forth in Article V of the Credit Agreementare true and correct as of the date hereof (except for those which expressly relate to an earlier date).(e) No Default exists or would result from giving effect to this Amendment and the transactions contemplated hereby.(f) Except as specifically provided in this Amendment, the Obligations are not reduced or modified by this Amendment and are not subject to any offsets, defenses or counterclaims.4.3. Reaffirmation of Obligations. The Borrower hereby ratifies the Credit Agreement and acknowledges and reaffirms(a) that it is bound by all terms of the Credit Agreement applicable to it and(b) that it is responsible for the observance and full performance of its respective Obligations.4.4. Loan Document. This Amendment shall constitute a Loan Document under the terms of the Credit Agreement.4.5. Expenses. The Borrower agrees to pay all costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including without limitationthe fees and expenses of the Administrative Agent’s legal counsel, in accordance with Section 11.04(a) of the Credit Agreement.4.6. Further Assurances. The Borrower agrees to promptly take such action, upon the request of the Administrative Agent, as is necessary to carry out the intent of this Amendment.4.7. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the sameinstrument. Delivery of an executed counterpart of a signature page of this Amendment or any other document required to be delivered hereunder, by fax transmission or e-mail transmission (e.g. “pdf” or“tif”) shall be effective as delivery of a manually executed counterpart of this Agreement. Without limiting the foregoing, upon the request of any party, such fax transmission or e-mail transmission shall bepromptly followed by such manually executed counterpart.4.8. No Actions, Claims, Etc. As of the date hereof, the Borrower hereby acknowledges and confirms that it has no knowledge of any actions, causes of action, claims, demands, damages and liabilities ofwhatever kind or nature, in law or in equity, against the Administrative Agent, the Lenders, or the Administrative Agent’s or the Lenders’ respective officers, employees, representatives, agents, counsel ordirectors arising from any action by such Persons, or failure of such Persons to act under the Credit Agreement on or prior to the date hereof.4.9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF TEXAS.4.10. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.4.11. Consent to Jurisdiction; Service of Process; Waiver of Jury Trial. The jurisdiction, service of process and waiver of jury trial provisions set forth in Sections 11.14 and 11.15 of the Credit Agreementare hereby incorporated by reference, mutatis mutandis.4.12. ENTIRE AGREEMENT.THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.[Remainder of Page Intentionally Left Blank. Signature Pages Follow.]ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A.,as Administrative AgentBy:Alexander L. RodySenior Vice PresidentSecond Amendment and Consent to Second Amended and Restated Credit Agreement – Signature PageLENDERS: BANK OF AMERICA, N.A.,as a Lender, L/C Issuer and Swingline LenderBy:Alexander L. RodySenior Vice PresidentSchedule 1.01(a)SCHEDULE 1.01(a)Certain Addresses for NoticesBorrower:U.S. PHYSICAL THERAPY, INC.:1300 Sam Houston Parkway, Suite 300Houston, Texas 77042Attention: Larry McAfeeTelephone: (713) 297-7021Telecopier: (713) 266-0558Electronic Mail: lmcafee@usph.comWebsite Address: www.usph.comU.S. Taxpayer Identification Number: 76.0364866Administrative Agent:For payments and Requests for CreditExtensionsBank of AmericaGateway Village-900 BuildingNC1-026-06-09 (MacLegal)900 W Trade StCharlotte, NC 28255Account No.: 1366211001000Ref: U.S. Physical Therapy, Inc.ABA# 026009593Other Notices for Administrative AgentBank of AmericaGateway Village-900 BuildingNC1-026-06-09 (MacLegal)900 W Trade StCharlotte, NC 28255With a copy to:Bank of AmericaTN9-120-24-03222 2nd Ave S, Suite 2440Nashville, TN 