PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SECTION 240.14a-11(c) or
SECTION 240.14a-12
U.S. Physical Therapy, Inc.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
-------------------------------------------------
(Name of Person(s)Filing Proxy Statement if other
than the Registrant)
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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2) Aggregate number of securities to which transaction
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
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fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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U.S. PHYSICAL THERAPY, INC.
3040 POST OAK BLVD., SUITE 222
HOUSTON, TEXAS 77056
(713) 297-7000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 2002
-------------------------
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders
(the "Annual Meeting") of U.S. Physical Therapy, Inc. (the "Company") will be
held on Tuesday, May 21, 2002, at 9:00 a.m. (EDT), at the Grand Hyatt New York
at Park Avenue (at Grand Central), New York, New York 10017 for the following
purposes:
(1) To elect seven directors; and
(2) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Pursuant to the Bylaws, the Board of Directors has fixed the close of
business on April 8, 2002 as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting. Only
holders of common stock of record at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
In the event that there are not sufficient votes to approve any one or
more of the foregoing proposals at the time of the Annual Meeting, the Annual
Meeting may be adjourned in order to permit further solicitation of proxies by
the Company.
By Order of the Board of Directors
/s/ Roy W. Spradlin
Roy W. Spradlin
President and Chief Executive Officer
Houston, Texas
April 25, 2002
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
U.S. PHYSICAL THERAPY, INC.
3040 POST OAK BLVD., SUITE 222
HOUSTON, TEXAS 77056
(713) 297-7000
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 2002
-------------------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to stockholders of U.S. Physical
Therapy, Inc. (the "Company") in connection with the solicitation by the Board
of Directors of the Company of proxies to be used at the 2002 Annual Meeting of
Stockholders (the "Annual Meeting") of the Company, to be held on Tuesday, May
21, 2002, at 9:00 a.m. (EDT), at the Grand Hyatt New York at Park Avenue (at
Grand Central), New York, New York 10017, and at any adjournments thereof.
The Annual Meeting has been called for the following purposes: (1) to
elect seven directors; and (2) to transact such other business as may properly
come before the meeting or any adjournments thereof. If the enclosed form of
proxy is properly executed and returned to the Company in time to be voted at
the Annual Meeting, the shares represented thereby will be voted in accordance
with the instructions marked thereon. PROPERLY EXECUTED BUT UNMARKED PROXIES
WILL BE VOTED FOR THE ELECTION OF THE SEVEN NOMINEES OF THE BOARD OF DIRECTORS
AS DIRECTORS. If any other matters are properly brought before the Annual
Meeting, the persons named in the accompanying proxy will vote the shares
represented by the proxies on such matters as determined by a majority of the
Board of Directors. This Proxy Statement is initially being mailed to
stockholders on or about April 25, 2002.
The presence of a stockholder at the Annual Meeting will not
automatically revoke such stockholder's proxy. Stockholders may, however, revoke
a proxy at any time prior to its exercise by delivering to the Company a duly
executed proxy bearing a later date, by attending the Annual Meeting and voting
in person, or by filing a written notice of revocation with Dorothy N. Flato,
Corporate Secretary of the Company, at the Company's principal executive
offices, 3040 Post Oak Boulevard, Suite 222, Houston, Texas 77056.
The cost of soliciting proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by mail, the
Company, through its directors, officers and regular employees, may also solicit
proxies personally or by telephone. The Company will also request persons, firms
and corporations holding shares in their names or in the name of their nominees,
which are beneficially owned by others, to send proxy material to and obtain
proxies from such beneficial owners and will reimburse such holders for their
reasonable expenses in doing so.
The securities which can be voted at the Annual Meeting consist of
shares of common stock of the Company with each share entitling its owner to one
vote on all matters. There is no cumulative voting in the election of directors.
The close of business on April 8, 2002 has been fixed by the Board of Directors
as the record date for determination of stockholders entitled to vote at the
meeting. The number of shares of the Company's common stock outstanding as of
such date was 11,012,757. The presence, in person or by proxy, of at least a
majority of the total number of outstanding shares of common stock is necessary
to constitute a quorum at the Annual Meeting. Directors of the Company will be
elected by a plurality vote of the votes cast at the Annual Meeting. Abstentions
and broker non-votes will be treated as votes present for the purpose of
determining a quorum at the Annual Meeting. Broker non-votes will not be counted
as shares entitled to be voted on any matter.
A copy of the Annual Report to Stockholders for the year ended December
31, 2001 accompanies this Proxy Statement. THE COMPANY HAS FILED AN ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001 (THE "FORM 10-K") WITH
THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). STOCKHOLDERS MAY OBTAIN,
FREE OF CHARGE, A COPY OF THE FORM 10-K BY WRITING TO U.S. PHYSICAL THERAPY,
INC., 3040 POST OAK BLVD., SUITE 222, HOUSTON, TEXAS 77056, ATTENTION: DOROTHY
FLATO, CORPORATE SECRETARY.
