Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the U.S. Physical Therapy first quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I would now like to turn the conference over to Mr. Chris Reading, Chief Executive Officer. Sir, you may begin.

Thanks, operator. Good morning, everyone. And welcome to U.S. Physical Therapy’s first quarter 2009 earnings call. With me here in Houston, I have Larry McAfee, our Executive Vice President and Chief Financial Officer; Glenn McDowell, our Chief Operating Officer; and Jon Bates, Vice President and Controller. Before we begin a review of our performance for the quarter, I will ask Jon to read a brief disclosure statement.

Thanks, Chris. This presentation contains forward-looking statements, which involve certain risks and uncertainties. And these forward-looking statements are based on the company's current views and assumptions and the company's actual results can vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information.

Thanks, Jon. For the past several quarters, we’ve been working hard to improve a number of operating metrics, including our net rates as well as our cost per visits. In the fourth quarter, we saw net rate grow to $98.68 as a result of focused recontracting and service line improvements. For the year 2008, we finished just about $98 a visit. And for this first quarter, as a result of the work done by our partners and our operations team to expand our service model, we pushed the net rate above $100 for the first time ever in a quarter. This work focused on improving and expanding our service model, and what we are calling internally our value proposition has resulted in improvements in our units per visit, our durations, our net rates, as well as a reduction in our cancellation rates. We believe that there is more opportunity yet to improve our rate and increase our efficiencies. This quarter, our salary cost as a percentage of revenue decreased 60 basis points and our gross margin increased 24.6%. In the quarter, we worked to reduce a number of cost items both in Houston and in the field. Those items include taking out of considerable amount of lease costs. We have a number of lease renegotiations, projects in the works, which we expect to help reduce our costs in the field at a number of locations, we reworked, recontracted and focused on a number of opportunities in purchasing both in corporate and the field that we expect to continue to reduce our costs. In addition, we have continued focus on our salary cost per visit, while we started the quarter a little bit slow in terms of productivity, because of the lighter volumes, which we’ll discuss in a minute. We finished…

Thanks, Chris. In the first quarter net revenues increased 6.4% to $48.2 million due to a 1.9% increase in patient business and an increase in our average net patient revenue per visit of $3.55 to $100.08. Same-store revenues for de novo and acquired clinics open for a year or more decreased 2.4%. Same-store visits decreased 5.4%, while the average net rate per visit increased by 3.2%. As Chris mentioned, our gross margin improved in the quarter to 24.6% from 23.9% a year earlier. Clinic operating costs were 75.4% of net revenue, as compared to 76.1%. Clinic salaries and related costs were reduced to 52.7% for the first quarter of 2009 versus 53.3% in 2008. Rent, clinic supplies, contract labor, and other costs were constant for both quarters at 21.2%. The provision for doubtful accounts was 1.5% of net revenue in the first quarter of 2009 versus 1.7%. Corporate office costs were 11.2% of revenue for both periods. Our operating income increased by $72,000 to $6,457,000, the operating income margin percentage of 13.4% with a 70 basis points improvement as compared to the first quarter of 2008. Net income rose 15.5% to $2,754,000. Diluted earnings per share increased to $0.23. The analyst consensus estimate for Q1 was $0.20. Despite the strong first quarter performance, the company is not at this time revising its 2009 annual earnings guidance. During the first quarter, we opened six new clinics. The company produced very strong cash flow in the period, despite the six clinic openings and purchasing more than $2.6 million of common stock, the company’s net debt increased by only $159,000 from year-end. The company’s days sales outstanding for accounts receivable were decreased to 48 days at March 31, compared to 57 days and 51 days at the end of the first quarter last year and year-end respectively. Adjusted EBITDA for the first quarter was $6.5 million and for the 12 months ended March, it was $25.1 million.

Thanks, Larry. In summary, let me say that while the current environment presents some challenges, our team has been able to work to offset those challenges and produce solid growth in revenue and earnings. We expect that this market will cull a number of competitors over time and lead to opportunity for additional and continued market expansion. Our balance sheet is very strong, which gives us great flexibility to invest in our future. With that operator, I know you have some questions. So let’s open up the line.

