U.S. Physical Therapy, Inc.

Good morning, everyone. Welcome to U.S.

Physical Therapy's Year End 2011 and Fourth Quarter Earnings Call. With me here in Houston, Larry McAfee, our Executive Vice President and Chief Financial Officer; Glenn McDowell, our Chief Operating Officer; and Rick Binstein, Senior Vice President and General Counsel; Jon Bates, our Vice President and Controller.

Before we begin our call today, I'll ask Jon to cover our brief disclosure. 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. Let me start by saying that I'm very happy to report that we're going to cover in detail a number of very positive things that occurred for company in this fourth quarter and 2011 year.

Before we do that in order to better understand our results, and because of some of the unique circumstances, I'm going to ask Larry to go ahead and cover the financials and some of the circumstances in greater detail. And then I'll add color to the operating results following Larry's discussion.

First, I'll go over the company's annual results. Net revenue increased 12.2% to $237 million, due to a 12.3% increase in patient visit, which was partially offset by a decrease in our average net revenue per visit of about $1.20 because of last year's Medicare rate cut.

Other revenue included a $2.5 million increase in physician services. Our total clinic operating cost ran at 74.4% of revenue.

Our provision for doubtful accounts for the year was 1.6% as compared to 1.5% the year before. Our corporate office costs as a percentage of revenue were reduced to 10.4% in 2011 as compared to 10.8% in 2010.

Our operating income for the year was $35.9 million.

In 2011, interest in other income, included a pre-tax gain of $5.4 million related to a purchase price settlement of an outpatient physical therapy group that we acquired in I believe March of 2010. As required by current accounting standard since this reduction in purchase price was pass the 1-year anniversary date and thus outside the adjustment period, this amount was recorded as a gain rather than as a reduction of goodwill.

In 2010, the year before, we had other income of $578,000 from the sale of a 5 clinic joint venture. Our provision for income taxes as a percentage of income was 34.6% in 2011 versus 36.1% in 2010.

For the 2011 period, $3.8 million of that $5.4 million gain was non-taxable.

Our reported net income attributable to shareholders increased 34% to approximately $21 million and earnings per share increased to $1.75 from $1.32. The 2011 gain had an impact of $0.40 per share and positive adjustments in 2010 had a positive adjusted effect of $0.10 per share.

So if you exclude those items, which are really kind of unusual and non-recurring, our diluted earnings per share would have been $1.35 in 2011 as compared to $1.22 in 2010.

Management's earnings guidance have been in the range of $1.31 to $1.35, so we finished at the high-end of the range. And we did slightly better than the analyst consensus estimate of $1.34.

Same store revenue for de novo and acquired clinics open for 1 year or more increased by 1.7%. Our average net rate per visit increased slightly, while same store visits increased by 1.5%.

This was the company's first annual increase in same store visits since the onset of the recession in 2008. During 2011, we opened or acquired 41 clinics and closed 17 clinics, ending the year with 416.

Now, I'll go over the quarterly results. Net revenue increased 13.8% to an increase in patient visits of 16.9%, offset by a decrease in average net revenue per visit.

Total clinic operating costs were at 75.6% of revenue. Corporate office costs were $7,088,000.

The increase is primarily due to higher accrued incentive comp in the quarter and an anticipated legal settlement reserve.

Our operating income for the quarter was $7.7 million. Other income included the gain of $5.4 million related to the purchase price settlement.

The reported net income for the quarter was $8.2 million compared to $4.1 million in the fourth quarter of 2010. Earnings per share were $0.69 versus $0.35.

Excluding the purchase price gain, EPS would have been $0.29. Analyst consensus estimate was $0.28.

Same store visits increased 3%, while the average net rate per visit decreased 2.9%. This was the company's first quarterly increase in same store visit since the third quarter 2008.

Our adjusted EBITDA for the year ended 2011 increased 15.3% to $35.2 million. During the year, the company repurchased approximately 255,000 shares at an average price of $18.28.

We announced today that we have increased our dividend. The quarterly dividend was raised by 12.5% from $0.08 to $0.09 per quarter.