ELECTION OF DIRECTORS
The Board of Directors is currently composed of eight members. All
directors hold office until the next annual meeting of stockholders of the
Company and until their successors have been elected and qualified. Prior to
April 2, 2002 the number of Board members was fixed at nine. Effective February
28, 2002, J. Livingston Kosberg resigned as a director of the Company (although
Mr. Kosberg will continue as a consultant to the Company). On April 2, 2002 the
Board reduced the size of the Board to seven effective as of the Annual Meeting
based upon a determination that the Board size was larger than necessary. Mr.
Eddy J. Rogers, Jr., previously a director, decided not to stand for reelection
to the Board. Mr. Rogers voted for the proposal to reduce the size of the Board.
Neither Mr. Kosberg nor Mr. Rogers resigned or determined not to stand for
reelection because of any disagreement with the Company on any matters relating
to the Company's operations, policies or practices. There are no arrangements or
understandings between the Company and any person pursuant to which such person
has been elected as a director.
At the Annual Meeting, seven directors will be elected for one-year
terms. Unless otherwise specified on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each properly
executed proxy for the election
2
as directors of each of the persons named below as nominees of the Board of
Directors. Each of the nominees has consented to stand for election and will
serve, if elected, as directors. However, if any person nominated by the Board
of Directors fails to stand for election or is unable to accept election, the
proxies will be voted for the election of such other person or persons as the
Board of Directors may recommend. THE BOARD RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES FOR DIRECTOR.
INFORMATION AS TO NOMINEES
The following information relates to the seven persons nominated by the
Board for election as directors. Each nominee currently serves as a director of
the Company. Also set forth is certain other information with respect to each
such person's age, the period during which he has served as a director and
positions currently held with the Company.
Position(s)
Director Held With
Nominees: Age (a) Since the Company
--------- ------- -------- ------------
Roy W. Spradlin 53 1994 Chairman of the Board,
President and Chief Executive
Officer
Mark J. Brookner(b) 57 1990 Vice Chairman of the Board
Daniel C. Arnold 72 1992 Director
Bruce D. Broussard 39 1999 Director
James B. Hoover 47 1993 Director
Marlin W. Johnston 70 1992 Director
Albert L. Rosen 78 1992 Director
------------
(a) At March 31, 2002.
(b) Mr. Brookner has served as a director and an officer of each corporate
predecessor (and subsidiaries thereof) of the Company since the
formation of the original predecessor, National Rehab Associates, Inc.,
in June 1990.
The principal occupation of each nominee for at least the past five years
is set forth below.
3
ROY W. SPRADLIN has served as Chairman of the Board of the Company
since May 2001 and as President of the Company since May 1994. From May 1994 to
August 1995, Mr. Spradlin served as the Company's Chief Operating Officer.
Effective August 1995, Mr. Spradlin was named the Company's Chief Executive
Officer.
MARK J. BROOKNER has served as Vice Chairman of the Board of the
Company since August 1998. Mr. Brookner served as Chief Financial Officer of the
Company from April 1992 to August 1998 and also served as Secretary and
Treasurer during portions of that time.
DANIEL C. ARNOLD is a private investor engaged primarily in managing
his personal investments. During the past five years, he had served on the Board
of Directors of both Parkway Properties, Inc., a real estate investment trust,
and Belco Oil & Gas Corp., an oil and gas exploration and production company. He
has also served as Chairman of the Board of Trustees of Baylor College of
Medicine.
BRUCE D. BROUSSARD has been the Chief Financial Officer of US Oncology
since August 2000. From December 1997 to August 2000, Mr. Broussard was the
Chief Executive Officer of HarborDental Properties. Mr. Broussard served as the
Chief Financial Officer for Regency Health Services, Inc. from 1996 to 1997 and
for Sun Health Care Group from 1993 to 1996.
JAMES B. HOOVER is the founding managing member of Dauphin Capital
Partners, a health care venture capital firm established in 1998. During the
prior six years, he was a general partner of Welsh, Carson, Anderson & Stowe, a
management buyout firm focused on the acquisition of health care and information
services companies. Mr. Hoover presently serves on the Board of Directors of
Quovadx, Inc., an e-commerce services provider to the health care industry, and
several privately owned health care companies.
MARLIN W. JOHNSTON has been a management consultant with Tonn &
Associates, a management consulting firm, since September 1993. During 1992 and
1993, Mr. Johnston served as a management consultant to the Texas Department of
Health and the Texas Department of Protective and Regulatory Services.
ALBERT L. ROSEN manages his personal investments and retired as
President and General Manager of the San Francisco Giants, a major league
baseball team, in December 1992.
4
CORPORATE GOVERNANCE AND OTHER MATTERS
AUDIT COMMITTEE DISCLOSURE
The Board of Directors has appointed an Audit Committee whose members
currently consist of Messrs. Johnston (chairman), Broussard and Rogers. The
Board has adopted a written Audit Committee Charter requiring the Audit
Committee to consist of at least three members of the Board and each member of
the Audit Committee is an "independent director" as that term is defined by
Nasdaq Stock Market Rule 4200(a)(14) Audit Committee. The Audit Committee is
responsible for, among other things: (i) engaging the Company's independent
auditors, (ii) reviewing with the auditors the plan, scope and timing of the
audit and any other services the auditors are asked to perform as well as the
auditors' report on the Company's financial statements following completion of
the audit, (iii) audit fees and (iv) the Company's policies and procedures with
respect to internal accounting and financial controls. The Audit Committee met
five times during 2001.