Thank you. (Operator instructions). Your first question is from the line of Larry Solow with CJS Securities.

Hi Larry. Lawrence Solow – CJS Securities: Hi, good morning, Chris and Larry. How are you doing? Just a couple of questions. Could you maybe talk a little bit about the visits through the quarter? I know they kind of go off to a slow start. And I imagine that had to some to do with the economy and also maybe some severe weather year-over-year, and how they kind of progressed through the quarter and how they looked in April?

Yeah. As everyone will remember, we've got a little bit of a seasonal effect. And I will tell you that January typically every year is a little bit slower, just I think attributed to [Dr. Boson] and to whether and what not, it’s hard for us to really look at year-over-year what are the changes, because we always have some severe weather in the first quarter early on. I think January in general started out slower than average for us. We got sequential improvement in February and considerable improvement in March. And we’ve seen that improvement carry forward into April. Now, we do have a seasonal element, and second quarter usually is a good quarter for us. So, we expect some improvement anyway relative to whether that is because of the economy or reaction to it or now a more orderly progression in terms of seasonality. I'm not sure that I'm able to completely separate all of those factors, but we have seen improvement through the year. Lawrence Solow – CJS Securities: Right. And then in terms of your average net rate, which is up a nice 3.2%, and I think you expressed on the Q4 call that you did believe it was going to be up and kind of the patient visits was more the question marks there, but….

Right. Lawrence Solow – CJS Securities: Did this number kind of even exceed your expectations or, and it’s pretty nice number, and it sounds like it’s sustainable and sounds like the growth trajectory has more legs to it.

Well. For me, no, it didn’t exceed my expectations. I don’t think it exceeded the team's expectations. This is something we’ve been working on for a while. We’ve gotten good traction with our partners on some of the service offerings that we’ve initiated this year. And as Larry mentioned our cash has been very, very strong. And I think, we haven’t rung out all the opportunity just yet. I don’t know that we will be north of a 100 every quarter, but I think we'll see good progression this year over the last year. And so, it’s doing what we expected it to do. Lawrence Solow – CJS Securities: Okay. And then do you have the numbers for the productivity measures, your billable units per patient and visits per therapist?

Yeah. I have those. From a unit standpoint for the first quarter of ’09, we were at 4.1 units, which was up from Q1 of ’08, 4.09. Visit per FTE basis for Q1 ’09, we were at 10.84, which is down slightly from Q4 of ’08, and we were 11.05. We have seen some increases in visit per FTE, though over the last several months. The lower visit per FTEs for the first quarter were because we started slow in January, February, but we're seeing very good visit per FTE increases in March and in April. Lawrence Solow – CJS Securities: Okay great. Thank you very much.

Thanks Larry.

Your next question is from the line of David Bachman with Longbow Research. David Bachman – Longbow Research: Good morning and congratulations on a nice quarter. Question just a little bit more I guess on the units, and the revenue per visit. Can you just sort of remind us some of that process there, I mean beyond just sort of the blocking and tackling and what leverage you really have to pull to increase that revenue per visit in terms of unit growth and are the sorts of capital investments that can happen at the sooner level that can help with the offerings there?

Yeah. We’ve made a number of capital investments strategically over the year particularly to bring in new services, much of which is product, specific balance and fall programs, other things, testing and the things that drive additional revenue, we’ve tried to couple that with a community-based marketing approach to combine traditional physician referrals through more of a community outreach perspective. We've seen some early solid response from that. So, there is some capital investment, but it really isn't, I think at a rate that's outside of our norm, it's just been very focused in terms of how we’ve rolled out these programs. In terms of the units, we've seen under the value proposition and improvement in that area, particularly of units that are of, what we would consider a higher quality and result in a better service model for our patient. You will recall that most of our contracts are really on a per unit basis. We do have some contracts that are fixed fee per visit, but a lesser number of those and so, as we deliver our care, and as we get slight incremental improvement in units, we see a similar impact in our net rate per visit. David Bachman – Longbow Research: And when you’re offering additional units or different service offerings, there's a pre-authorization process that's involved or how does that piece of the business work?