37201Attn: Alex RodyPhone: 615.749.3483Email: alex.rody@bofa.comL/C Issuer:Bank of AmericaGateway Village-900 BuildingNC1-026-06-09 (MacLegal)900 W Trade StCharlotte, NC 28255Swingline Lender:Bank of AmericaGateway Village-900 BuildingNC1-026-06-09 (MacLegal)900 W Trade StCharlotte, NC 28255Schedule 1.01(b)SCHEDULE 1.01(b)Commitments and Applicable PercentagesLender Commitment Applicable Percentage(Loans)Bank of America, N.A. $150,000,000.00 100.000000000%Total: $150,000,000.00 100.000000000%Exhibit 21.1NotesNameDBAEntityTypeState ofFormationDate ofFormationForeignQualificationGeneral Partner (LP)/BOD (corp)/MangingMember orBoard of Managers (LLC)Tax ID 2037953 Ontario, Inc. CorpCanada Briotix Health, LP Ability Health PT Management GP, LLC LLCTX FLRehab Partners #4, Inc.81-4216526 Ability Health Services and Rehabilitation, L.P.Ability RehabilitationLPTX FLAbility Health PT Management GP, LLC38-4017532 Achieve Management GP, LLC LLCTX Rehab Partners #4, Inc47-3291851 Achieve Physical Therapy and Performance, LimitedPartnership LPTX Achieve Management GP, LLC47-3283941 Action Therapy Centers, Limited PartnershipAction Physical TherapyHouston Hand Therapy PTProfessionalsLPTX Rehab Partners #1, Inc.76-0389610 Adams County Physical Therapy, Limited Partnership LPTX PARehab Partners #5, Inc.76-0483100 Advance Rehabilitation & Consulting, Limited Partnership LPTX AL, FL & GAAdvance Rehabilitation ManagementGP, LLC27-4414647 Advance Rehabilitation Management GP, LLC LLCTX FLRehab Partners #4, Inc27-4414443 Agape Physical Therapy & Sports Rehabilitation, LimitedPartnership LPTX MDAgape Physical Therapy ManagementGP, LLC32-0378859 Agape Physical Therapy Management GP, LLC LLCTX Rehab Partners #4, Inc45-5378415 Agility Spine & Sports PT Management GP LLC LLCTX 82-10244870 Agility Spine & Sports Physical Therapy andRehabilitation, Limited Partnership LPTX AZAgility Spine & Sports PT ManagementGP, LLC82-0901134 ARC Iowa PT Plus, LLC LLCTX IAARC PT Management GP, LLC (note: owned 100% by ARC Physical TherapyPlus, LP)82-5241308 ARC Physical Therapy Plus, Limited Partnership LPTX IA, KS, MOARC PT Management GP, LLC80-0955852 ARC PT Management GP, LLC LLCTX MORehab Partners #4, Inc.46-3942987 ARCH Physical Therapy and Sports Medicine, LimitedPartnership LPTX MIRehab Partners #1, Inc.27-5086288 Arrow Physical Therapy, Limited PartnershipBroken Arrow PhysicalTherapyLPTX OKRehab Partners #2, Inc.76-0631992 Arrowhead Physical Therapy, Limited PartnershipElite Sports Medicine &Physical TherapyLPTX MSRehab Partners #2, Inc.26-0176798 Ashland Physical Therapy, Limited Partnership LPTX ORRehab Partners #6, Inc.75-3054977 Audubon Physical Therapy, Limited Partnership LPTX LARehab Partners #6, Inc.76-0622471 Barren Ridge Physical Therapy, Limited Partnership LPTX VARehab Partners #6, Inc.26-3594831 Bayside Management GP, LLC LLCTX Rehab Partners #4, Inc27-4348787 Bayside Physical Therapy & Sports Rehabilitation, LimitedPartnership LPTX MDBayside Management GP, LLC27-4348871 Beaufort Physical Therapy, Limited Partnership LPTX NCRehab Partners #3, Inc.76-0639928 Bow Physical Therapy & Spine Center, Limited Partnership LPTX NHRehab Partners #6, Inc.76-0623486 Brazos Valley Physical Therapy, Limited Partnership LPTX Rehab Partners #3, Inc.76-0407118 Brick Hand & Rehabilitative Services, Limited Partnership LPTX NJRehab Partners #3, Inc.76-0420711 Briotix Health, Limited PartnershipInSite Health (6/25/2020 - PerCyndi M. and Leon P. this dbais no longer used).LPDE AL, AZ, CA,CO, CT, FL,GA, HI, IL, IA,IN, KS, KY, LA,MA, MD, ME,MI, MN, MO,MT, NV, NJ, NY,NC, OH, OK,OR, PA, SC,TN, TX, UT,VA, WA, WIBriotix Management GP, LLC81-1190407 Briotix Management GP, LLC LLCTX FL, MA, OH,UT 81-1200727 BTE Workforce Solutions, LLC (formerly BTE Technoligies,Inc.) LLCDE AK, AL,CO,DC, FL, GA, HI,IA, ID, IL, IN,KS, KY, LA,MD, ME, MI,MN, MO,MS,MT, NC, ND,NE, NH, NJ,NM, NV, OK,PA, RI, SC, SD,TX, UT, VT,WI, WV, WYBriotix Health, LP52-1165956 C. Foster Physical Therapists, Limited