During 2008, the Company completed the following acquisitions of physical therapy practices:

                                                       % Interest     Number of
           Acquisition                    Date          Acquired       Clinics

           Michigan Acquisition         January 1           100 %          1
           Mid-Atlantic Acquisition      June 11             65 %          9
           San Antonio Acquisition     November 18           65 %          4

The results of operations of the 2008 acquisitions have been included in the Company's consolidated financial statements since their respective dates acquired. There were no acquisitions during the nine months ended September 30, 2009.
At September 30, 2009, we operated 367 clinics in 42 states. During the three months ended September 30, 2009, we opened five new clinics and closed four. During the nine months ended September 30, 2009, we opened 14 new clinics and closed seven. The average age of our clinics at September 30, 2009 was 6.8 years.
In addition to our owned clinics, we also manage physical therapy facilities for third parties, primarily physicians, with 12 third-party facilities under management as of September 30, 2009. During the quarter ended September 30, 2009, we added one new management contract.
In December 2007, the FASB issued guidance which established new accounting and reporting standards for the noncontrolling interest (formerly referred to as "minority interests") in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest as equity in the consolidated financial statements and separate from the parent entity's equity. The amount of net income attributable to a noncontrolling interest will be included in consolidated net income on the face of the income statement. This guidance clarified that changes in a parent entity's ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent entity retains its controlling financial interest. In addition, this guidance required that a parent entity recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. This guidance also included expanded disclosure requirements regarding the interests of the parent entity and its noncontrolling interest. We adopted this guidance effective January 1, 2009.
In accordance with this guidance, we will no longer record an intangible asset when the purchase price of a noncontrolling interest exceeds the book value at the time of purchase. Any excess or shortfall will be recognized as an adjustment to additional-paid-in-capital. During the nine months ended September 30, 2009, there was no excess or shortfall recognized. Additionally, operating losses will be allocated to noncontrolling interests even when such allocation creates a deficit balance for the noncontrolling interest partner. For the quarter and nine months ended September 30, 2009, the net operating losses allocated to noncontrolling interest had the effect of increasing net income attributable to our common shareholders by $45,000 and $111,000, respectively, net of taxes, and reducing the net income attributable to noncontrolling interest by $74,000 and $183,000, respectively.

Selected Operating and Financial Data
The following table presents selected operating and financial data that we
believe are key indicators of our operating performance.

                                                 For the Three Months Ended                For the Nine Months Ended
                                                        September 30,                            September 30,
                                                   2009                 2008                2009                2008
Number of clinics, at the end of period                  367                364                   367                364
Working days                                              64                 64                   191                192
Average visits per day per clinic                       20.4               20.2                  20.5               20.5
Total patient visits                                 479,385            470,155             1,429,635          1,395,466

Net patient revenue per visit                 $       103.42         $    98.11        $       102.50        $     97.84
Statement of operations per visit:
Net revenues                                  $       106.46         $   100.46        $       105.62        $    100.23
Salaries and related costs                             55.95              54.58                 55.02              53.44
Rent, clinic supplies, contract labor
and other                                              21.23              21.64                 21.32              21.15
Provision for doubtful accounts                         2.09               1.59                  1.80               1.60
Closure costs                                           0.10               0.09                  0.06               0.11

Contribution from clinics                              27.09              22.56                 27.42              23.93
Corporate office costs                                 12.08               9.94                 11.93              10.87

Operating income                              $        15.01         $    12.62        $        15.49        $     13.06

RESULTS OF OPERATIONS
Three Months Ended September 30, 2009 Compared to the Three Months Ended September 30, 2008
• Net revenues increased to $51.0 million for the three months ended September 30, 2009 ("2009 Third Quarter") from $47.2 million for the three months ended September 30, 2008 ("2008 Third Quarter") due to a 2.0% increase in patient visits from 470,000 to 479,000 and a $5.31 increase from $98.11 to $103.42 in net patient revenue per visit. The 2009 net revenue figure includes the results of RMG and the San Antonio Acquisition for the entire 2009 Third Quarter. These acquisitions were consummated in October 2008 and November 2008, respectively. Our net patient revenue per visit has increased due to our continuing efforts to provide additional services and to negotiate more favorable reimbursement rates with certain payors.