Also we gave preliminary earnings guidance for the year. We expect earnings at this point for the year 2012 to be in the range of $17.1 million to $18.1 million in net income and $1.43 to $1.41 in diluted earnings per share.

That represents our earnings from existing operations and as the norm -- and as we do acquisitions, if they are significant, and we'll adjust guidance accordingly.

Thanks, Larry. So let's talk about and provide some color to the operations, and touch on a few things.

First, in very simple terms, the company finished the year much stronger than we started it.

Of note and as Larry mentioned, for the quarter we're able to deliver 3% positive same store growth, first same store growth that we have produced in a number of years. And that was enough to tip us into positive same store growth territory for the year on a visit basis.

That coupled with our solidly performing acquisitions helped to deliver for the quarter 6.9% growth in revenue, muted slightly by a rate reduction that occurred within earlier in the year Medicare change that began in 2011.

The good news is that for 2012 Medicare has provided us with a slight rate boost for the year. And the President recently signed off on the payroll tax bill, which included some very positive elements with respect to having to numerate for us for 2012.

Also as we look at our final quarter's performance in 2011, this was a best net rate quarter of the year, the best clinic visit volume of the year and the best total volume and revenue quarter of the year, with a significantly stronger December than we've experienced in years passed.

For the year, adjusted net income before those items, Larry, explained earlier rose approximately 12%. Net revenue increased over 12%.

And physician services revenue grew by over $2.5 million for the year.

Also of note, in the fourth quarter, we were able to reduce the salary cost as a percentage of revenue, 80 basis points from the prior year period, which have been significant focus and effort for the operations team in latter part of the year.

Additionally, we continue to make good progress with the Fit2Work program. Team has been incredibly busy and we are seeing very good results from that program with a growing list of new customers spanning a variety of industry, including heavy manufacturing, chemical companies, supermarkets, steel fabricators, municipalities and food-related industries and companies.

With respect to our OsteoArthritis Centers of America Franchise, we've rolled out an expanded GPO of group purchase offering, providing significant discounts to our customers. We have put the third quarter franchisee default fully behind us with the unencumbered ability to resell the territory.

We've rolled out an advertising campaign in the Southwest Air magazine with alternating months focused on patient-related information followed by franchise opportunity information. We look forward to that part of our company growing, as we further expand our support and service offerings within that brand.

Finally, let's talk a little bit about deployment of cash over the past few years. Recently, for board meeting, we gathered some statistics on our cash usage for acquisitions, repurchase of minority interest and stock buyback program.

In the past 2 years we have completed 4 acquisitions, adding approximately 45 locations initially not including the organic growth as occurred post transaction. These fields deployed over $29 million in cash.

Adding to that was over $21 million in minority interest repurchase. Mostly fractional interest in earlier acquired deals and over $6 million in share repurchase in the last 2 years.

For a total of about $55 million in cash deployed to further grow the company.

At the same time, we initiated a dividend in 2010. And today with our earlier release and announcement, we've increased that dividend by 12.5%.

We still have a good deal of room under our current credit facility and we expect to use that room to further grow our company in similar and very creative deals as compared to those we've done in the past.

All-in-all, through the twist and turns that the economy has presented us over the last few years, I am very proud of our entire team here and across the many partnerships throughout the company, both at the clinical level, the partnership level, the management team and the corporate support. They have found a way to focus on areas that they can make a difference and for the benefit of our patients and our partnerships, and ultimately to the benefit of our shareholders.

We continue to work hard to deploy capital. We continue to work hard through program development and resource allocation to grow the company.

And we expect with a neutral-to-slightly positive reimbursement year. This will be a good year for the company.

We appreciate your continued support.

And with that, operator, we'll open up for questions.

I am just curious -- I know you don't want to provide a lot of guidance for 2012. But could you say whether the December strengthen volumes has continued into the New Year?

We've seen the December volume continue. We've been blessed with good weather, I think throughout most of the country for the most part, with just a few exceptions and so far so good.

