Ladies and gentlemen, thank you for standing by. And welcome to the U.S. Physical Therapy first quarter 2010 earnings 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, President and CEO of U.S. Physical Therapy. Sir, you may begin your conference.

Thank you. Good morning and welcome everyone, to U.S. Physical Therapy's first quarter 2010 earnings release call. With me here in the office today are Larry McAfee, our Executive Vice President and Chief Financial Officer, Glenn McDowell, our Chief Operating Officer and Jon Bates, our Vice President and Controller. Before we begin today's review, I will ask Jon to read a brief disclosure statement. Jon?

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. We started this year with high expectations for growth and expansion and we continue to have those expectations looking ahead. That said, we got off to what was a slower than normal start to the year with a fairly significant, much more significant than normal impact from severe weather that hurt us in places as far South as Dallas, Texas. With everything though, there is a season so we say, thank goodness for spring. March came in very strong with a significant referral flow and a marked improvement in volume, allowing us to finish the quarter in very strong fashion. Net revenue increased a little less than 5% from the comparable 2009 quarter with more than a $3 per visit increase in net rate per visit. Also in the quarter in March, we closed a very nice, five location facility in the east forming a partnership with a great group, who is already focused on expanding into several additional locations. Overall development activity has improved significantly since last year. We've a number of active discussions and our organic activity has picked up as a result of the adjustments that we have made in our advertising in social media events and publications. To date, we have approximately a dozen approved, although not all yet opened sites so far that we'll roll in at various points this year. And that excludes our acquisition. Also in our results this quarter was a sale of a five clinic Texas joint venture, which produced a pre-tax gain of approximately $578,000 or about $0.03 in EPS for the quarter. This helped to offset the $0.05 impact from the weather and the $0.01 expense associated with closing our first quarter acquisition that one expense under the new accounting rules effective this year. Volumes have been solid for the past two months and we expect to continue to make progress in the plans discussed in our shareholder letter, including driving additional volume through our Fit-to-Work initiatives, as well as growing our company organically and through acquisitions. With that, I'd like to ask Larry to review our financial performance in greater detail before we open it up for questions.

Thanks, Chris. Net income for the quarter ended March 31 was $3.2 million or $0.27 per share as compared to $2.8 million or $0.23 per share in the first quarter of 2009. As Chris mentioned, included in the recent period is an after-tax gain of $0.03 per share related to the sale of an interest -- a joint-venture interest. Additionally, the company incurred legal costs of approximately $0.01 per share in conjunction with the acquisition. Excluding the gain and acquisition costs, the company's adjusted earnings from operations was $0.25, which is rather exceptional considering that this was achieved despite unusually severe weather in January and February that adversely impacted our earnings by about a nickel. Net revenue increased 4.6% in Q1 to $50.4 million due to an increase in our average net rate per visit of $3.28 and an increase in patient visits of 1.2%. Our gross margin increased slightly to 24.7%. Our corporate office costs were $5.8 million or 11.5% of revenues. However, included in those costs are the legal fees and other acquisition costs. Our operating income increased to $6.7 million. Our other income in the first quarter includes the gain from the joint venture sale. Net income was $3.2 million and EPS $0.27. Same-store revenues for de novo and acquired clinics opened for a year or more increased 1.7%. That figure would have been better both in terms of dollars and volume had we not had the weather impact. Receivables collections in the first quarter we excellent. Despite the financing for the acquisition, we ended the first quarter with less than $1 million in debt net of our cash position.

Thanks, Larry. With that, operator, we'd like to go ahead and open it up for questions.

(Operator Instructions) Your first question comes from the line of Larry Solow of CJS Securities.

Good morning, Larry. Larry Solow – CJS Securities: Hi. Good morning, guys. How's it going? Could you maybe just quickly on the impact of the weather -- if I guesstimate like $750,000 sales impact, is that a good ballpark number?

Actually, we filed an 8-K -- let's see here. We filed an 8-K in early March. Larry Solow – CJS Securities: Okay.

It was $550,000 in revenue and… Larry Solow – CJS Securities: Okay. So I was a little bit aggressive. Okay.