• Net income attributable to our common shareholders for the 2009 Third Quarter was $3.1 million versus $2.5 million for the 2008 Third Quarter. Net income was $0.26 per diluted share for the 2009 Third Quarter as compared to $0.21 per diluted share for the 2008 Third Quarter. Total diluted shares were 11.7 million for the 2009 Third Quarter and 12.1 million for the 2008 Third Quarter. During the nine months ended September 30, 2009, we purchased 518,335 shares of our common stock. See "Liquidity and Capital Resources" below.

Net Patient Revenues
• Net patient revenues increased to $49.6 million for the 2009 Third Quarter from $46.1 million for the 2008 Third Quarter, an increase of $3.5 million, or 7.5%, due to a 2.0% increase in patient visits to 479,000 and an increase of $5.31 in net patient revenues per visit to $103.42 from $98.11.

• The growth in patient visits was attributable to an increase of 20,000 visits in clinics opened or acquired between October 1, 2008 and September 30, 2009 ("New Clinics") offset by a decrease of 11,000 for clinics opened or acquired prior to October 1, 2008 ("Mature Clinics").

• The $3.5 million net patient revenues increase for the 2009 Third Quarter included $2.0 million from New Clinics, primarily due to the San Antonio Acquisition, $0.6 million from clinics opened or acquired in the first nine months of 2008, and $0.9 million from clinics opened or acquired prior to January 1, 2008.

Net patient revenues are based on established billing rates less allowances and discounts for patients covered by contractual programs and workers' compensation. Net patient revenues are after contractual and other adjustments relating to patient discounts from certain payors. Payments received under these programs are based on predetermined rates and are generally less than the established billing rates of the clinics. Management Contract and Other Revenues
Management contract and other revenues increased by $355,000 from $1,104,000 to $1,459,000 due to the inclusion of revenues from RMG, which was acquired in October 2008.
Clinic Operating Costs
Clinic operating costs as a percentage of net revenues were 74.6% for the 2009 Third Quarter and 77.5% for the 2008 Third Quarter. Clinic Operating Costs - Salaries and Related Costs Salaries and related costs increased to $26.8 million for the 2009 Third Quarter from $25.7 million for the 2008 Third Quarter, an increase of $1.1 million, or 4.5%. The $1.1 million increase included costs of $1.0 million attributable to the New Clinics. The remaining increase was due to slightly higher costs of $0.1 million at the Mature Clinics. Salaries and related costs as a percentage of net revenues were 52.6% for the 2009 Third Quarter and 54.3% for the 2008 Third Quarter.
Clinic Operating Costs - Rent, Clinic Supplies, Contract Labor and Other Rent, clinic supplies, contract labor and other remained at $10.2 million for both quarters. Of the $10.2 million for the 2009 Third Quarter, $0.6 million was incurred at the New Clinics. For Mature Clinics, rent, clinic supplies, contract labor and other decreased by $0.6 million due to cost containment efforts. Rent, clinic supplies, contract labor and other as a percentage of net revenues was 19.9% for the 2009 Third Quarter and 21.5% for the 2008 Third Quarter. Clinic Operating Costs - Provision for Doubtful Accounts The provision for doubtful accounts was $1.0 million for the 2009 Third Quarter and $0.7 million for the 2008 Third Quarter. The provision for doubtful accounts as a percentage of net patient revenues was 2.0% for the 2009 Third Quarter and 1.6% for the 2008 Third Quarter. Our allowance for bad debts as a percentage of total patient accounts receivable was 7.7% at September 30, 2009, as compared to 8.1% at December 31, 2008. Our days sales outstanding was reduced to 45 days at September 30, 2009 compared to 54 days at September 30, 2008 and 51 days at December 31, 2008.
Corporate Office Costs
Corporate office costs, consisting primarily of salaries and benefits of corporate office personnel, rent, insurance costs, depreciation and amortization, travel, legal, professional, and recruiting fees, were $5.8 million, or 11.3% of net revenues, for the 2009 Third Quarter and $4.7 million, or 9.9% of net revenues for the 2008 Third Quarter. This increase of $1.1 million is primarily due to increased accrual for incentive compensation. Interest expense
Interest expense was $93,000 for the 2009 Third Quarter and $158,000 for the 2008 Third Quarter which was a decrease of $65,000, or 41.1%, due to a reduction in interest rates and a decrease in average borrowings outstanding during the period in 2009 versus 2008. At September 30, 2009, $3.4 million was outstanding under our revolving credit facility. See "Liquidity and Capital Resources" below for a discussion of the terms of our revolving credit facility contained in the Credit Agreement.