I don't know if there's any big explanation for why you're seeing the rebound beyond all the many good things you're doing to drive the company's performance. But is there anything you'd point out besides weather, besides modest improvement in the overall U.S.

economic picture that might account for the volume strength?

We've got a number of things. Honestly, I think it's a combination of things.

I think that the general sentiment in the economy has improved. I think the fear that was there has ratcheted down to a certain extent.

Jobs numbers have improved modestly. Hopefully, we'll continue to do that over some period of time.

On our end, we've further expanded our sales team, getting deeper and deeper, and in some cases doubling sales forces in larger markets. Fit2Work has added a nice revenue stream, although it hasn't been made a huge difference in our payer mix, which I am sure we'll cover in a minute.

It has added significant revenue to the company through this tough period. We continue to get a lot of traction with that.

We continue to have high demand. And I continue to believe we're just scratching the surface.

So again, everybody has been very focused on trying to get to a positive same store result. The operations team, support staff, either the partners, the clinicians through their marketing efforts, and then coupled with that I think the environment has begun to improve a little bit too.

I'll just ask one more and then hop back into the queue. You mentioned the osteoarthritis.

Can you give us any more color on where you're at with that and what we might expect in 2012?

Yes. In terms of the OA program itself, we've got probably about 80 licensed locations.

We've got 80 franchises. We've got 71 clinic locations that have been bought.

And we've got basically 32 clinics have opened so far with 4 more to open in the next couple of months.

So we've got, Brooks, the way this works is we get a front-end fee for training. And then there's kind of a skip period that typically averages about 6 months to give the clinics time to get opened.

And so out of the 70 some markets that we have sold, we have not quite passed that number open today, so there'll be a continued progression of openings. We continue to work on the sale cycle to expand into new markets.

We continue to look at products and services. We've had some interesting meetings in the last few months with some additional companies.

We've expanded the GPO offering, which give our franchisees the ability through us to purchase goods, and services, and the drugs, the devices that are injected into these joints that provide the relief. And so we expect to continue to grow it going forward.

We're looking at some other things that we prefer not to talk about just yet. But so far so good and we expect continued growth over the next few years.

If I can just think out loud for a second. Your qualitative comments seem pretty enthusiastic.

Just curious, if we sort of add back the $0.05 or $0.06 that the default had the impact. And I look at your lower-end of your EPS range, I would think it would be higher than that.

Because essentially low-end to your range is almost flat with what this year would have been excluding the default [ph], but yet it sounds like things are a lot better certainly than they were a year ago. So any thoughts on that?

Hopefully we’re being conservative. Again, it's not to low ball the number, but look at our history, we've repeatedly beat our guidance.

But the same token just coming out and shoot, we want to have some number that we have to come back later in the yearend.

I mean do you expect, it sounds like, in terms of pricing your outlook at least from the government side is virtually flat?

Actually the government is going to increase and we'll have additional disclosure about this in the 10-K, which will filed tomorrow. But it's a 4% to 6% increase the way it worked out.

And Larry to comment and early you mentioned that the default, which was about $0.06, I don't expect that. Just to add a little color to that, that default involved a single franchisee purchasing and attempting to license, we had about 40 plus 20, 60 total locations with 1 franchisee.

I think that you'd have to look at that that was a 1x event. I don't expect this to have another franchisee, where we would even allow them to purchase that many markets upfront.

So I'm not sure you can necessarily add that back and then add that to the go-forward look, if it was kind of a unique circumstance, we learn from it. We've adapted some things here, but I don't expect another 60% group to jump out in this year or next year or any other year.

And that way we've had very good growth, even with that default in physician services. It accounted for only 8% of our after-tax income last year.

I mean, that default was huge for that part of the business. And so just either, we're not saying that I think what happened frankly is unfortunately earlier in the year, in the first few quarters and we thought that was good revenue and earnings and overstated.

So maybe a part of that, maybe you did see some of that physician revenue not repeating itself as you adjust it?

I think it will grow this year from last year. I mean just to assume that it's going to triple or something.