Partnership LPTX C. Foster PT Management GP, LLC36-4965660 C. Foster PT Management GP, LLC LLCTX Rehab Partners #4, Inc.35-2689219 Cape Cod Hand Therapy, Limited PartnershipCape Cod Hand & UpperExtremity TherapyLPTX MARehab Partners #1, Inc.27-0058293 Carbon County Therapy, LLC LLCWY Fremont Therapy Group, LimitedPartnership85-2336515 Carolina Physical Therapy and Sports Medicine, LimitedPartnership LPTX SCCarolina PT Management GP, LLC82-1408170 Carolina PT Management GP, LLC LLCTX 82-1453799 Center for Physical Rehabilitation and Therapy, LimitedPartnership LPDE MICPR Management GP, LLC47-4006118 Cleveland Physical Therapy, Ltd. LPTX Rehab Partners #2, Inc.76-0410649 Clinical Partnership Solutions, LLCProgressiveHealth ClinicalPartnership SolutionsLLCIN 27-3006735 Clinical Management Solutions, LLCProgressiveHealth ClinicalManagement SolutionsLLCIN 38-3975536 Comprehensive Hand & Physical Therapy, LimitedPartnership LPTX FLRehab Partners #2, Inc.76-0452158 Coppell Spine & Sports Rehab, Limited PartnershipNorth Davis/Keller PhysicalTherapyPhysical Therapy ofColleyvillePhysical Therapy of NorthTexasPhysical Therapy of CorinthTrinity Sports & PhysicalTherapyPhysical Therapy of FlowerMoundSouthlake Physical TherapyPhysical Therapy of TrophyClubHeritage Trace PhysicalTherapyTherapy Partners ofFrisco/Little ElmTherapy Partners of NorthTexasLPTX Rehab Partners #5, Inc.76-0513962 CPR Management GP, LLC LLCTX Rehab Partners #4, Inc.47-3434985 Cross Creek Physical Therapy, Limited Partnership LPTX MSRehab Partners #4, Inc.35-2185612 Crossroads Physical Therapy, Limited PartnershipGreen Oaks Physical Therapy- Fort WorthGreen Oaks Physical TherapyLPTX Rehab Partners #1, Inc.76-0551398 Crossroads Rehabilitation, Limited PartnershipCrossroads Physical TherapyLPTX MIRehab Partners #1, Inc.84-1658419 Custom Physical Therapy, Limited Partnership LPTX NVRehab Partners #4, Inc.04-3708931 Cutting Edge Physical Therapy, Limited Partnership LPTX INRehab Partners #4, Inc.20-4069256 Dearborn Physical Therapy, Ltd.Advanced Physical TherapyLPTX MIRehab Partners #1, Inc.76-0376595 Decatur Hand and Physical Therapy Specialists, LimitedPartnership LPTX GARehab Partners #4, Inc.20-3319149 Dekalb Comprehensive Physical Therapy, LimitedPartnership LPTX GARehab Partners #4, Inc.20-3631634 Denali Physical Therapy, Limited Partnership LPTX AKRehab Partners #5, Inc.20-8666329 DHT Hand Therapy, Limited PartnershipArizona Desert Hand TherapyServicesDesert Hand and PhysicalTherapyLPTX AZDHT Management GP, LLC20-5881475 DHT Management GP, LLC LLCTX AZRehab Partners #4, Inc20-5881418 Dynamic Hand Therapy & Rehabilitation, LimitedPartnership LPTX ILRehab Partners #4, Inc.20-8847486 Eastgate Physical Therapy, Limited PartnershipSummit Physical TherapyLPTX OHRehab Partners #4, Inc.76-0637484 Edge Physical Therapy, Limited PartnershipRiver's Edge PhysicalTherapyLPTX MTRehab Partners #3, Inc.76-0473771 Enhance Physiotherapy and Performance, LLC LLCTX 1/25/2022STAR Physical Therapy, LP87-4738491 Enid Therapy Center, Limited PartnershipEnid Physical TherapyLPTX OKRehab Partners #2, Inc.76-0384228 Everett Management, LLC LLCWA U.S. Physical Therapy, Ltd.37-1776322 Evergreen Physical Therapy, Limited Partnership LPTX MIRehab Partners #1, Inc.20-8613843 Excel Physical Therapy, Limited Partnership LPTX AKExcel PT Texas GP, LLC20-3951569 Excel PT Texas GP, LLC LLCTX Rehab Partners #6, Inc.20-3951532 Fit2WRK, Inc. CorpTX U.S. Physical Therapy, Inc.27-1647054 Five Rivers Therapy Services, Limited PartnershipPeak Physical TherapyLPTX ARRehab Partners #3, Inc.20-3785604 Flannery Physical Therapy, Limited PartnershipPhysical Therapy PlusLPTX NJRehab Partners #3, Inc.76-0580514 Fredericksburg Physical Therapy, Limited Partnership LPTX Rehab Partners #1, Inc.20-3589445 Fremont PT Management GP, LLC LLCTX 85-4237359 Fremont Therapy Group, Limited Partnership LPTX UT, WYFremont PT Management GP, LLC86-1249211 Frisco Physical Therapy, Limited PartnershipPT of ProsperLPTX Rehab Partners #1, Inc.76-0625171 