INDEPENDENT AUDITORS' FEES
Audit Fees. Aggregate fees for professional services rendered by KPMG
LLP in connection with the audits of the Company's financial statements and
reports for the fiscal year ended December 31, 2001 were $78,815.
Financial Information Systems Design and Implementation Fees. During
the fiscal year ended December 31, 2001, KPMG LLP rendered no professional
services in connection with the design and implementation of financial
information systems.
All Other Fees. In addition to the fees described above, aggregate fees
of $10,400 were paid to KPMG LLP during the fiscal year ended December 31, 2001
related to employee compensation consulting and assistance with filing of
registration statements on Form S-8.
The Audit Committee has discussed the non-audit services provided by
KPMG LLP and the related fees and has considered whether those services and fees
are compatible with maintaining auditor independence.
REPORT OF THE AUDIT COMMITTEE
In connection with the December 31, 2001 financial statements, the
Audit Committee (1) reviewed and discussed the audited financial statements with
management; (2) discussed with KPMG LLP the matters required by Statement on
Auditing Standards No. 61; and (3) received and discussed with the auditors the
matters required by Independence Standards Board Statement No. 1 and considered
5
the compatibility of non-audit services with the auditor's independence. Based
upon these reviews and discussions, the Audit Committee has recommended to the
Board of Directors, and the Board of Directors has approved, that the Company's
audited financial statements be included in the Securities and Exchange
Commission Annual Report on Form 10-K for the fiscal year ended December 31,
2001.
Respectively submitted,
The Audit Committee
Marlin W. Johnston, Chairman
Bruce D. Broussard
Eddy J. Rogers, Jr.
OTHER COMMITTEES
The Board has a Compensation Committee, the current members of which
are Messrs. Arnold (chairman), Hoover and Rosen. Until his resignation in
February 2002, Mr. Kosberg was a member of the Compensation Committee. The
Compensation Committee reviews matters concerning compensation of employees of
the Company. During 2001, the Compensation Committee held two meetings.
The Board has a Stock Option Committee, the current members of which
are Messrs. Arnold (chairman), Hoover and Rosen. Until his resignation in
February 2002, Mr. Kosberg was a member of the Stock Option Committee. The Stock
Option Committee reviews matters concerning the Company's stock option plans.
During 2001, the Stock Option Committee held two meetings.
The Board of Directors has a Corporate Compliance Committee, the
current members of which are Messrs. Johnston (chairman), Brookner, Broussard
and Rogers. The Corporate Compliance Committee reviews and assesses the
activities and findings of internal audits, the Audit Committee relative to the
compliance program and reports of material noncompliance within the Company and
approves resolutions and corrective actions proposed by management. During 2001,
the Corporate Compliance Committee held four meetings.
In November 1994, the Board of Directors established the Executive
Committee whose members are Messrs. Spradlin (chairman), Arnold and Hoover.
Until his resignation in February 2002, Mr. Kosberg was a member and chairman of
the Executive Committee. The Executive Committee assists management by providing
advice and recommendations when needed and performs such other services as
delegated by the Board of Directors. During 2001, the Executive Committee did
not hold any meetings.
6
There is no separate Nominating Committee of the Board of Directors.
OTHER CORPORATE GOVERNANCE MATTERS
During 2001, the Company's Board of Directors held eight meetings. All
directors attended at least 75% of the total number of meetings of the Board of
Directors of the Company and of all committees of the Board of Directors during
their tenure during 2001. Average attendance by directors at the aggregate
number of Board and committee meetings for which they were scheduled to attend
was 93%.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company are not compensated
separately for serving on the Board. Each of the Company's directors who are not
employees of the Company receives $3,500 for attendance at each regular meeting
of the Board of Directors. Directors are also reimbursed for their out-of-pocket
travel and related expenses incurred in attending all Board and committee
meetings. In June 2001, upon his election to the Board of Directors of the
Company, Eddy J. Rogers, Jr., one of the Company's current non-employee
directors, received a ten-year non-qualified option to purchase 45,000 shares of
the Company's common stock, becoming exercisable over a five-year period. The
exercise price of the option, which was granted under the Company's 1992 Stock
Option Plan, is $15.40 per share. In August 2001, the then six non-employee
directors, Daniel C. Arnold, Bruce D. Broussard, James B. Hoover, Marlin W.
Johnston, Albert L. Rosen and Eddy J. Rogers, Jr., each received ten-year
non-qualified options to purchase 5,000 shares of the Company's common stock.
The exercise price of these options, which were granted under the Company's 1992
Stock Option Plan, is $16.34 per share. Stock options to directors become
exercisable ratably over three years, subject to acceleration upon a change of
control (as described in footnote (a) to "Option Grants in 2001 Fiscal Year").