Provision for Income Taxes
The provision for income taxes increased to $2.0 million for the 2009 Third Quarter from $1.6 million for the 2008 Third Quarter. During the 2009 Third Quarter, the Company accrued state and federal income taxes at an effective tax rate (provision for taxes divided by the difference between income from operations and net income attributable to noncontrolling interest) of 38.8% versus 39.2% for the 2008 Third Quarter. Noncontrolling interests
Net income attributable to noncontrolling interests was $2.0 million for the 2009 Third Quarter and $1.6 million for the 2008 Third Quarter. Net income attributable to noncontrolling interests as a percentage of operating income before corporate office costs was 15.7% for the 2009 Third Quarter and 14.9% for the 2008 Third Quarter.
Nine Months Ended September 30, 2009 Compared to the Nine Months Ended September 30, 2008
• Net revenues increased to $151.0 million for the nine months ended September 30, 2009 ("2009 Nine Months") from $139.9 million for the nine months ended September 30, 2008 ("2008 Nine Months") due to a 2.4% increase in patient visits from 1,395,000 to 1,430,000 and a $4.66 increase from $97.84 to $102.50 in net patient revenue per visit. The 2009 figures include the results of the Mid-Atlantic Acquisition, RMG and San Antonio Acquisitions for the entire 2009 Nine Months. These acquisitions were consummated in September 2008, October 2008 and November 2008, respectively. Our net patient revenue per visit has increased due to our continuing efforts to provide additional services and to negotiate more favorable reimbursement rates with certain payors.

• Net income attributable to our common shareholders for the 2009 Nine Months was $9.5 million versus $7.8 million for the 2008 Nine Months. Net income was $0.80 per diluted share for the 2009 Nine Months as compared to $0.65 per diluted share for the 2008 Nine Months. Total diluted shares were 11.8 million for the 2009 Nine Months and 12.0 million for the 2008 Nine Months. During the nine months ended September 30, 2009, we purchased 518,335 shares of our common stock. See "Liquidity and Capital Resources" below.

Net Patient Revenues
• Net patient revenues increased to $146.5 million for the 2009 Nine Months from $136.5 million for the 2008 Nine Months, an increase of $10.0 million, or 7.3%, due to a 2.4% increase in patient visits to 1,430,000 and an increase of $4.66 in net patient revenues per visit to $102.50 from $97.84.

• The growth in patient visits was attributable to an increase of 50,000 visits in New Clinics offset by a decrease of 15,000 for Mature Clinics.

• The $10.0 million net patient revenues increase for the 2009 Nine Months included $5.3 million from New Clinics, primarily due to the San Antonio Acquisition, and $5.6 million from clinics opened or acquired in the first nine months of 2008, primarily due to the Mid-Atlantic Acquisition, offset by a decrease of $0.9 million from clinics opened or acquired prior to January 1, 2008. Since the Mid-Atlantic Acquisition was consummated on September 11, 2008, the 2008 results from this acquisition include 78 operating days whereas the 2009 results are for the entire nine month period.

Net patient revenues are based on established billing rates less allowances and discounts for patients covered by contractual programs and workers' compensation. Net patient revenues are after contractual and other adjustments relating to patient discounts from certain payors. Payments received under these programs are based on predetermined rates and are generally less than the established billing rates of the clinics. Management Contract and Other Revenues
Management contract and other revenues increased by $1.1 million from $3,342,000 to $4,460,000 due to the inclusion of revenues from RMG, which was acquired in October 2008.