It was about 9,000 visits. It was $0.05 per share. Larry Solow – CJS Securities: Got it. Got it. And the -- it sounds like you certainly had a nice improvement in March. And I guess when you refer to the last two months, I assume you mean April as well?

Correct. Larry Solow – CJS Securities: Great. And then the -- it's fair to say that the same store visits which were down about a little over 1% in the quarter, were they actually up year over year in March or closer to flat?

I didn't look at it for the month. We look at it on the quarter so I can't… Larry Solow – CJS Securities: Right.

The question, but they should have been a favorable comparison considering how we finished the quarter. Larry Solow – CJS Securities: Got you. Got you. And then the -- any reason for the sale of the clinics, any outstanding reason?

I would say that it was a partnership that was created not very long ago from an operating perspective, a little different view of the world. It was an opportunity to exit, take a gain and come back into the market at a later time. Larry Solow – CJS Securities: Okay. And last question, just any clarity with the -- I know the physician fee schedule was pushed out, I believe is it until October? Is it until year end? And then your thoughts on going forward in '11, any thoughts on that?

Yes. The physician fee schedule was -- is just pushed out now really just to the end of the month to be revisited again, I guess in June. Everything that we've heard is still positive for a resolution. Although, at the rate they're going I expect it'll still continue to lag into June and maybe July until something's done with some finality. Larry Solow – CJS Securities: Okay. So they keep buying themselves a little bit of time, but inevitably it doesn't seem like -- it would sort of be contradictory if they would actually raise that or lower those rates. I mean it wouldn't make any sense, actually. Okay. That's it. Great. Thanks, guys.

Thanks, Larry.

Your next question comes from Rob Hawkins of Stifel Nicolaus. Rob Hawkins – Stifel Nicolaus: Good morning.

Hey, Rob. Rob Hawkins – Stifel Nicolaus: You know I always like to ask questions about the marketing and development strategy because -- I mean it seems you guys are, if you pull the 9,000 visits out, it appears you guys are comping out over the contractions we saw last year? Is that a fair assumption?

What contractions, Rob? Rob Hawkins – Stifel Nicolaus: Well, the visits -- the volumes that were down.

Well, our visits overall were up. Our same store was slightly softer. Rob Hawkins – Stifel Nicolaus: I guess -- actually no, that's what I'm talking about. And then if you add back the 9,000…

The nine is. It was 5,000 was from the weather if that's what you're talking about. Rob Hawkins – Stifel Nicolaus: I thought it was 9,000. I'm sorry.

9,000. Okay, sorry.

Yes. Yes. We lost 9,000 visits in January and February.

No. I'll tell you we normally lose some business from weather. I think we had an exceptional weather impact this year. But yes, I mean all things being otherwise equal, since once we cleared the weather that was killing us in everyplace from Oklahoma, Dallas, throughout the country, volume's picked up, referrals have been very strong and we expect to get back into a more normal pattern. That said, unemployment's still high and we're still working through some market factors I think so…

Well, I'll be -- in our budgeting process, we assumed that 10% unemployment would continue and we did not assume same store volume growth. So we're not saying that we turned the corner on same store volume. Larry Solow – CJS Securities: Okay. But you're not saying it in your guidance. Your budget and your guidance you're saying that synonymous, correct?

Yes. And our guidance and our budget…

Our guidance and our budget tie together. Yes. Larry Solow – CJS Securities: So I was going to say, they're relative. I understand. Okay. So you are, but it looks like -- I mean it looks like you're up. I mean it looks like we're back to growth. I mean is that fair or -- on a same store basis?

I don't have the March numbers isolated, but considering how strong a month it was. I suspect we had same-store volume growth. But that's not to say one month is a trend. Larry Solow – CJS Securities: Okay. Well, okay. Okay. But you said April looked like it was pretty good too, right? Or is that just too early to call?

Yes. March and April volumes and referrals both in terms of what we had budgeted and in terms of the recent trends, were very solid. Larry Solow – CJS Securities: Okay. And I know we're going into kind of the better part of the year. But it looks -- and I guess maybe I don't want to put words in your mouth, but is it fair to assume that we're in these kinds of low-single digit numbers and so they could kind of swing month to month, either way. It can leave you flat or slightly negative or leave you flat or slightly positive. Is that kind of about where you're headed on this?