All options issued under the 1992 Stock Option Plan expire thirty days after the
termination of the recipient's position with the Company, thus Mr. Rogers'
options will expire when he ceases to be a director on May 21, 2002.
J. Livingston Kosberg received $12,500 and Mark J. Brookner received
$75,070 for serving as Chairman of the Board through May 2001 and Vice Chairman
of the Board in 2001, respectively. Additionally, Mr. Kosberg is compensated by
the Company as a consultant as stated in the section of "Employment and
Consulting Agreements." These compensation arrangements currently remain in
effect.
EXECUTIVE OFFICERS
Information about Mr. Spradlin, the Company's Chief Executive Officer,
and Mark J. Brookner, the Company's Vice Chairman and an employee, is included
under
7
"Information as to Nominees." Certain information about the Company's other
executive officers is set forth below. The age of the named executive officers
is as of March 31, 2002.
J. MICHAEL MULLIN, age 50, joined the Company in 1998 and was elected
Chief Financial Officer. From May 1993 through May 1998, Mr. Mullin was
President of Imperial Health Resources, Inc., a management company specializing
in management of subacute units in acute care hospitals.
J. LIVINGSTON KOSBERG, age 65, served as Chairman of the Board of the
Company from April 1992 until May 23, 2001 and is currently a consultant for the
Company.
EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company and its
subsidiaries during 2001, 2000 and 1999 to Messrs. Spradlin, Mullin, Brookner
and Kosberg (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------- --------------
Other Securities
Name and Fiscal Annual Underlying
Principal Position(s) Year Salary Bonus Compensation Options(#)(a)
--------------------- ------ ------ ----- ------------ ---------------
Roy W. Spradlin 2001 $250,000 $125,000 $ 0 112,500
Chairman, President 2000 220,000 100,000 0 75,000
and Chief Executive 1999 200,000 50,000 0 0
Officer
J. Michael Mullin 2001 $150,000 $ 40,000 $ 0 60,000
Chief Financial Officer 2000 132,000 30,000 0 75,000
1999 120,000 20,000 0 75,000
Mark J. Brookner 2001 $ 75,000 $ 0 $ 0 0
Vice Chairman 2000 75,000 0 0 0
and employee 1999 75,000 0 0 0
J. Livingston Kosberg(b) 2001 $ 95,000 $ 0 $ 0 0
Chairman and 2000 35,000 0 0 0
consultant 1999 35,000 0 0 0
8
----------------
(a) Reflects shares of the Company's common stock underlying options
granted, as adjusted for stock splits, under the Company's 1992 Stock
Option Plan, as amended.
(b) Mr. Kosberg served as Chairman of the Board until May 23, 2001.
OPTION GRANTS
The following table contains information with respect to grants of
stock options to the Named Executive Officers during the year ended December 31,
2001.
OPTION GRANTS IN 2001 FISCAL YEAR
Individual Grants Potential
Realizable Value
Number of % of Total at Assumed Annual
Securities Options Rates of Stock
Underlying Granted to Exercise Price Appreciation
Options Employees of Base for Option Term
Granted in Fiscal Price Expiration ------------------------
Name (#)(a) Year ($/Sh) Date 5%($) 10%($)
---- ---------- ---------- ------- ------------ -------- ---------
Roy W. Spradlin 112,500 39% $15.40 06/12/11 $1,089,560 $2,761,159
J. Michael Mullin 60,000 21% $15.40 06/12/11 $ 581,099 $1,472,618
------------------
(a) The non-qualified stock options, which expire in ten years, were
granted under the 1992 Option Plan and vest one-fifth on each of the
first, second, third, fourth and fifth anniversaries of the date of
grant, subject to accelerated vesting upon a change in control.
Specifically, vesting will be accelerated in the event of a "change in
control" of the Company (defined generally as the acquisition of 50% or
more of the Company's outstanding voting stock, a change in a majority
of the Board of Directors or a merger, consolidation or acquisition of
all or substantially all of the assets of the Company), subject to
certain limitations if vesting would result in adverse tax consequences
to the optionee. The per share option exercise price equals the fair
market value of a share of the Company's common stock on the date of
grant, as determined in accordance with the 1992 Option Plan, as
adjusted for stock splits, including two splits in 2001.
OPTION EXERCISES AND HOLDINGS
The following table sets forth the option exercises during fiscal year
2001 and the year-end value of all unexercised in-the-money options held by the
Named Executive Officers.
9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Shares Value of Securities
Acquired Value Number of Securities Underlying Unexercised
on Realized Underlying Unexercised In-the-Money Options at
Name Exercise (#) ($) Options at FY-End (#)(a) FY-End ($)(a)(b)
---- ------------ -------- ------------------------ -------------------------
Un- Un-
Exercisable exercisable Exercisable exercisable
----------- ----------- ----------- -----------
Roy W. Spradlin 155,000 $2,178,831 463,750 348,750 $5,802,052 $3,122,206
J. Michael Mullin 41,250 $ 526,547 0 213,750 $ 0 $2,062,149
Mark J. Brookner 0 $ 0 180,000 0 $2,270,050 $ 0
-------------------
(a) Reflects the number of shares of the Company's common stock underlying
options granted under the Executive Option Plan and the 1992 Option
Plan and the exercise or base price of such options, as adjusted for
stock splits.