Gahanna Physical Therapy, Limited PartnershipCornerstone PhysicalTherapyLPTX OHRehab Partners #4, Inc.27-0643842 Genesee Valley Physical Therapy, Limited Partnership LPTX MIRehab Partners #1, Inc.26-2299603 Green Oaks Physical Therapy, Limited Partnership LPTX Rehab Partners #1, Inc.72-1531238 Hamilton Physical Therapy Services, LP LPTX NJHPTS Management GP, LLC74-3145890 Hands-On Sports Medicine, Limited PartnershipMetro Spine and SportsRehabilitationLPTX ILRehab Partners #4, Inc.20-3300800 Hanoun Medical, Inc.BTE Workforce SolutionsBriotix HealthCorpOntario, CanadaBritishColumbia2037053 Ontario, Inc. (owned by Briotix Health, LP) Harbor Physical Therapy, Limited Partnership LPTX MDRehab Partners #6, Inc.20-3303737 HH Rehab Associates, Inc.Genesee Valley PhysicalTherapyTheramax Physical TherapyCorpMI DEU.S. PT - Michigan, Inc.38-2427228 High Plains Physical Therapy, Limited Partnership LPTX WYRehab Partners #4, Inc.41-2060941 Highlands Physical Therapy & Sports Medicine, LimitedPartnership LPTX NJRehab Partners #3, Inc.27-3126287 Horizon Rehabilitation PT Management GP, LLC LLCTX USPT, Ltd.87-3158670 Horizon Rehabilitation and Sports Medicine, LimitedPartnership LPTX Horizon Rehabilitation PT ManagementGP, LLC87-3221050 Houston On Demand Physical Therapy, LLC LLCTX Kingwood Physical Therapy, Ltd.85-3267403 HPTS Management GP, LLC LLCTX NJRehab Partners #3, Inc.74-3145888 Indy ProCare Physical Therapy, Limited Partnership LPTX INRehab Partners #4, Inc.45-4419567 Integrius, LLC LLCGA 46-4689092To bedissolvedInSite Health Limited Partnership LPDE IH GP, LLC82-4365153 Intermountain Physical Therapy, Limited Partnership LPTX IDRehab Partners #6, Inc.76-0532873 Jackson Clinics PT Management GP , LLC LLCTX Rehab Partners #4, Inc.46-4470249 Jackson Clinics, Limited Partnership LPTX MD, VAJackson Clinics PT Management GP,LLC61-1729833 Jaco Rehab Honolulu Management GP, LLC LLCTX 84-3191941 Jaco Kapolei Management GP, LLC LLCTX 84-3152468 Jaco Mililani Management GP LLC LLCTX 84-3167120 Jaco Waikele Management GP LLC LLCTX 84-3176419 Jaco Rehab Honolulu, Limited Partnership LPTX HIJaco Rehab Honolulu Management GP,LLC84-3255422 Jaco Rehab Kapolei, Limited Partnership LPTX HIJaco Kapolei Management GP, LLC84-3236943 Jaco Rehab Mililani, Limited Partnership LPTX Jaco Mililani Management GP, LLC84-3206751 Jaco Rehab Waikele, Limited Partnership LPTX HIJaco Waikele Management GP, LLC84-3226914 Joan Ostermeier Physical Therapy, Limited PartnershipSport & Spine Clinic ofWittenbergLPTX WIRehab Partners #1, Inc.76-0556793 Julie Emond Physical Therapy, Limited PartnershipMaple Valley PhysicalTherapyLPTX VTRehab Partners #3, Inc.76-0544267 Kelly Lynch Physical Therapy, Limited PartnershipSport & Spine Clinic ofWatertownLPTX WIRehab Partners #1, Inc.76-0559026 Kennebec Physical Therapy, LLC LLCTX MEU.S. Physical Therapy, Ltd.46-4456545 Kingwood Physical Therapy, Ltd.Spring-Klein PhysicalTherapy West Woodlands PhysicalTherapyLake Conroe Sports Medicineand Rehabilitation CypressOaks Physical TherapyStar Therapy Services ofFairfield; Grand Oaks Sports Medicineand RehabilitationStar Therapy Services ofLakewoodLPTX Rehab Partners #2, Inc.76-0384227 Lake Houston Physical Therapy, Limited PartnershipNorthern Oaks Orthopedic &Sports PTLPTX Rehab Partners #1, Inc.75-3050296 Leader Physical Therapy, Limited PartnershipMemphis Physical TherapyLPTX TNRehab Partners #4, Inc.76-0539465WithdrawPALife Fitness Physical Therapy, LLCIn Balance Physical Therapy Herbst Physical TherapyLLCMD PAU.S. Physical Therapy, Ltd.20-1193079 Life Strides Physical Therapy and Rehabilitation, LimitedPartnership LPTX SCRehab Partners #2, Inc.20-5120914 LiveWell Physical Therapy, Limited Partnership LPTX Rehab Partners #5, Inc.26-3700763 Madden and Gilbert PT GP, LLC LLCTX1/7/2022 OPTN, LLC87-4640726 Madden and Gilbert Physical Therapy, LP LPTX1/20/2022 Madden and Gilbert PT GP, LLC87-4672389 Madison Physical Therapy, Limited Partnership LPTX NJMSPT Management GP, LLC 27-2047964 Madison