We're having total -- we're going to have growth in total volume even if same store volume is off a little. We're going to have revenue growth, obviously. And we're having significant earnings growth. So I don't -- and though volume is – same store volume is important, it's not the driver of our earnings.

Yes. We're working on the same things we always focus on. And we're trying to drive business to the facilities. Our partners are doing a good job. The sales people are hitting it hard. Unemployment's still high. And that said, the last couple of months, we've been encouraged. Two months as Larry said, don't make the year. And we're focused on executing for the remainder of the year to hit our plan and exceed our plan. And that plans been expressed in terms of our guidance and that's kind of where we're headed right now. And we think we have a good opportunity to do all those things. Larry Solow – CJS Securities: Anything – strategy, I mean is there anything beyond just basic blocking and tackling relative to the new marketing plans, some of the folks that you've put out in the field on a commission basis. Anything that you're kind of -- that you're willing to report there?

We've increased the number of sales people that we have over the first quarter. We grew to 91 sales reps which includes both our traditional full time and part time, plus our commission sales reps. So, we've added a number of each across the country in certain markets. That will continue to grow or decline based upon performance and where we feel it makes sense for us to add additional people. But the commission sales rep program has continued to do quite well for us. January was actually the strongest month we've had from the commission sales reps since we put that program into effect. So we will continue to grow that and run with it as long as it's viable for us to continue to find people with the economy that way that it is.

And then Rob, beyond that we've talked about all this was in the shareholder letter, but the Fit-to-Work initiative, which focuses on industry and work comp and we have people that are out there both doing training and sales on that front. And that's a new initiative for us this year. And then it's a lot of the same stuff just trying to move more than our share of market share right now.

Later on this year, we'll be emphasizing and looking at a consumer marketing program which is still in the planning stages, which we hope will have an impact over time also. Larry Solow – CJS Securities: Well, I mean I'm glad to hear you guys are taking it in stride. But I mean you guys are doing really well relative to a lot of other folks that have…

Thanks. Appreciate that. Larry Solow – CJS Securities: I'm sorry to press it. It's just kind of like, it's interesting and it's kind of like okay, guys, what's the formula? You guys seem to have hit it. So that's where I'm coming from, all right. Well, I'll jump back into queue. Thank you for the comments.

Thank you.

Thanks, Rob.

Your next question comes from Mitra Ramgopal of Sidoti.

Hey, Mitra. Mitra Ramgopal – Sidoti & Company: Yes. Hey, good morning, guys. Just a couple of questions. First, we continue to see nice increases in the average revenue per visit. And I was wondering if you'd comment on what's driving that and maybe, Larry, if you can maybe comment on the payor mix, if it's changed significantly since last quarter?

I'll let Larry, do the payor mix momentarily. In terms of the revenue provision, we had a focus last year that continues on enhancing value for our patients and making sure we have very robust, clinical programs particularly at the latter end of care in an effort to move people to a higher level of function, to make sure that we are progressing visit to visit and providing, quite honestly just additional value from a clinical perspective. And so we've gotten traction with that. I think that's driven some units growth and it's driven some revenue growth. And that's reflected in that number.

In terms of the payor mix, I don't think there was a change. But for the quarter, as a percentage of billing private was about 26%, managed care was 34%, so you can lump those together and say really 60% comes from insurance. Workers comp was 14%, Medicare, 22% and then other 4%. Mitra Ramgopal – Sidoti & Company: Okay. And I noticed that if you look on the de novos, one clinic this quarter, probably the lowest we've seen in some time. Are you deemphasizing that in any way or?

No. There's no deemphasis. We've got, as I said, we have 12 approved so far for the year. We have a number that we expect to get opened in the second quarter. And we're actually on pace from where we thought we'd be at this point in time. We didn't have a lot in the first quarter. Some of that's timing. We tend to be a little lumpy from period to period. But it's actually the call volume has increased in terms of the interest level. We track that. But we also track our unique visitor volume to a couple different websites. We have the own your own clinic website. And all those things are up markedly from last year. So it takes some time, but right now in terms of the ones that we have in the hopper, they're good people, they're good deals and I'm encouraged right now. Mitra Ramgopal – Sidoti & Company: Okay. And on the acquisition front, if you could comment on the pipeline? You clearly don't have a pretty underleveraged balance sheet that would support being more aggressive on the acquisition front. Maybe you can let us know what you're seeing out there?