(b) Market value of underlying securities at year-end of $16.16 per share
minus the exercise or base price of in-the-money options at year-end.
EMPLOYMENT AND CONSULTING AGREEMENTS
Mr. Spradlin has entered into a second amended and restated employment
agreement with the Company dated as of February 21, 2001, which superseded his
prior employment agreement with the Company dated as of February 24, 1998. Under
his employment agreement, Mr. Spradlin is employed as President and Chief
Executive Officer for a three-year term ending on February 21, 2004, which term
may be extended through February 21, 2006. Pursuant to the terms of his new
employment agreement, Mr. Spradlin's base salary is $250,000 per year.
Additionally, Mr. Spradlin is eligible to receive cash bonuses payable at the
discretion of the Board of Directors and, subject to conditions of eligibility,
is entitled to participate in any employee benefit plans adopted by the Company.
Mr. Spradlin's new employment agreement may be terminated by the Company prior
to the expiration of its term in the event (i) he becomes disabled for 90
consecutive days or (ii) his employment is terminated for "cause" (as defined in
the agreement). In the event that there is a "change in control"(as defined in
the agreement) of the Company, Mr. Spradlin would be entitled to receive a lump
sum equal to $500,000 and the term of his employment agreement shall be modified
to end one year from the change in control. In the event Mr. Spradlin's
employment is terminated without "cause", or Mr. Spradlin resigns "for good
cause" (as defined in the agreement), Mr. Spradlin would be entitled to receive
a lump
10
sum termination/severance benefit equal to Mr. Spradlin's (i) base compensation
for the remainder of the term of the new employment agreement, (ii) the greater
of (a) Mr. Spradlin's bonus paid the last fiscal year prior to termination or
resignation or (b) the average of the bonuses paid over the three fiscal years
prior to termination or resignation and (iii) Mr. Spradlin's accrued but unused
vacation days. Under his new employment agreement, in the event of his death,
Mr. Spradlin's heirs or beneficiaries would become entitled to receive a payment
equal to one year's annual salary. Mr. Spradlin's new employment agreement
further contains a covenant not to compete or solicit during its term and for a
two-year period following the termination of his employment.
Mr. Kosberg is party to a consulting agreement with the Company dated
March 1, 2001. Under this consulting agreement Mr. Kosberg has been retained by
the Company to provide consulting services for a five-year term ending May 31,
2006. Pursuant to the terms of his consulting agreement, Mr. Kosberg is paid a
consulting fee equal to $95,000 per year. In addition to the consulting fee, the
Company will provide health insurance coverage for Mr. Kosberg and his spouse.
Mr. Kosberg's consulting agreement may be terminated by the Company prior to the
expiration of its five-year term in the event (i) he becomes disabled for 90
consecutive days or (ii) a material default of the consulting agreement that is
uncured for 30 days.
Management intends to propose certain changes to the compensation
arrangements of Messrs. Spradlin, Kosberg and Brookner beginning in June 2002
subject to the approval of the Compensation Committee and the Board of
Directors. Mr. Kosberg's compensation is proposed to be reduced from $95,000 to
$80,000, and a provision is to be added that Mr. Kosberg and his wife will be
provided primary coverage health insurance until Mr. Kosberg becomes 75 (Mr.
Kosberg is presently 65). Mr. Spradlin's employment agreement is proposed to be
amended by adding a provision that he and his family will be provided primary
coverage health insurance until he becomes 75 (Mr. Spradlin is presently 53).
Mr. Brookner, presently an at-will part-time employee being paid at an annual
rate of $75,000 per year, is proposed to become subject to a three year
part-time employment agreement calling for compensation at an annual rate of
$50,000 per year, with a provision that he and his wife will be provided primary
coverage health insurance until he becomes 75 (Mr. Brookner is presently 57). No
assurance can be given that such proposals will be accepted by the Compensation
Committee or Board of Directors.
CERTAIN TRANSACTIONS
Eddy J. Rogers, Jr. is a partner in the law firm Andrews & Kurth,
L.L.P., Houston, Texas, which provided certain legal services to the Company
during 2001. The dollar amount of fees that the Company paid to that firm during
2001 did not exceed 5% of that firm's gross revenues for its last full fiscal
year.
11
STOCK PERFORMANCE GRAPH
The following performance graph compares the cumulative total
stockholder return of the Company's common stock to The Nasdaq Stock Market
United States Index and The Nasdaq Stock Market Healthcare Index for the period
from December 31, 1996 through December 31, 2001. The graph assumes that $100
was invested in each of the Company's common stock and the companies listed on
The Nasdaq Stock Market United States Index and The Nasdaq Stock Market
Healthcare Index on December 31, 1996 and that any dividends were reinvested.