Spine, Limited Partnership LPTX NJMSPT Management GP, LLC 90-0813058 Max Motion Physical Therapy, Limited Partnership LPTX AZRehab Partners #3, Inc.26-3988733 Merrill Physical Therapy, Limited Partnership LPTX WIRehab Partners #1, Inc.76-0512097 Mishock Physical Therapy, Limited PartnershipXcelerate Physical TherapyLPTX PAMishock PT Management GP, LLC30-0783139 Mishock PT Management GP, LLC LLCTX Rehab Partners #4, Inc.46-2793533 Mission Rehabilitation and Sports Medicine, LimitedPartnershipRYKE RehabilitationLPTX RYKE Management GP, LLC26-3747839 Mobile Spine and Rehabilitation, Limited Partnership LPTX ALRehab Partners #6, Inc.76-0600186 Momentum Physical & Sports Rehabilitation, LimitedPartnershipMomentum Physical Therapy& Sports Rehab; MomentumOn Demand;Momentum Mobile PTLPTX FL, CO, AZRehab Partners #10, LLC47-2388509 Mountain View Physical Therapy, Limited PartnershipMountain View Physical andHand TherapyLPTX ORRehab Partners #6, Inc.76-0528482 MSPT Management GP, LLC LLCTX NJRehab Partners #4, Inc27-2047906 National Rehab Delaware, Inc. CorpDE MONational Rehab GP, Inc.74-2899827showstaxclearanceNational Rehab GP, Inc. CorpTX FL,MOU.S. PT - Delaware, Inc.76-0345539 National Rehab Management GP, Inc. CorpTX IL, OHU.S. PT - Delaware, Inc.76-0345543 New Horizons Physical Therapy, Limited Partnership LPTX INRehab Partners #4, Inc.20-2729857 Norman Physical Therapy, Limited Partnership LPTX OKRehab Partners #4, Inc.76-0420713 North Jersey Game On Physical Therapy, LimitedPartnershipMadison Spine & PhysicalTherapyLPTX NJRehab Partners #3, Inc.27-3885529 North Lake Physical Therapy and Rehab, LimitedPartnership LPTX ORNorth Lake PT Management GP, LLC90-0964749 North Lake PT Management GP, LLC LLCTX Rehab Partners #4, Inc.46-2599705 Northern Lights Physical Therapy, Limited Partnership LPTX NDRehab Partners #3, Inc.27-0342077 Northwest PT Management GP, LLC LLCTX Rehab Partners #4, Inc.82-2410286 Northwoods Physical Therapy, Limited Partnership LPTX MIRehab Partners #1, Inc.26-1258418 OPR Management Services, Inc. CorpTX AK, AL, AZ,CO, CT, DE, FL,GA, IA, ID, IL,IN, KS, LA,MA, MD, ME,MI, MN, MO,MS, MT, NC,ND, NE, NH,NJ, NM, NV,OH, OK, OR,PA, SC, SD,TN, VA, VT,WI, WYU.S. Physical Therapy, Ltd.81-3815218 OSR Physical Therapy, Limited Partnership LPTX MNOSR Physical Therapy Management GP,LLC83-0657305 OSR Physical Therapy Management GP LLC LLCTX 83-0649952 One to One PT Management GP LLC LLCTX FLRehab Partners #4, Inc.84-4060850 One to One Physical Therapy, Limited Partnership LPDE FLOne to One PT Management GP, LLC84-4074270 Oregon Spine & Physical Therapy, Limited PartnershipPeak State Physical TherapyLPTX ORRehab Partners #6, Inc.76-0613909 Peak Performance PT Management GP, LLC LLCTX Peak Performance Physical Therapy andFitness, LLC85-3948317 Peak Performance Physical Therapy, Limited Partnership LPTX LAPeak Performance PT Management GP,LLC85-4174416 Pelican State Physical Therapy, Limited PartnershipAudubon Physical TherapyLPTX LARehab Partners #6, Inc.76-0433513 Penns Wood Physical Therapy, Limited Partnership LPTX PARehab Partners #5, Inc.76-0430771 PerformancePro Sports Medicine and Rehabilitation, LimitedPartnership LPTX Rehab Partners #5, Inc.26-1539873 Phoenix Physical Therapy, Limited Partnership LPTX OHRehab Partners #4, Inc.27-0932165Checkwith Peterif to bedissolvedPhysical Restoration and Sports Medicine, LimitedPartnership LPTX VARehab Partners #6, Inc.27-0878621 Physical Therapy Northwest, Limited Partnership LPTX ORNorthwest PT Management GP, LLC82-2397360 Physical Therapy and Spine Institute, Limited Partnership LPTX ILRehab Partners #4, Inc.76-0438263 Physical Therapy Solutions, Limited Partnership LPDE VAPTS GP Management, LLC47-3075583 Pinnacle Therapy Services, LLC LLCDE MOU.S. Physical Therapy, Ltd.46-3247784 Pioneer Physical Therapy, Limited Partnership LPTX NERehab Partners #1, Inc.20-3530492 Plymouth Physical Therapy Specialists, Limited Partnership LPTX MIRehab Partners #3, Inc.76-0424739 Port City Physical