Yes. We're talking to some really good people. I mean there's been a dramatic change in activity and discussions. It doesn't always translate to ensuring that everything will come to closure. But compared to last year and we continued to be active last year and it got real quiet last year. This year has picked up considerably. We're talking to a number of good people. So we'll -- you'll see us do some deals this year.

Yes. I mean it's not really a pipeline. We're, as you know, we're highly selective in terms of the people we're willing to do acquisitions with and how we structure them. We structure them like our partnerships where they retain a large equity interest. But I'd be surprised if we don't do at least one or two more this year.

And that said, to the extent that we can find high quality deals and this deal that we just completed is an excellent example of that, really good folks. We're not afraid to get some leverage on our balance sheet. You will see that as long as we can find good deals that we can bring forward. And I think we will. Mitra Ramgopal – Sidoti & Company: Okay. Thanks again, guys.

Your next question comes from Adam Deland [ph] of Moore Capital. Adam Deland – Moore Capital: Hey, guys. I just have one question for you. Have you seen anything coming down the pipe as far as new rules or regulations or any changes regarding physical therapy and particularly for the physician owned practices or the incident to clinics?

No rules and regulations. We're pretty connected with the folks in Washington that -- between the OIG and CMS, and MedPAC. And it wouldn't surprise me to see MedPAC at least raise the issue later this year. Now that's not a guarantee. But I think there's been more activity in that regard. Whether "raising the issue" does anything or not, I can't really say. But I think it's going to be looked at. Quite honestly, people are looking at in Washington on the spend rate and while the industry has -- is growing at a modest pace, there seems to be a significant proliferation in physician ownership and in the growth on that side. And I think, like it has with diagnostics and some other areas, I think it's going to get some attention. Whether that results in a law or a rule, I don't know. Adam Deland – Moore Capital: Okay. That's it for me. Thanks, guys.

Thank you.

(Operator Instructions) Your next question comes from Mike Petusky of Noble Research.

Good morning, Mike. Mike Petusky – Noble Research: Good morning, guys. If you gave this, I didn't catch it. Did you guys give the visits per full-time employee?

Yes. The visits for FTE I hadn't given it yet. For the first quarter, it came in at 11.1 -- it was actually up slightly even though we were down from a visit standpoint, over fourth quarter when it was at 10.6. We did a good job, I think in controlling staffing and costs in the first quarter. But it was up slightly.

Yes, which is pretty amazing considering we really started slow in January and February, so actually pretty pleased with that. Mike Petusky – Noble Research: That's great. That's great. And I don't know if you have a breakout like this, but I am curious of the 91 sales reps. How many of those are full-time? How many of those are part-time? How many of those are commission based?

Currently, at least at the end of April, we had 44 full-time reps. We had 11 part-time reps. And we had 35 straight commission reps. Mike Petusky – Noble Research: And Larry, I think the bad debt expense looked up a little bit. Do you have any, I guess commentary around that and I guess also just kind of how we should think about that for the rest of the year?

Yes. It was a little higher normal. If you look back, we almost always run between 1.5% and 2%. I think it was 2.1% or something for the quarter. We had clean up at actually an operation that was doing really well. I think it's an aberration. I think we'll be back below 2% this quarter. Mike Petusky – Noble Research: Okay. So kind of 1.5 to 2 is the…

Yes. Mike Petusky – Noble Research: Go forward?

Yes. Mike Petusky – Noble Research: All right. And guys, I think that may be all I have. Great job.

Thank you. Mike Petusky – Noble Research: Thanks.

(Operator Instructions) At this time, we have no further questions.

Okay. Well, listen, I know there's a lot of companies reporting this week. Thank you for your time. We're available if you have additional questions later today or later this week. And we appreciate your support. Thanks.

Thank you. This concludes your conference. You may now disconnect.