And I don't think that's a good assumption. And again, as we do acquisitions, as we normally do, we'll revise the guidance then.

Just on the rates and then I'll move on. So to say, you get mid-single digit on the government side.

Is your pricing assumption on private sort of flat, or I mean do you care to share that with us?

Yes, I think pricing on private is hopefully flat.

So if it's down a little bit, I mean, net of it all, is it a safe assumption sort of flat year-over-year all in on your revenue rotation, is that fair?

I think flat to up slightly. It's what we're working toward right now.

And could you just disclose the and/or just give a little color, what was that legal settlement?

Well, it's early on in the process. We put a reserve aside and it was about $0.5 million.

As it is unfolds, we'll have more disclosure. We just want to make sure that we had it reserved.

So that was obviously in the corporate office comps, correct?

Correct.

And then any other reason for the doubtful account sort of jump sequentially?

We did a bunch of clean up at yearend. I mean, if at the year we ended up at 1.6% versus 1.5% from prior years, the quarter I acknowledge was a little higher than normal, but it was really just cleaning up stuff at yearend.

Can you disclose maybe just a little bit more your assumptions around net rate and same-store visits in your '12 guidance?

I don't know. We've guided on the same-store basis.

I'll tell you that same-store for the fourth quarter was positive 3% on volume. For the year, that's in positive territory or 0.5%.

We haven't guided '12 on a same-store basis, although we did anecdotally say that December which was incrementally a much more positive month for us than it is normally with the holidays and other things that whether it be weather, a combination of some of the things that we're doing here and improving economy, volumes continue to be on par with what they looked like last quarter. They've been positive thus far.

We hope we can continue that.

Chris mentioned that January and February had good patient volume. We had good weather.

Other revenue, isn't there a small part of that that's not related to the physician services?

Yes, management contract.

Yes, we had about 15 locations worth of management contracts.

What percentage of that other revenue is the physician services business?

It's the vast majority of physician services.

Jon is saying it's 80% to 90%.

Of that revenue, how much of that in '11 was attached to the front-end fees?

Most of it would be the front-end fees, because as you sign up, you get a large payment upfront when you do the training. And then once the clinics are open, you get a management fee monthly for 5 years.

So most of it would be upfront fees. So what's going to happen is early on the revenues and the profits are kind of lumpy and as the business continues to grow and you have more and more of open and up-and-running clinics, it's going to smooth out the revenue and earnings.

So it will continue to grow.

I think it was 71 markets that you've sold, although they'd been opened. You've received the front-end fees on those?

Correct.

Do you have any guidance in terms of how many additional markets you hope to open in physician services in '12?

I don’t know if we’re prepared to discuss what we expect for the year at this point.

There is a much longer sales cycle to this than there is with what we do on the outpatient side [indiscernible].

And to be honest, just a year into this, we've been a little lumpy. We've been through periods where we've gone and gone great guns and we've been through the periods where it's been a little bit more modest.

And it's continuing to go forward. I don't have a number that I'm ready to throw out at this point.

I just was looking at our actual numbers. I think we may have overstated the percentage.

The physician services was $5.6 million of revenues in 2011 out of $10.4 million.

It's a little more than half.

But the percentage of that front-end fees makeup is 80%, 90% of that?

Yes, 75% is what Jon is saying. But again, you have to remember a lot of those clinics don't open for 6 months.

So this year, you'll have more and more clinics turning off the monthly fees.

I'm going to publicly confess some ignorance on this issue in terms of government pricing in your core business. I think I assumed -- I know I had assumed that when I saw essentially the flat adjustment that it would be roughly flat for you guys.

Can you walk me through and maybe a few other ignorant people on this call what makes up that 4% to 6% you're looking for there?

Essentially with Medicare, what you're looking at is that with the reimbursement rate the CMS comes out with is on a yearly basis there are changes and modifications based upon geographic price indexes throughout the country. So different areas of the country have different statistical analysis which either lowers or increases that Medicare puts out depending upon whether you're urban or rural there are analyses that you've go through that will affect your overall pricing.