Therapy, Limited Partnership LPTX MERehab Partners #3, Inc.76-0585914 Precision Physical Therapy, Limited Partnership LPTX PARehab Partners #5, Inc.76-0438265 Premier Physical Therapy and Sports Performance, LimitedPartnership LPDE Premier Management GP, LLC47-5385666 Premier Management GP, LLC LLCDE Rehab Partners #4, Inc.47-5403407 ProActive Physical Therapy, Limited Partnership LPTX SDRehab Partners #3, Inc.76-0600187 ProCare Physical Therapy Management GP, LLC LLCTX Rehab Partners #4, Inc.46-2044643 ProCare PT, Limited Partnership LPTX PAProCare Physical Therapy ManagementGP, LLC90-0941849 ProgressiveHealth Companies, LLC LLCDE U.S. Physical Therapy, Ltd.87-4264322 ProgressiveHealth Occ Health, LLC LLCIN MI, TNU.S. Physical Therapy, Ltd.20-8266936 ProgressiveHealth HealthSpot, LLC LLCIN U.S. Physical Therapy, Ltd.85-3187128 ProgressiveHealth, LLC LLCIN 68-0666444 ProgressiveHealth Rehabilitation Solutions,Inc. CorpGA 58-1888359 Progressive Physical Therapy Clinic, Ltd.Progressive Hand andPhysical TherapyLPTX Rehab Partners #1, Inc.76-0387638 PTS GP Management, LLC LLCTX Rehab Partners #4, Inc.47-3239903 Quad City Physical Therapy & Spine, Limited Partnership LPTX IARehab Partners #5, Inc.14-1921829 RACVA GP, LLC LLCTX VARehab Partners #4, Inc.37-1838302 R. Clair Physical Therapy, Limited PartnershipClair Physical TherapyLPTX Rehab Partners #1, Inc.76-0478967 Radtke Physical Therapy, Limited Partnership LPTX MNRehab Partners #5, Inc.76-0574455 Reaction Physical Therapy, LLC LLCDE OKU.S. Physical Therapy, Ltd.47-1586428 Rebound Physical Therapy, Limited Partnership LPTX ORRebound PT Management GP, LLC81-1026078 Rebound PT Management GP, LLC LLCTX Rehab Partners #4, Inc.81-1045143 Red River Valley Physical Therapy, Limited Partnership LPTX Rehab Partners #5, Inc.20-4489003 Redmond Ridge Management, LLC LLCWA U.S. Physical Therapy, Ltd.61-1754288 Regional Physical Therapy Center, Limited Partnership LPTX Rehab Partners #5, Inc.76-0429008 Rehab Partners #1, Inc. CorpTX FL, MA, & WIU.S. PT Delaware, Inc.76-0345544 Rehab Partners #2, Inc. CorpTX FLU.S. PT Delaware, Inc.76-0379584Withdraw,NJRehab Partners #3, Inc. CorpTX MO, MT, NJ,ND, & SDU.S. PT Delaware, Inc.76-0394604WithdrawUTRehab Partners #4, Inc. CorpTX OH, & UTU.S. PT Delaware, Inc.76-0418425 Rehab Partners #5, Inc. CorpTX U.S. PT Delaware, Inc.76-0427607 Rehab Partners #6, Inc. CorpTX ORU.S. PT Delaware, Inc.76-0433511 Rehab Partners Acquisition #1, Inc. CorpTX U.S. Physical Therapy, Inc.76-0377650 Rehabilitation Associates of Central Virginia, LimitedPartnershipRehab Associates of CentralVirginia (Campbell County)LPTX VARACVA GP, LLC81-3831622 Rice Rehabilitation Associates, Limited Partnership LPTX GARehab Partners #4, Inc.76-0430769 Riverview Physical Therapy, Limited Partnership (formerlyYarmouth Physical Therapy) LPTX MERehab Partners #3, Inc.27-0001262 Roepke Physical Therapy, Limited PartnershipElite Hand & Upper ExtremityClinicLPTX WIRehab Partners #1, Inc.76-0483099 RYKE Management GP, LLC LLCTX Rehab Partners #5, Inc.26-3747599 Saginaw Valley Sport and Spine, Limited PartnershipSport & Spine PhysicalTherapy and Rehab;Evergreen PTLPTX MIRehab Partners #3, Inc.76-0403520 Saline Physical Therapy of Michigan, Ltd.Physical Therapy in MotionLPTX MIRehab Partners #1, Inc.76-0376594 San Antonio On Demand Physical Therapy, LLC LLCTX U.S. Physical Therapy, Ltd.86-1384984 Seacoast Physical Therapy, Limited Partnership LPTX MERehab Partners #3, Inc.45-2498148 Signature Physical Therapy, Limited Partnership LPTX OKRehab Partners #2, Inc.20-5992649 Snohomish Management, LLC LLCWA U.S. Physical Therapy, Ltd.38-3953679 Snohomish Physical Therapy, PLLC PLLCWA Snohomish Management, LLC South Tulsa Physical Therapy, Limited PartnershipPhysical Therapy of JenksLPTX OKRehab Partners #2, Inc.76-0566430 Spectrum Physical Therapy, Limited PartnershipSouthshore Physical TherapyLPTX CTRehab Partners #2, Inc.76-0393448 Sport & Spine Clinic of Fort Atkinson, Limited PartnershipSport & Spine Clinic of