It really comes down; we’re trying to deliver across the board what the patient needs. There are some companies generically that require a pre-authorization for care and there are some companies that put cap on the number of units. And that really hasn’t changed much over the period, but generally speaking, you're not pre-authorizing each and every unit ever. You're just pre-authorizing the care of the patient, and it's up to us to get somebody better on to do that with great care and service. David Bachman – Longbow Research: Okay. So you’re developing the plan of care and then as you see best fit.

Okay. David Bachman – Longbow Research: And then you mentioned that this environment may be putting some pressure on some other players and there could be maybe some consolidation or opportunity for some expansion. Can you just talk about sort of what you’ve seen on that front over the past few months? And beyond I guess sort of corporate overhead, what are some of the other scale and scope advantages of growing larger beyond just top line growth?

Right. Yeah, we’ve seen some competitors in some markets go out of business. There have been a number in Texas, ironically Texas is a very good market for us, very strong market. In an economic market that hasn’t been as hard hit as a number of areas in the country. So, as a number of those have occurred particularly in a few of our partners we had a dinner with a number of different of our Texas partners a few weeks ago. And in a nearby facility where one of these competitors went out of business, we immediately picked up 8 to 10 visits a day. I know hospitals across the board are under duress from a financial perspective, many. And I know that in some cases, people are cutting cost, by cutting headcount and pulling back on different service offering. So, I expect the economy to begin to improve as the year progresses. I think we are still probably looking at early part of 2010, before things really get going. But I think, as we look at this is a mom-and-pop industry. I think it will take out some providers. I think we’ve already seen that and I think that will give us an opportunity to move some market share. We're in a very good financial position; we have a great working capital line with B of A, and we will be very opportunistic but proactive as we have been in the past in terms of how we grow the company. So, I think the market although it's challenging will create some opportunity for us. David Bachman – Longbow Research: Okay. Great. And then just one last question if I can on the community-based marketing side, it sounds like you mentioned this last quarter as well, but believe that there is some good opportunity there. And is some of what you’re alluding to, I think we’ve seen some surgery softness and so you’re probably seeing some softness on the related to elective care, but is there an opportunity to really sort of get the message out there sort of as an alternative similar to the, on the OA side -- just an alternative lower cost intervention that you can offer with the message that might get traction in this kind of economy.

Yeah. I think it’s less from a generic perspective, less from U.S. Physical Therapy and this is a lower cost alternative. What we’ve seen in OA that’s been very good and very specific is, when it’s driven around a niche program, a problem that people have that they are not sure how to address effectively. That will bring people out. We do that sometimes in combination with physicians and other types of independent physicians, but we’ve seen the ability to capture patients directly from those interactions on a group basis, drive patients back into doctors where they need to be seen before they can get a referral, in some cases few patients directly as a result of that interaction. So, we are going to continue to expand that. We think there is an opportunity in there to pick up some additional market share and maybe jump out of line a little bit from our traditional physician to physical therapy, referral order, particularly as more and more states have direct access laws that vary, but that give us the ability to see people directly. David Bachman – Longbow Research: Okay, great. Very good quarter, I will jump off. Thanks.

Thank you.

(Operator Instructions) Your next question is from the line of Rob Hawkins with Stifel Nicolaus. Robert Hawkins – Stifel Nicolaus & Company, Inc.: Good morning. Another question about growth, the sequential growth you’re saying is picking up, I guess is that rate of growth picking up faster than last year. And what does the trend kind of tell you anything about potential demand. Is it coming soon or you mentioned is it still kind of a more 2010 type of thing as you just kind of indicated, am I thinking about these things right?

Robert, I think our challenge this year, which we’re trying to meet head on by dealing with what we can affect directly, is going to be same-store. I think that’s going to be a challenge for the year. Now, I think we are going to work very hard to improve it from where it is. We have seen volume improve through the progressive months, but we would not only see that. And I can’t honestly tell you whether I know that is better directly than the volume improvement we saw sequentially last year. I really need to go back and look at that. But I think same-store is our challenge for the year. I think to offset that, we’re going to be more efficient. I think we will be more creative in our marketing opportunity. I think that will help us when people begin to not keep the purse strings quite as tight as the economy improves in general and as people begin to go back and get their elective procedures done, because they're back in a job or they have insurance or they are no longer as worried as they were. But for the time being, I think that's what we've kind of focused on the most.