COMPARISON OF FIVE YEARS CUMULATIVE TOTAL RETURN FOR THE YEAR ENDED
DECEMBER 31, 2001*
[GRAPH]
12/96 12/97 12/98 12/99 12/00 12/01
----- ----- ----- ----- ----- -----
U.S. Physical Therapy, Inc. 100 121 86 85 240 495
The Nasdaq Stock Market United States Index 100 122 173 321 193 153
The Nasdaq Stock Market Healthcare Index 100 103 87 70 96 104
12
*Cumulative total return assumes an initial investment of $100 on December
31,1996 and the reinvestment of dividends. There were no dividends paid by the
Company during the period presented.
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors and its Compensation and Stock Option Committees
have prepared the following report on the Company's policies with respect to the
compensation of executive officers for 2001. The Board of Directors makes all
decisions on compensation of the Company's executive officers (other than stock
options) based upon recommendations of the Compensation Committee. Decisions as
to the grant of stock options are made by the Stock Option Committee.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation policies of the Company are designed to enable the
Company to attract, motivate and retain experienced and qualified executives.
The Company seeks to provide competitive compensation. The Company's policy has
been to provide a significant component of an executive officer's compensation
through the grant of stock options. The Company believes that grants of stock
options to executives, as well as to employees generally, help align the
interests of such persons with the interests of Company stockholders.
The following describes in more specific terms the elements of
compensation of executive officers for 2001.
BASE SALARIES
Other than the base salary for the Company's Chief Executive Officer,
which is set by an employment agreement (see "Employment and Consulting
Agreements"), base salaries of executives are initially determined by evaluating
the responsibilities of the position, the experience and knowledge of the
individual and the competitive marketplace for executive talent. Base salaries
for executive officers are reviewed annually by the Compensation Committee and
the Board of Directors based on, among other things, individual performance and
responsibilities.
INCENTIVE COMPENSATION
Based on performance, incentive opportunities are available to a wide
range of Company employees. Incentive compensation is effective in reinforcing
both the overall values of the Company and the specific operating goals of the
various business units.
13
Incentive compensation programs are designed to focus employees'
attention on the key performance goals of the Company, to identify the expected
levels of performance and to reward individuals who meet or exceed such
expectations. The aggregate amounts available for incentive awards are
determined by the overall financial performance of the Company. The actual
awards paid to individual recipients are formulated by management and approved
by the Compensation Committee at its discretion.
STOCK OPTION AWARDS
The Company's 1992 Stock Option Plan, as amended (the "1992 Option
Plan") and the Executive Stock Option Plan (the "Executive Option Plan") were
approved by the Board of Directors and the stockholders of the Company to align
employee and outside directors' interests with stockholders' interests, to
provide incentives to key employees of the Company by encouraging their
ownership of common stock and to aid the Company in attracting and retaining
such key employees, upon whose efforts the Company's success and future growth
depends. While certain options are outstanding under the Executive Option Plan,
no options were granted under such plan during 2001 or will be granted under
such plan in the future.
Options are granted at the discretion of the Stock Option Committee.
Individual grant sizes are determined based on organizational and individual
performance. At the discretion of the Stock Option Committee, and based on the
recommendation of management, options may also be used as an incentive for
candidates recruited to fill key positions.
During 2001, the Company granted options covering a total of 363,825
shares of Company common stock to 66 directors, officers and employees. This
includes options granted under the 1999 Employee Stock Option Plan and options
granted to individuals to induce employment. No options have been granted to the
Named Executive Officers or directors under the 1999 Employee Stock Option Plan
or as inducements of employment. The per share exercise price of all options
granted in 2001 equaled the fair market value of a share of Company common stock
on the date of grant.
Stock option grants made to executive officers in 2001 reflect
significant individual performance and contributions relating to the Company's
operations and an incentive to an executive officer to join the Company.
OTHER
The Company has a 401(k) profit sharing plan covering all employees
with three months of service. The Company may make discretionary contributions
of up to 50% of employee contributions. The Company did not make any
contributions during 2001.
14
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Pursuant to employment agreements with the Company (see "Employment and
Consulting Agreements"), Mr. Spradlin received a salary of $250,000, $220,000
and $200,000 in 2001, 2000 and 1999, respectively. He also received bonuses
totaling $125,000, $100,000 and $50,000 in 2001, 2000 and 1999, respectively.
Although Mr. Spradlin participated in the Company's 401(k) Plan from 1999
through 2001, the Company did not make any matching contributions to such plan
during these years. In addition to cash compensation, Mr. Spradlin was granted
112,500 and 75,000 options to purchase shares of Company common stock under the
1992 Option Plan during 2001 and 2000, respectively.
In determining the appropriate compensation (other than base salary,
which is fixed by an employment agreement with Mr. Spradlin), the Compensation
Committee evaluates the overall performance of the Company under Mr. Spradlin's
leadership, as well as his individual contributions to key strategic, financial
and development objectives. The Compensation Committee does not utilize any
specific quantitative factors or formulas in reviewing his performance or
compensation.
COMPENSATION DEDUCTIBILITY POLICY
Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the"Code") and applicable Treasury regulations, no deduction is allowed for
annual compensation in excess of $1 million paid by a publicly traded
corporation to its chief executive officer and the four other most highly
compensated officers. Under those provisions, however, there is no limitation on
the deductibility of "qualified performance-based compensation."