So when you look at what we call the GPCI index impact across the board, generally speaking in most of our markets it was slightly positive, which is where we think we'll see a slight increase over the set fees.

And we have additional disclosure related to that that will be in the 10-K.

I did hear you right when you said you thought you'd actually going to get a 4% to 6% bump.

That's what the calculation was.

A couple of housekeeping items that I regularly keep track of. Sales force numbers and how many facilities covered?

Yes, currently at the end of the fourth quarter, we had 77 total sales reps covering a total of 318 locations. Most of those were full-time or part-time traditional sales reps.

We still have 5 commission-only sales reps that are out there. If you look at our visit productivity, visit productivity numbers for the fourth quarter was 11.04, again it's per visit for the fourth quarter was 4.23 and our average visits for all of our durations which is the average number of times we see a patient from evaluation to discharge was 10.5 in the fourth quarter.

What are those comps against versus of the same period, previous year?

If you look at these visit productivity, Q4 of 2010 we were 10.71, so we were up slightly. Units in the Q4 of 2010 we were at 4.21, so again up slightly.

And durations our visits per referral in Q4 2010 we were 11.02 so our durations drops, so slightly in fourth quarter of last year.

And then do you guys have the pair mix that you normally have.

The combination of private and managed care was 53%. These stats are for the fourth quarter.

Workers comp was 17%. Medicare and Medicaid combined was 24%.

And then other was 6%.

Can you guys just talk about because to me it seems like I would agree with your previous person that was essentially saying maybe you guys are being conservative and I think you guys basically conceded that point, but to me it seems like the thing that can move the needle outside of the range potentially to be beyond the upside of the range is M&A activity. Could you guys just talk about and I know you're always looking at things and all the rest, but are there needle moving deals out there that you are actually having at least some level of discussion about how you define the needle moving deal?

We don't do deals that aren't accretive.

Absolutely.

So if you look, for example we closed the single clinic acquisition in January, well that one big enough to announce and frankly I didn't adjust the numbers for it. Typically, if we do a group that have 5 or 10 or more clinics then we have an operating contribution or add at least several cents if not more, then we revise guidance.

Just kind of randomly saying are there deals out there you know 20 to 40 clinics where you are in discussions.

I don’t think we ought to get into that.

I don’t want to either. Some companies preannounce as soon as they have a handshake and that puts a lot of pressure on getting things to close.

You're going to have to rely on how we have done it historically which is to announce once we get something close and then we update and provide color at that point.

Yes, to put additional perspective on the guidance, because of that default which came out of nowhere, frankly. We're out of the blue.

We had a lower guidance in the middle of the year. We'd never have to do that before.

We don't like doing that. The market doesn't like us doing that.

So maybe we are being overly conservative but at same time I think we're little gunshot right now.

And that fair enough on the M&A front, you guys have been excellent, A-plus in terms of integrating these deals and doing good deals and the rest of it. I guess that's why makes us to hear that there are other things out there.

Mike, just to your point. There are other things that are out there like we have done in the past.

And we will continue to be active.

Just a few questions, Chris, you talked about one of the reasons you saw some nice growth as the sales force expansion. And I believe you certainly invested in that strategy a lot over the years.

Just we look out to 2012 now with the guidance et cetera, should we assume you are going to consider adding bodies there or is this just sort of a question of leveraging your existing base?

I can tell you, where we are adding bodies recently is really in 2 areas, I'm going to talk about this little bit more. Within markets where we've had somebody for a while and we've continue to grow in those markets.

So some of the bigger markets, it's been in the work comp area and it's been with the newly acquired relationships with new partners through acquisition, maybe that hasn't had a defined sales force at least as we look at it in the past. And so those things as we continue to grow the company we'll continue to grow I think.

And I agree with Chris. And you may not see the number of locations increased significantly, but I do think we're looking at markets where we already have existing sales looking to add additional sales there, because we have geographic density from both the location and from the population of physician base.

