Good morning. My name is Lynn 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 2012 Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the conference over to Mr. Chris Reading, Chief Executive Officer. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to U.S. Physical Therapy's First Quarter 2012 Earnings Call. With me here in Houston, Larry McAfee, our Executive Vice President and Chief Financial Officer; Glenn McDowell, our Chief Operating Officer; Jon Bates, Vice President and Controller, and Rick Binstein, our Vice President, General Counsel, and Chief Compliance Officer. So, before we begin, I would like to ask Jon to cover 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. Before I ask Larry to cover the financial performance in detail, I am going to provide a little color and go off script a little bit just so you know what we did for the quarter, what's going on here, and where we're focused. Overall, we had an excellent quarter. Bonds were up about 12%. EPS of over 21%. We had very steady net rate, good net rate of nearly $105 a visit. We had good cost control, although we still have opportunity here, which I will talk about in a minute. Very good corporate cost control, and we'll take a minute to just complement our team here, by department, and I hope I don't leave anybody out, because everybody has done an excellent job: HR, IT, Financial Services, Managed Care, Legal Department, Development, the Operations team. Everybody here carries a big load and they have worked very, very hard, as we have not only grown the company organically, but onboarded a number of these acquisitions. And on that vein, these guys work particularly hard to make sure that the service level is very high, being very careful to get these fields integrated quickly but done the right away, so that we can hearts and mind intact and keep everybody focused on growing the business. They've done an excellent job at that. You will recall that just a number of years ago, we -- this company had only grown organically before the current management team was here, came. We've stretched everybody. We've done a lot of very good acquisitions and that has propelled the company's growth even further. We will continue to deploy capital in that way and we're encouraged with some of the folks that we're talking to right now. We had -- in the quarter, we…

Thanks Chris, I will go with the first quarter 2012 results as compared to the first quarter 2011. Net revenue increased 10.3% from $56.7 million to $62.6 million, primarily due an increase in patient visits of 12.3% as the average net rate between the two periods was basically flat. Clinic salaries and related cost were 52.4% of that revenue of the recent quarter versus 52.2%. Rent, clinic supplies, contract labor and other costs were 19.9% for both periods. Provision for doubtful accounts increased slightly, though it was still well within our normal range. It was 1.8% in the recent period versus 1.1% a year ago. Corporate cost declined to $6,262,000 as compared to $6,481,000. Our corporate office costs as a percent of revenue was reduced to 10% in the recent quarter versus the 11.4% a year ago. Operating income rose to $9.9 million from $8.7 million. Net income attributable to non-controlling interest was reduced. The reduction is attributable to the fact that the company has increased its ownership interest in certain of its partnerships. Tax rate for both periods was 39.3%. Net income to common shareholders was $4,788,000 versus $3,746,000. Diluted earnings per share rose from $0.31 to $0.38. Same store revenues for de novo and acquired clinics open for year or more increased 5.9%. The same store volumes increase was 6% while the debt rate declined by one-tenth of 1%. It was the best quarterly same store revenue that the company has produced since 2004. Our adjusted EBITDA grew from $8 million in the first quarter of last year to $9.4 million in the recent quarter. That’s an increase of 17.4%. With regards to our annual earnings guidance, we're not increasing it at this time, but we may do so next quarter or in conjunction with an acquisition. The company announced that a regular of dividend of $0.09 per share will be paid on June 1 to shareholders of record as of May 15.

Thanks Larry. With that, operator, I know there's a lot of calls today so, let's go ahead and open it up for questions.

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

Probably not easy to quantify but I know last year the weather was terrible, this year it was fabulous. I mean, any other way to describe -- I mean 6% volume growth in same-store sales is off the charts, right?

Yeah, it's pretty good. We were happy. I mean, so we had 3% in the fourth quarter -- around 3% I think from memory, in the fourth quarter of '11, which, as you recall, was really the first quarter we got any decent same-store volume track since the recession started. Unquestionably, weather was a factor. I think we're seeing things improve in the economy. We've added sales reps. We've added programs. We're focused on fit to work. We're doing a lot of things. So I think the net combination of those is positive but it's all mixed together and it's tough to sort out which part of the soup is doing what, so. 6% is a very strong number, though, for us.

That’s great. And I know you guys sometimes don’t like to -- I know, I think you called it out last year, don’t really want to give the look in into the -- until early in the following quarter but anything you can say? Was there any change during in the quarter at least or in terms of grade trends?

The only comment I'll make is it's steady although I haven’t gone back and looked at what volume did from quarter one to quarter two in '11. So, on a same-store basis I really don’t have any color that I can provide but we're staying steady.