In general, the Company's policy is to maximize the extent of tax
deductibility of executive compensation under the provisions of Section 162(m)
so long as doing so is compatible with its determinations as to the most
appropriate methods and approaches for the design and delivery of compensation
to the Company's executive officers.
Respectfully submitted,
The Board of Directors Compensation Committee
Roy W. Spradlin Daniel C. Arnold
Mark J. Brookner James B. Hoover
Daniel C. Arnold Albert L. Rosen
Bruce D. Broussard
James B. Hoover Stock Option Committee
Marlin W. Johnston Daniel C. Arnold
Albert L. Rosen James B. Hoover
Eddy J. Rogers, Jr. Albert L. Rosen
15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers to file with the SEC initial reports of
ownership of the Company's equity securities and to file subsequent reports when
there are changes in such ownership. The Company believes that during 2001 all
Section 16(a) filing requirements applicable to the Company's directors and
officers were complied with on a timely basis, except for one late filing of
Form 3, Initial Statement of Beneficial Ownership of Securities, by Mr. Rogers
relating to a total of two transactions.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company appointed KPMG LLP as the
Company's independent auditors beginning September 27, 1999. For a description
of audit and non-audit fees, see "Corporate Governance and Other Matters -
Independent Auditors' Fees."
Representatives of KPMG LLP are expected to be present at the Annual
Meeting. Such representatives will be given an opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of April 8, 2002 with
respect to the shares of the Company's common stock beneficially owned by each
director of the Company, each nominee for election as a director of the Company,
the Company's Chief Executive Officer and the Named Executive Officers and by
all directors and executive officers as a group.
AMOUNT AND PERCENT OF
NAME OF NATURE OF COMMON STOCK
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(a) OUTSTANDING
---------------- ----------------------- -----------
Roy W. Spradlin 388,750 3.4%
Chairman of the Board, President
and Chief Executive Officer
Mark J. Brookner 173,750 1.6
Vice Chairman of the Board
Daniel C. Arnold 103,002 *
Director
16
Bruce D. Broussard 2 *
Director
James B. Hoover 212,752 1.9
Director
Marlin W. Johnston 21,000 *
Director
J. Livingston Kosberg 791,240(c) 7.2
Director
Albert L. Rosen 122,800(b) 1.1
Director
Eddy J. Rogers, Jr
Director 0 N/A
J. Michael Mullin 18,750 *
Chief Financial Officer
All directors and 1,832,046 15.5
executive officers as
a group (10 persons)
------------
* Less than 1%.
(a) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934
(the "1934 Act"), a person is deemed to be the beneficial owner, for
purposes of this table, of any shares of the Company's common stock if
he has or shares voting power or investment power with respect to such
security, or has the right to acquire beneficial ownership at any time
within 60 days from April 8, 2002. As used herein, "voting power" is
the power to vote or direct the voting of shares and "investment power"
is the power to dispose or direct the disposition of shares. All
persons shown in the table above have sole voting and investment power,
unless otherwise indicated. This table includes 773,806 shares of
common stock subject to outstanding options which are exercisable
within 60 days from April 8, 2002. Of such shares, Messrs. Spradlin,
Brookner, Arnold, Broussard, Hoover, Rosen and Mullin hold options to
purchase 388,750, 75,000, 103,002, 2, 133,002, 55,300 and 18,750
shares, respectively.
17
(b) Includes 67,500 shares of Company common stock held by the Rosen Family
Trust. Mr. Rosen serves as a trustee for the Rosen Family Trust.
(c) See "Principal Holders of Voting Securities."
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of April 8, 2002 with
respect to the ownership of shares of Company common stock by the persons known
to management to be the beneficial owners of more than 5% of the Company's
outstanding common stock. The information is based on the most recent statements
on Schedule 13D or 13G filed on behalf of such persons or on other information
available to the Company.
AMOUNT AND PERCENT OF
NAME AND ADDRESS NATURE OF COMMON STOCK
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------- -------------------- ------------
J. Livingston Kosberg 791,240(a) 7.2%
3040 Post Oak Blvd., Suite 700
Houston, Texas 77056
Cannell Capital, LLC 874,850(b) 7.9
2500 18 Street
San Francisco, California 94110
George D. Bjurman & Associates 676,185(c) 6.1
10100 Santa Monica Boulevard
Suite 1200
Los Angeles, California 90067
Sloan Financial Corporation 900,000(d) 7.6
Richard C.W. Mauran
31 Burton Ct.
Franklins Row
London, SW 3, England
RS Investments Management Co., LLC 908,500(e) 8.2
388 Market Street, Suite 200
San Francisco, California 94111
FMR Corp. 1,443,650(f) 13.1
82 Devonshire Street
Boston, Massachusetts 02109
18
-----------------
(a) The reported share amount includes 651,240 shares held by the
Livingston Kosberg Trust, 60,000 shares held by the Kosberg Foundation
Charitable Trust, 50,000 shares held by the Lewis Wilkenfeld Trust and
30,000 shares held individually in Mr. Kosberg's name. Mr. Kosberg is
the trustee and the income beneficiary of the Livingston Kosberg Trust
and the trustee of the Kosberg Foundation Charitable Trust and the
Lewis Wilkenfeld Trust. The reported share amount excludes 2,340 shares
held by Mr. Kosberg's wife for which Mr. Kosberg disclaims beneficial
ownership.