And then there is some opportunity, with the new acquired partners that we have got on board to give them to look at sales the way that we do and that will takes a little bit of time, but we are seeing positive things from that stand point also.

And again I'm just coming back on the clinic expansion. I believe that if we look back at 2011, absent the acquisition in you probably opened about 4 clinics on a net basis, should we expect an acceleration this year?

We opened 21 clinics last year, we opened 19 the year before and 18 the year before that. It's been pretty consistent.

What I meant was would that be close to 17.

The once we close or those that we opened, often times we are also closing clinics that have been acquired. So you can't just compare the de novos to the closures.

Some of those closures are the acquired clinics.

And they are not equal. I mean the clinics were closing or even not contributing anything or drain or have been drain for particular period of time.

Some of those have been dark. And we've been unable to find a suitable person to put in their clinics that we're opening, obviously, contribute in fairly short order.

And there is a life cycle to some of these. We're going to continue to do as many as we can do.

That would be of the quality that we look forward to demand. And we'll continue to grow through acquiring clinics and there will be attrition between those 2 groups to a certain extent.

If you look at the 2 years, let's just go back and look at these numbers, this is in a schedule at the end of the press release embedded 2010, we open 19 clinics, we acquired 25, we sold 5 in a joint venture which is unusually. We hardly ever sell clinics.

And we close 15. So if you want to look at it as we said before, we typically the norm has been the last 2 years to open 20, acquire at least 20, close around 15.

I mean that again, the closure cost is minimal, I think, Jon, it will be less than a $100,000 last year. So we closed 17 clinics, the cost is less than $100,000.

But the savings we got from the earning strain on those.

Well and not only that these clinics that are dark, are not performing well, taking an inordinate amount of management time. This is of the ways we've been able to reduce our corporate cost as a percentage of revenue.

I frankly have a few poor performers around.

Right, now, again, I know the guidance and assume no acquisitions. So I was sure if that meant you were going to be more aggressive on the de novos versus acquiring?

It's just a matter of finding the right people and at a point when they're ready to go.

And finally again, Larry, you bought back some shares in the quarter and you probably have about under 3 million remaining given the current authorization, is that correct?

I don't remember. Again, I know it's a separate foot note in tail.

I apologize, I just don’t have it in front of me.

I guess if you use the authorization. It's fair to assume you'll probably put into new one.

Yes. If we made the decision to buy more than that and when we went to Bank of America, I am sure they will accommodate us in that provision just put in their several -- a while back.

Just I may have missed it in the discussion, but with regard to the fourth quarter corporate cost. Those were up maybe and I think it was regarding reimbursement, et cetera.

Could you give us some color on that?

Yes. It wasn't reimbursement, Greg, but it was as incentive comp accrual was higher.

And then we had a legal reserve, it's just over $0.5 million.

And the reason incentive comp accrual was higher we've dumped a lot in the third quarter following that franchise to fall. In the fourth quarter, we actually finished operationally with a bit of a rally and so we're able to swing some of that back end if you just look at quarter-to-quarter.

And if you look at the proxy, the executive teams, incentive comp is tied to earnings per share. So once we got back to certain levels, we ended up the high end of the range.

It required us to book more incentive comp.

And so if I kind of look at it, well, even on annualized basis while the '11, 7% versus '10, 7%, I guess that includes that the legal cost et cetera included in that piece?

Well, for the year, the corporate cost ran at, I think, it was at 10.4% versus 10.8%. And at backyard, it did include legal accrual.

So it would have been even lower. If we say it before objective is eventually to get corporate cost down to 10% or less of revenue.

And then if I look at the de novo, the same-store revenue growth for de novo plus acquired clinics was relatively flat. I am not assuming then that the de novo are the sort of the down side of that and the acquired at the upside or how could you just give it the once that we're open for year?

Could you give us a sort of feeling for those 2 groups in terms of their growth?

Well, we actually had whether its same-store is any clinic that we owned their seat belts in a year or more, whether it's a de novo or an acquired clinic. And in fact our de novos it did better, not that the acquired finished it poorly, but we really saw consistent growth across the board for the first time, since the recession on 2008.