And Chris, you mentioned a bunch of these -- when you framed my new outlook of my next picnic, are any of these guys -- what are the trends in terms of all these companies? Are you getting a lot of new companies on there? I mean, I imagine a lot of these that you listed are existing long term...

Actually a lot of -- a number of those companies are new. And some are new by in this quarter and some are new in the last four to six months. So, we're getting pretty good roll in and some of those are more regional, some of those are local, and some of those are more national. So it was kind of a mix but it's been steady. And the guys on that team are doing a very, very good job and literally right now are traveling 5 days a week just to keep up with the demand.

Got it. And then just lastly, I know you've touched on it the last couple of quarters, some of your initially for cost cutting and I think you called out making some select cuts basically across clinics of non-mandatory personnel. Has that proceeded, has that occurred, is that occurring or?

Yes, it continues. We have been slow quarterly a little bit with some seasonality. So, it's not as many. We did make a number of cuts in the fourth quarter across all the regions. It's more just trying to keep it dialed in and quarterly appropriate and not allow it to creep. And in particular, when this is really strong -- there's a little bit of tendency in the field to project that out and to want to bring on staff right at the outset of that. And so, it’s a continual thing that we just have to stay focused on. I do think, in general, as we roll in these deals, the water gets a little bit muddy because somebody may be a little bit higher than we are in a particular area and that may swing our numbers temporarily, but it also gives us good opportunity to continue to help them to grow and to dial that in over time too. So, that’s not going to go away. We're going to have continued opportunity and as the market progresses over the next few years, we're going to have to continue to progress right along with it, but I think we can and I think we will.

Your next question comes from the line of Brian Tanquilut with Jefferies.

Chris, just wanted to hear your thoughts on the pipeline for de novos. You added -- or you opened two locations during the quarter and I figured you're still getting a lot of interest from the physical therapists out there out there. Just wanted to see what your expectation is in terms of pace and what the outlook -- pipeline looks like.

Yes, we are occasionally lumpy by quarter and we were probably [ph] a little lumpy this last quarter. I expect we'll do about what we've done in the last couple of years. We're seeing good people. It ebbs and flows a little bit, but the team's focused. And I think we'll do okay. The acquisitions that we brought on are seeing good growth. Our partners are strong partners, continue to look at opportunities. One thing that I didn’t mention on my little colored narrative is that really for the first time in addition to doing the kind of deals that we've always done, we believe that over the next few years that as -- as the health care market continues to be difficult for small providers that there's going to be an opportunity and we're beginning to see that now already. There's going to be an opportunity to roll in, really on a pretty efficient basis, some little practices in markets where we already have good market coverage, strong partners, strong partnerships and really begin to assimilate those into our existing partnerships. We really haven’t done much of that until recently. Now that Rick's here on the legal team, we're able to handle all that work internally. We have a partner training program that kicks off from next month with our top partners across the country. Our biggest partnerships, really beginning to take them through the anatomy and the psychology and the practical aspects of prospecting, integrating and assimilating small practices and so you'll see a focus on that as well. And those will be kind of jump-started organic opportunities that don’t cost much and that already have some volume that we're able to roll in and kick start things a little bit in that regard as well, so.

We didn’t put it in the narrative of the press release but if you look at the schedule in the back we did 2 single clinic tuck-in acquisitions in the first quarter.

Yeah, I saw that. Larry, since you mentioned acquisitions, and Chris as well. It seems like there's a valuation gap right now. I mean, we've seen some of these larger private deals go for much higher multiples than where you guys are trading and where I'm guessing some of these smaller guys are looking to sell. So how does the industry reconcile that as you look for acquisition opportunities of different sizes?

It's only really the big players that can get the multiples you're talking about. If you've got 50 plus clinics, you can get high single digits, low double digit multiples. If you’re a group with one location, you may not get 4x EBITDA for it. If you have 5 or 6, it's still in the 5 to 7 range. So there's quite a bit of disparity based on size but private equity guys are paying up for platforms and those are -- that’s a 50 plus clinic group normally.

So in your sweet spot which is 10 clinics or so for deals, you're not seeing any multiple expansion?

No, not really. It's 5 to 7, I mean the deal we -- all the deals we've done, the ones we're looking at are all typically in that range, at least on the PT side.

And Larry, are you bumping into these platforms now, now that they're better capitalized, I would assume? Are they getting more aggressive with acquisitions?

Yes, I think they continue to look at a variety of different size deals and we've bumped into them a few times. We've actually done okay most of the time. It's really a different -- it's a different model than we offer.