(b) The Schedule 13G of Cannell Capital, LLC dated February 14, 2002 states
that Cannell Capital, LLC has shared voting and shared dispositive
power over the entire number of such shares; J. Carlo Cannell has
shared voting and shared dispositive power over the entire number of
such shares; The Anegada Fund Limited has shared voting and dispositive
power over 118,950 shares; Tonga Partners, L.P. has sole voting and
sole dispositive power over 347,100 shares; Pleiades Investment
Partners, L.P. has shared voting and shared dispositive power over
35,700 shares; The Cuttyhunk Fund Limited has shared voting and shared
dispositive power over 262,950 shares; GS Cannell Portfolio, LLC has
shared voting and shared dispositive power over 100,650 shares; George
S. Sarlo 1995 Charitable Remainder Trust has shared voting and shared
dispositive power over 9,500 shares. Mr. Cannell is the managing member
of Cannell Capital, LLC and is the investment advisor of each of the
other named entities.
(c) The Schedule 13G of George D. Bjurman & Associates dated March 31, 2001
states that George D. Bjurman & Associates has sole voting and
dispositive power over the entire number of shares.
(d) Consists of 900,000 shares of Company common stock that may be acquired
by Sloan Financial Corporation ("Sloan Financial") upon conversion of
$3,000,000 aggregate principal amount of the Company's outstanding 8%
Convertible Subordinated Notes, Series C, due June 30, 2004 owned by
Sloan Financial. Sloan Financial and Mr. Mauran possess shared voting
and shared dispositive power over the entire number of such shares.
(e) The Schedule 13G of RS Investments Management Co., LLC dated February
14, 2002 states that RS Investments Management Co., LLC has shared
voting and dispositive power over the entire number of shares. RS
Investment Management, L.P., has shared voting and dispositive power
over 589,200 shares.
(f) The Schedule 13G of FMR Corp. dated February 14, 2002 states that FMR
Corp. has shared voting and sole dispositive power over the entire
number of shares.
19
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS TO BE
PRESENTED AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS
Any proposal intended to be presented by any stockholder for action at
the 2003 Annual Meeting of Stockholders of the Company must be received by the
Company on or before December 31, 2002 in order for the proposal to be
considered for inclusion in the proxy statement and form of proxy relating to
the 2003 Annual Meeting. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement and form of proxy relating to the
2003 Annual Meeting any stockholder proposal which does not meet all of the
requirements for inclusion established by the SEC in effect at the time such
proposal is received. In such cases, the Board may exercise any discretion
authority granted by the proxies to be solicited on behalf of the Board in
connection with the 2003 Annual Meeting of stockholders.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matters to be presented for action by the
stockholders at the 2002 Annual Meeting. If, however, any other matters not now
known are properly brought before the meeting, the persons named in the
accompanying proxy will vote such proxy in accordance with the determination of
a majority of the Board of Directors.
By Order of the Board of Directors
/s/ Roy W. Spradlin
Roy W. Spradlin
President and Chief Executive Officer
Houston, Texas
April 25, 2002
U.S. PHYSICAL THERAPY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- MAY 21, 2002
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of U.S. Physical Therapy, Inc. (the "Company")
hereby appoints Roy W. Spradlin and J. Michael Mullin, and each of them, with
full power of substitution in each, as proxies to cast all votes, as designated
below, which the undersigned stockholder is entitled to cast at the 2002 Annual
Meeting of Stockholders of the Company to be held on Tuesday, May 21, 2002, at
9:00 a.m. (EDT), at the Grand Hyatt New York at Park Avenue (at Grand Central),
New York, New York 10017, and at any adjournments thereof, upon the following
matters.
This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED AND IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE
BOARD OF DIRECTORS AS TO OTHER MATTERS.
The undersigned stockholder hereby acknowledges receipt of the Notice of
Annual Meeting and Proxy Statement, and hereby revokes any proxy or proxies
heretofore given. This proxy may be revoked at any time before its exercise.
(continued and to be signed and dated on reverse side)
(1) Election of seven directors for one-year terms. Nominees: Roy W. Spradlin,
Mark J. Brookner, Daniel C. Arnold, Bruce D. Broussard, James B. Hoover,
Marlin W. Johnston and Albert L. Rosen.
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed.
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PRINT
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
--------------------------------------------------------------------------------
(2) As determined by a majority of the Company's Board of Directors, the
proxies are authorized to vote upon such other business as may properly
come before the meeting, or any adjournments thereof.
Please date and sign exactly as name
appears hereon and return in the enclosed
envelope
Date: ------------------------------------
-----------------------------------------
Signature of Stockholder or Authorized
Representative (Only one signature is
required in the case of stock ownership in
the name of two or more persons.)