And so, Greg, from the from a business perspective, we saw growth. From a revenue perspective, it was little bit flat, because of Medicare reduction in 2011.

Little bit lumping on a quarterly basis. When you look at, for a year, it was about a $1.20.

For the quarter, it was little bit more than that even though our fourth quarter had slightly higher net rates than the other quarters. But going forward, we should have a fairly stable net revenue per visit base to go for.

And then if I just look at the rate pieces of that total going forward looking out. Basically, what we were saying as the Medicare side of things should get better obviously as you've said, and any is Medicaid I know it's small but from that standpoint is there anything there that looks positive negative relative to the rate structure.

Medicaid is less than 2% of our risk, so it doesn't make any difference.

So then the big piece obviously then is the private pay et cetera. Anything with regard to your discussions with people that it suggests any shift or change in either direction in that regard?

I think the shift to change is not necessarily in this year. We've seen a couple of payers late in '11 now that they were going to follow Medicare's MPPR reduction that it occurred the year prior.

A small part of our business, so I expect a fairly neutral environment this year for commercial unless something changes that hasn't happened.

The commercial payers they don't piggy back off the Medicare rate unlike they do in other healthcare sectors. What they were saying is that they were going to make some cuts that were similar terms of the formula to the MPPR cut.

But the commercial payer is typically on average pay more than the Medicare's do.

And then is there any color you could give us on coding. Has there been any pressure on the part of the payers or the government or anything and in terms of how the coding is being done?

And do you expect any changes there?

No. Not at this point.

Basically CPT coding for 2011 was essentially unchanged on the on the outpatient rehab side compared to 2010. So no impact there.

And if I may go back to the point about the openings in the other revenues that physician services, did you have any sign-on of those 71 in the fourth quarter and where there any in January, February?

No, we do not have any new franchisee sign up in January, February of this year.

And none in the fourth quarter either?

I believe we have some in the fourth quarter. I don't have those in front of me right now.

Modest, in other words. Most of them were done earlier in the year, is that the point?

Correct.

The dividend, you cleared that this is the second kind of round on the dividend, I guess. Is there any policy or can you give us any color as to how the board looks at the dividend and any background to the increase in the dividend.

When we initiated the dividend, one of the thing that we talked about on the board was that we wanted to increase it annually. And we don't targeted yield.

Sometimes you'll see, probably some will say we're trying to have ex amount of yield on their stock but the dividend is something we want to continue increase over the years.

But payout ratio or anything like that is arranged or anything like that?

No, we have a payout ratio. It's not like the utility or passed through of that LP or something.

Greg, the majority of our funds were going to use to grow the company, grow our volume, grow our revenue, acquisitions and other things. We have enough cash.

We're able to do this as well.

We're really in a unique position where we can continue to do acquisitions that may practically been self-funding. We do de novo.

Start-ups, they are self-funding. We've been able to buy back shares and pay for it pretty much around cash flow and we had cash leftover so we started paying dividend.

But if we look at the buyback in the dividend is that kind of by the board looked at as one piece?

No, they are viewed separately. Again, the best use of funds in terms of a return are start-ups.

Second best use is an acquisition. You can argue which is better than I will look at it between dividends and share buybacks.

We look at share buybacks the way we look at acquisitions as a multiple of EBITDA, certain trading ranges and we've looked at cash deployment opportunities.

We bought back our shares at less 7x EBITDA. We pay 5 to 7 typically for acquisitions/

And in the quarter did you say how much you bought?

Yes. It's in the release.

We bought 129,000 shares in the quarter and 255,000 for the year

And about $6 million worth over the last 2 years.

And then the 129,000, given me an idea of the price?

Well it's in the release. It's $18.39 in the fourth quarter and then for the year it was $18.28.

Average price, obviously, we bought it higher and lower than that.

Okay, thank you. We're available if you have other questions after the call.

We appreciate your time and attention this morning. And we hope you have a great day.

Thank you.