Yes, I mean, we're looking for somebody who wants to continue to grow their practice and stay...

And continue their identity in the marketplace.

Keep an equity interest. Some of these platforms, if they do an acquisition they want to buy 100%, they want to change their name, they want to change even some of the ways they go to market and treat clinically, so it's a...

Kind of an apples and bananas offering.

I hear you. And then last one, as I look at the expenses, do we still have opportunities to squeeze some gross margin as we think about business per therapist? I mean -- if you don't mind give us an update on that? And then on the other side of it, corporate expenses are now at 10%, kind of like within the goal that you stated. Is there more that you can do there to leverage the corporate infrastructure?

This is Glenn. On the productivity side from a visit per FTE [ph] standpoint, clinically, there is certainly upside for us. In Q1, we were at $10.87 million which is down a little bit from where we were running. So there is still opportunity for us. Our goal is to still to get the 12. The ops team is focused on doing that and we are constant looking at the things that we need to do to impact that.

And now on the corporate side, it s really a function of as we roll in deals, for the most part we are able to assimilate those with either limited expansion here or very modest expansion of people. Now there's certainly some departments which from time-to-time we have to pick up additional personnel on, but that’s really where the opportunity is, I think, for us forward. And I think over time, and you may not see it this year necessarily, but on a quarterly basis, wouldn't surprise me that at some point in time we'll begin to dip below 10. But we've got good people here that have capacity in terms of their ability to manage a much bigger company and I think we'll be fine.

Your next question comes from the line of David Williat [ph] with Keeley.

Yes, I noticed the provision for doubtful accounts jumped quite a bit. Could you drill down a little bit on that? Is it an unusually large jump this year or was it unusually low a year ago?

It varies quite a bit from quarter-to-quarter. If you go back and look over the last 10 years, our bad debt reserve year-in and year-out averages about 1.5%. Some quarters it's 2%, some quarter it's 1% [ph] but 1.8%, is-- I mean, that's really not unusual.

So when you look at the comparison from first quarter a year ago, it was probably lighter than normal. [indiscernible] quarter that's a little bit...

Was there anything in particular that happened in this latest quarter that would...

No, no. You're talking about [indiscernible] fractions of 1%. I mean, it's [indiscernible] individual line item, but I mean, I still think for the year we'll probably average around 1.5%.

[Operator Instructions] Your next question comes from the line of Mitra Ramgopal with Sidoti.

Just a couple of questions. First, given the strength you've seen in same-store business, does that alter your acquisition strategy at all in terms of maybe being less aggressive?

No, not a bit. In fact, some of the same-store volume growth that we're seeing -- and I just have to compliment both the longstanding organic partners as well as the acquired partners. They've done equally as well and they're equally as focused. So it only makes me more enthusiastic to continue to go out and grow the company because I think, we're -- we have a capable group of people that even in a tough market can figure out a way. And so -- and that includes the acquired partners, so it makes me absolutely no less enthusiastic. We're very enthusiastic about it.

Thanks. And it seems like clearly you're going to rely increasingly on increasing the volume. It looks like pricing is starting to, sort of, settle down at current levels?

Well, it's not -- I would love to tell you that as much as we've like to have $110 net rate, there's a limit to that and seasonal cycles in terms of what's going on with the government and other things. I think we've said all along that we felt like, this year at least, pricing would be steady, if through a combination of deals or other things that we're working on, if we can get that up a little bit, I think that would be positive. In terms of the long-term, I don't know. But I don't think there's a massive amount of elasticity in the pricing number right now, from my perspective. But I also don't think there is a lot of downside either. I think it will be a steady year.

Okay. No, that's definitely helpful. And finally again, maybe Glenn can give me an update in terms of the sales force and where we stand as it relates to clinic coverage?

Sure, Mitra. At this point in time, at the end of the first quarter we had 69 sales reps, which was down a little bit from where we were previously, covering about 310 locations. And that includes all our full times and part times plus several industrial sales reps that we have out there.

Thanks. Just a quick reminder of like how that compares to, say, a year ago?

A year ago we had about 77 reps. What we started to do is look at our sales rep force and we're churning the bottom, those that aren’t meeting our goals for growth. We're turning over and as we do that sometimes it takes us a little while to find an additional sales rep. But the sales team that we have right now is doing an excellent job, as you can see by the results of the first quarter. So we're very happy with where we're at.

And there are no further questions at this time.

Very good. Okay, thanks everybody. Larry and I and the rest of the group are around this morning and this afternoon if you additional questions. We appreciate your time and attention this morning, and we hope you have a great day.

This concludes today's conference. You may now disconnect.