Clinic Operating Costs
Clinic operating costs as a percentage of net revenues were 74.0% for the 2009 Nine Months and 76.1% for the 2008 Nine Months. Clinic Operating Costs - Salaries and Related Costs Salaries and related costs increased to $78.7 million for the 2009 Nine Months from $74.6 million for the 2008 Nine Months, an increase of $4.1 million, or 5.5%; however, salaries and related costs as a percentage of net revenues decreased to 52.1% for the 2009 Nine Months from 53.3% for the 2008 Nine Months. The $4.1 million increase included costs of $2.3 million attributable to the New Clinics. The remaining increase was due to higher costs of $1.8 million at the Mature Clinics.
Clinic Operating Costs - Rent, Clinic Supplies, Contract Labor and Other Rent, clinic supplies, contract labor and other increased to $30.5 million for the 2009 Nine Months from $29.5 million for the 2008 Nine Months, an increase of $1.0 million, or 3.3%; however, rent, clinic supplies, contract labor and other as a percentage of net revenues decreased to 20.2% for the 2009 Nine Months from 21.1% for the 2008 Nine Months. The $1.0 million increase included $1.6 million incurred at the New Clinics offset by a decrease of $0.6 million for Mature Clinics.
Clinic Operating Costs - Provision for Doubtful Accounts The provision for doubtful accounts was $2.6 million for the 2009 Nine Months and $2.2 million for the 2008 Nine Months. The provision for doubtful accounts as a percentage of net patient revenues was 1.8% for the 2009 Nine Months and 1.6% for the 2008 Nine Months. Our allowance for bad debts as a percentage of total patient accounts receivable was 7.7% at September 30, 2009, as compared to 8.1% at December 31, 2008. Our days sales outstanding was reduced to 45 days at September 30, 2009 compared to 54 days at September 30, 2008 and 51 days at December 31, 2008.
Corporate Office Costs
Corporate office costs, consisting primarily of salaries and benefits of corporate office personnel, rent, insurance costs, depreciation and amortization, travel, legal, professional, and recruiting fees, were $17.0 million, or 11.3% of net revenues, for the 2009 Nine Months and $15.2 million, or 10.8% of net revenues, for the 2008 Nine Months. This increase of $1.8 million is primarily due to increased accrual for incentive compensation. Interest and other income
Other income for the 2008 Nine Months includes a pre-tax gain of $193,000 from the sale of a 49% interest in two of our Texas partnerships. Interest expense
Interest expense decreased to $294,000 for the 2009 Nine Months from $421,000 for the 2008 Nine Months due to lower borrowing costs and decreased average borrowings. At September 30, 2009, $3.4 million was outstanding under our revolving credit facility. See "Liquidity and Capital Resources" below for a discussion of the terms of our revolving credit facility contained in the Credit Agreement.
Provision for Income Taxes
The provision for income taxes increased to $6.1 million for the 2009 Nine Months from $5.1 million for the 2008 Nine Months. During the 2009 Nine Months, the Company accrued state and federal income taxes at an effective tax rate (provision for taxes divided by the difference between income from operations and net income attributable to noncontrolling interest) of 39.1% versus 39.4% for the 2008 Nine Months.
Noncontrolling interests
Net income attributable to noncontrolling interests was $6.3 million for the 2009 Nine Months and $5.2 million for the 2008 Nine Months. Net income attributable to noncontrolling interests as a percentage of operating income before corporate office costs was 15.9% for the 2009 Nine Months and 15.6% for the 2008 Nine Months.