SaukCitySport & Spine Clinic ofMadison Sport & Spine Clinic ofJeffersonSport & Spine EdgertonLPTX WIRehab Partners #1, Inc.76-0694802 Sport & Spine Clinic, L.P.Sport & SpineSport & Spine Clinic of EdgarSport & Spine MinocquaSport & Spine - Rib MountainLPDE WIRehab Partners Acquisition #1, Inc.76-0376131 Spracklen Physical Therapy, Limited Partnership LPTX NERehab Partners #1, Inc.76-0580510 STAR PT Management GP, LLC LLCTX Rehab Partners #4, Inc26-1107563 STAR Physical Therapy, LP LPTX AR, TN, INSTAR PT Management GP, LLC62-1707893 Star Therapy Centers, Limited PartnershipStar Therapy Services ofCopperfieldStar Therapy Services of Cy-FairStar Therapy Services ofFulshearStar Therapy Services of KatyStar Therapy Services ofMagnoliaStar Therapy Services ofSpring Cypress StarTherapy Services of CincoRanchLPTX Rehab Partners #1, Inc.76-0389608 Texstar Physical Therapy, Limited Partnership LPTX Rehab Partners #5, Inc.76-0669263 The Hale Hand Center, Limited Partnership LPTX FLRehab Partners #2, Inc.76-0601187 The U.S. Physical Therapy Foundation NPTX Qualified tofund raise inCA, FL, KS,MD, MI, TN,TX, VA 81-1071364 Therapyworks Physical Therapy, LLCTherapyworksLLCDE INU.S. Physical Therapy, Ltd.46-4446075 Thibodeau Physical Therapy, Limited Partnership LPTX MIRehab Partners #1, Inc.26-1147899 Thunder Physical Therapy, Limited Partnership LPTX WARehab Partners #4, Inc.26-3806761 U.S. Physical Therapy, Inc. CorpNV AZ; HI; MI; NJN/A76-0364866 U.S. Physical Therapy, Ltd. LPTX NCNational Rehab GP, Inc.76-0388092 U.S. PT - Delaware, Inc. CorpDE FL, IL, MN,MONM,U.S. Physical Therapy, Inc.51-0343523 U.S. PT Alliance Rehabilitation Services, Inc.Alliance RehabilitationServicesCorpTX PAU.S. Physical Therapy, Inc.26-2377769 U.S. PT Management, Ltd. LPTX CA, ID, OH,WA, WINational Rehab Management GP, Inc.76-0388500 U.S. PT Michigan #1, Limited PartnershipGenesee Valley PhysicalTherapyLPTX MIRehab Partners #1, Inc.76-0570431 U.S. PT Michigan #2, Limited PartnershipPhysical Therapy SolutionsLPTX MIRehab Partners #2, Inc.76-0579492 U.S. PT Solutions, Inc.Physical Therapy SolutionsCorpTX VAU.S. Physical Therapy, Inc.26-0609553 U.S. PT Texas, Inc.Kinetix Physical TherapyCorpTX MSU.S. Physical Therapy, Inc.20-5125415To bedissolvedU.S. PT Therapy Services, Inc. (formerly U.S. SurgicalPartners, Inc.)Capstone Physical TherapyCarolina Hand and WellnessCenterHand Therapy of North Texas- FriscoHand Therapy of North Texas- CoppellInnovative Physical TherapyLake City Hand TherapyLife Sport Physical TherapyLife Sport Physical Therapy -Glen EllynMetro Hand RehabilitationMissouri City PhysicalTherapyMountain View PhysicalTherapy of MedfordMountain View PhysicalTherapy of TalentNorthern Illinois TherapyServicesPropel Physical TherapyReAction Physical TherapyTherapeutic ConceptsTulsa Hand TherapyWaco Sports Medicine andRehabilitationCorpDE CA, FL, IA, IL,IN, KS, ME,MS, MO, NC,OH, OK, OR,PA, TX VA, &WIU.S. Physical Therapy, Inc.76-0613914 U.S. PT Turnkey Services, Inc.(formerly Surgical Management GP, Inc.The Hand & OrthopedicRehab ClinicCorpTX INU.S. Physical Therapy, Inc.20-2803028 U.S. Therapy, Inc.First Choice Physical TherapyCorpTX INU.S. PT - Delaware, Inc.76-0637511 The Facilities Group, Inc. University Physical Therapy, Limited Partnership LPTX VARehab Partners #6, Inc.76-0613913 USPT Physical Therapy, Limited PartnershipBody Basics PhysicalTherapyLPTX IARehab Partners #5, Inc.20-5441273 Victory Physical Therapy, Limited Partnership LPTX Rehab Partners #5, Inc.20-4406904 West Texas Physical Therapy, Limited Partnership LPTX Rehab Partners #5, Inc.20-5834588 Wright PT Management GP, LLC LLCTX Rehab Partners #4, Inc.82-3239740 Wright Physical Therapy, Limited Partnership LPTX IDWright PT Management GP, LLC82-3255983EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe have issued our reports dated March 1, 2022, with respect to the consolidated financial statements and internal control over financial reporting included in the Annual Report of U.S. Physical Therapy,Inc. on