It’s kind of interesting that with same store being soft and what's generally happening in the economy and delinquency rates and bad debt experience, that our collections have been as strong as they have been. This is the first quarter ever we've run under 50 days, on average on our AR. Our copay collections even have been good as well as the deductible. And so our liaisons and operations team has made a huge focus on cash over the really 15 months and it’s paid off with exceptionally strong cash flow.

I know our days, our AR days over 120 has continued to come down.

We’ve reduced it by like 17%. So it’s pretty dramatic decrease in old receivables. And the early indications were that April was just as good as March, and March was a record month. Robert Hawkins – Stifel Nicolaus & Company, Inc.: We’re seeing that also in some of the hospitals, and it's got everybody a little bit puzzled. And it is pretty astonishing, particularly with where the headlines are. But kind of more along not so much about growth, I'm just curious though, and you mention how you have to be creative. Are your partners, are they asking or they demanding different kind of services from you or kind of higher amount kind of in this downturn to kind of to go with that. How is that kind of dynamic changing with the way you support these clinics and what’s happening out on the regions?

Yeah, let me make a comment, then I'll ask Glenn to comment as well. I think the thing that has happened in this economy is that we have probably better alignment, we’ve had good alignment with our partners for years. We probably have the best alignment with our partners that I’ve seen maybe since that we’ve got here 5.5 years ago. I think people understand, we’ve explained why we are doing certain things. To be specific, we haven’t seen them demand new or more things. We’ve seen the things that we have offered, we adopted readily because our partners understand that they need tools to go out and overcome some of these market challenges and the synergies actually seem to be very good.

And just to jump in. I agree with Chris. The partners haven’t demanded anything more, I think we have a very good communication line with our partners and what’s going on out there, especially we have offered them our different creative ideas and how they need to look at the economy and their market, and their referral sources and what they need to do to impact and grow their business. It’s our belief that people are looking for value for their dollar, which is why we focused on that piece. And from a marketing standpoint, we believe that going to the community is a good way to go from an exposure standpoint. And it may open up some lines of business and referrals that we haven’t had before. And then in this environment our partners have been very open to that. We are seeing some very good early success with many of the plans that we’ve given to them to put into place.

And we view that our partners, we have a number of, we have a lot of strong partnerships, but our partners have been very interested in sharing the things that are working for them, particularly our biggest partnerships with the other partners and that exchange has gone very well. And so again we are trying to take our team, which is strong, strengths in different areas and spread that information across the whole partnership and people have been very open about it. So, it's been good. Robert Hawkins – Stifel Nicolaus & Company, Inc.: All right, and then, kind of along this same line of questioning, with all the marketers you guys have out there, and physician offices are down too. Is it making access easier, more difficult? Are they being pulled different ways from different partners given you've got people kind of covering multiple sites.

Yeah. The multiple sites coverage hasn't changed, I think the fact that, the doctors particularly on the specialty side, the orthopedic guys are lower. The elective procedure volumes down some. That has a downstream impact on us, but in terms of (Inaudible) to offices, I haven’t heard anything that would lead me to believe that we're having a harder time getting in to see people, as compared to before.

No, this is Glenn. I mean from a sales standpoint, from a focus standpoint, we are not having any more challenges getting into offices than we’ve ever had. We have a very strong sales team, but as Chris has talked about, many physicians especially, orthopedists and some of the elective surgery pieces have impacted business. And so it's been a matter of us broadening our referral horizon and looking at primary care docs and growing other pieces of our business. Robert Hawkins – Stifel Nicolaus & Company, Inc.: All right. I'm going to jump back in a queue, but if there is time, I might ask you follow up.

Okay.

There are no further questions at this time

Thank you, operator. Listen, everybody, Larry and I and Glenn and the rest of the team will be around all day today. And if you have additional questions, Rob, if you have an additional question, just give us a shout. We'll be happy to talk to you. We appreciate your time and we appreciate your continued support. Thanks and have a great day.

Thank you all for participating in today's conference call. You may now disconnect.