LIQUIDITY AND CAPITAL RESOURCES
We believe that our business is generating sufficient cash flow from operating activities to allow us to meet our short-term and long-term cash requirements, other than those with respect to future acquisitions. At September 30, 2009, we had $9.3 million in cash compared to cash and cash equivalents of $10.1 million at December 31, 2008, a decrease of 7.8%. Although the start-up costs associated with opening new clinics and our planned capital expenditures are significant, we believe that our cash and availability under our revolving credit facility are sufficient to fund the working capital needs of our operating subsidiaries, corporate costs, purchases of our common stock, clinic closure costs accrued, future clinic development and investments through at least September 2010. Significant acquisitions would likely require financing under our existing revolving credit facility.
The decrease in cash and cash equivalents of $0.8 million from December 31, 2008 to September 30, 2009 was due primarily to $24.5 million provided by operations offset by major uses of cash which included: purchase of fixed assets ($3.3 million), distributions to noncontrolling interest partners ($7.4 million), purchases of our common stock ($5.6 million), net reduction on our revolving credit facility ($8.0 million) and payments on seller notes ($1.0 million).
Effective August 27, 2007, we entered into the Credit Agreement with a commitment for a $30.0 million revolving credit facility which was increased to $50.0 million effective June 4, 2008. Effective March 18, 2009, we amended the Credit Agreement to permit the Company to purchase up to $15,000,000 of its common stock subject to compliance with certain covenants, including the requirement that after giving effect to any stock purchase, our consolidated leverage ratio (as defined in the Credit Agreement) be less than 1.0 to 1.0 and that any stock repurchased be retired within seven days of purchase. In addition, the Credit Agreement was amended to adjust the pricing grid which is based on our consolidated leverage ratio with the applicable spread over LIBOR ranging from 1.5% to 2.5%. The Credit Agreement has a four year term maturing August 31, 2011, is unsecured and includes standard financial covenants. Proceeds from the Credit Agreement may be used for acquisitions, working capital, purchases of our common stock, capital expenditures and other corporate purposes. Fees under the Credit Agreement include a closing fee of .25% and an unused commitment fee ranging from .1% to .35% depending on our consolidated leverage ratio and the amount of funds outstanding under the Credit Agreement. On September 30, 2009, the outstanding balance on the revolving credit facility was $3.4 million leaving $46.6 million in availability and we were in compliance with all of the covenants thereunder.
Historically, we have generated sufficient cash from operations to fund our development activities and to cover operational needs. We plan to continue developing new clinics and making additional acquisitions in selected markets. We have from time to time purchased the noncontrolling interests in our Clinic Partnerships. We may purchase additional noncontrolling interests in the future. Generally, any acquisition or purchase of noncontrolling interests is expected to be accomplished using a combination of cash and financing. Any large acquisition would likely require financing.
We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts, in a consistent manner for all payor types. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor's requirements. When possible, we submit our claims electronically. The collection process is time consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect. Medicare and other payor claims relating to new clinics awaiting Medicare Rehab Agency status approval initially may not be submitted for six months or more. When all reasonable internal collection efforts have been exhausted, accounts are written off prior to sending them to outside collection firms. With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the account receivable has been outstanding for at least 120 days.
In connection with the San Antonio Acquisition in 2008, we incurred a note payable in the amount of $400,400 payable in equal annual installments totaling $200,200 beginning November 18, 2009, plus any accrued and unpaid interest. Interest accrues at a fixed rate of 4.00% per annum. The final principal payment and any accrued and unpaid interest then outstanding is due and payable on November 18, 2010. In addition, we assumed leases with remaining terms ranging from nine months to three years for the operating facilities.
In connection with the RMG acquisition in 2008, we incurred a note payable in the amount of $157,100 payable in equal annual installments totaling $78,550 beginning October 8, 2009, plus any accrued and unpaid interest. Interest accrues at a fixed rate of 5.00% per annum. The final principal payment and any accrued and unpaid interest then outstanding is due and payable on October 8, 2010. The purchase agreement also provides for possible contingent consideration of up to $3,781,000 based on the achievement of a designated level of operating results within a three-year period following the acquisition. We anticipate paying additional consideration for this acquisition in the fourth quarter of 2009. The amount to be paid will be determined after a review and analysis of the operating results for the earnout period, which ends on October 31, 2009.

In connection with the Mid-Atlantic Acquisition in 2008, we incurred notes payable in the aggregate totaling $950,625 payable in equal annual installments totaling $475,312, plus any accrued and unpaid interest, which began June 11, 2009. Interest accrues at a fixed rate of 5.00% per annum. The final principal payment and any accrued and unpaid interest then outstanding is due and payable on June 11, 2010. The purchase agreement also provides for possible contingent consideration of up to $1,500,000 based on the achievement of a designated level of operating results within a three-year period following the acquisition. There was no contingent consideration earned based on the operating results of the first year. In addition, we assumed leases with remaining terms ranging from one month to five years for the operating facilities.
In connection with the acquisition of STAR in 2007, we incurred notes payable in the aggregate totaling $1,000,000 payable in equal annual installments totaling $333,333, plus any accrued and unpaid interest, with the first payment due September 6, 2008. Interest accrues at a fixed rate of 8.25% per annum. The remaining principal and any accrued and unpaid interest then outstanding is due and payable on September 6, 2010. In addition, we assumed leases with remaining . . .