Form 10-K for the year ended December 31, 2021. We consent to the incorporation by reference of said reports in the Registration Statements of U.S. Physical Therapy, Inc. on Forms S-8 (File Nos.333-30071 effective June 26, 1997, 333-64159 effective September 24, 1998, 333-67678 effective August 16, 2001, 333-67680 effective August 16, 2001, 333-82932 effective February 15, 2002, 333-103057effective February 10, 2003, 333-113592 effective March 15, 2004, 333-116230 effective June 4, 2004, 333-153051 effective August 15, 2008, 333-185381 effective December 11, 2012, 333-200832 effectiveDecember 10, 2014, and 333-230368 effective March 18, 2019)./s/ GRANT THORNTON LLPHouston, TexasMarch 1, 2022EXHIBIT 31.1CERTIFICATIONI, Christopher J. Reading, certify that: 1.I have reviewed this annual report on Form 10-K of U.S. Physical Therapy, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstancesunder which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating tothe registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls andprocedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscalquarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committeeof the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s abilityto record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.Date: March 1, 2022 /s/ Christopher J. Reading Christopher J. Reading President and Chief Executive Officer (Principal Executive Officer) EXHIBIT 31.2CERTIFICATIONI, Carey Hendrickson, certify that: 1.I have reviewed this annual report on Form 10-K of U.S. Physical Therapy, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstancesunder which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating tothe registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls andprocedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscalquarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committeeof the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s abilityto record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.Date: March 1, 2022 /s/ Carey Hendrickson Carey Hendrickson Chief Financial Officer (Principal Financial and Accounting Officer) EXHIBIT 31.3CERTIFICATIONI, Jon C. Bates, certify that: 1.I have reviewed this annual report on Form 10-K of U.S. Physical Therapy, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstancesunder which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating tothe registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls andprocedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscalquarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committeeof the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s abilityto record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.Date: March 1, 2022 /s/ Jon C. Bates Jon C. Bates Vice President and Corporate Controller EXHIBIT 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of U.S. Physical Therapy, Inc. (the “registrant”) on Form 10-K for the year ending December 31, 2021 as filed with the Securities and Exchange Commission on thedate hereof (the “report”), we, Christopher J. Reading, Carey Hendrickson and Jon C. Bates, Chief Executive Officer, Chief Financial Officer and Controller, respectively, of the registrant, certify, pursuant to18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge: (1)The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2)The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.March 1, 2022/s/ Christopher J. Reading Christopher J. Reading Principal Executive Officer /s/ Carey Hendrickson Carey Hendrickson Principal Financial and Accounting Officer /s/ Jon C. Bates Jon C. Bates Vice President and Corporate Controller A signed original of this written statement required by Section 906 has been provided to U. S. Physical Therapy, Inc. and will be retained by U. S. Physical Therapy, Inc. and furnished to the Securities andExchange Commission or its staff upon request. 

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