Acquisitions | 5. Acquisitions Alliance Home Health Care On August 1, 2019, the Company completed the acquisition of all of the assets of Alliance Home Health Care (“Alliance”). The purchase price was approximately $23.5 million. The purchase of Alliance was funded through the Company’s revolving credit facility. With the purchase of Alliance, the Company expanded its personal care, home health and hospice operations in the state of New Mexico. The related acquisition costs of $0.3 million for the three and nine months ended September 30, 2019 were included in general and administrative expenses on the Condensed Consolidated Statements of Income and were expensed as incurred. The results of Alliance are included on the Condensed Consolidated Statements of Income from the date of the acquisition. The Company’s acquisition of Alliance has been accounted for in accordance with ASC Topic 805, Business Combinations Goodwill and Other Intangible Assets Total (Amounts in Thousands) Goodwill $ 15,973 Identifiable intangible assets 5,422 Cash 1,172 Accounts receivable 1,936 Other assets 95 Accounts payable (296 ) Other liabilities (844 ) Total purchase price allocation $ 23,458 Management’s assessment of qualitative factors affecting goodwill for Alliance includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market. Identifiable intangible assets acquired consist of $1.1 million in state licenses, with an estimated useful life of ten years and $4.3 million of state licenses with an indefinite life. The preliminary estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The fair value analysis and related valuations reflect the conclusions of management. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The goodwill and intangible assets acquired are deductible for tax purposes. The Alliance acquisition accounted for $3.4 million of net service revenues and $0.8 million of operating income for the three and nine months ended September 30, 2019. VIP Health Care Services On June 1, 2019, the Company completed the acquisition of all of the assets of VIP Health Care Services (“VIP”). The purchase price was approximately $29.9 million. The purchase of VIP was funded through a combination of the Company’s delayed draw term loan portion of its credit facility and available cash. With the purchase of VIP, the Company expanded its personal care operations in the state of New York and into the New York City metropolitan area. The related acquisition costs were $0.4 million for the nine months ended September 30, 2019 and integration costs were $0.2 million and $0.3 million for the three and nine months ended September 30, 2019. These costs were included in general and administrative expenses on the Condensed Consolidated Statements of Income and were expensed as incurred. The results of VIP are included on the Condensed Consolidated Statements of Income from the date of the acquisition. The Company’s acquisition of VIP has been accounted for in accordance with ASC Topic 805, Business Combinations Goodwill and Other Intangible Assets Total (Amounts in Thousands) Goodwill $ 10,374 Identifiable intangible assets 15,370 Cash 110 Accounts receivable 5,986 Other assets 2,308 Property and equipment 27 Accounts payable (385 ) Accrued expenses (747 ) Accrued payroll (1,571 ) Other liabilities (1,554 ) Total purchase price allocation $ 29,918 Management’s assessment of qualitative factors affecting goodwill for VIP includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market. Identifiable intangible assets acquired consist of state licenses and customer relationships, with estimated useful lives of six and eight years, respectively. The preliminary estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The goodwill and intangible assets acquired are deductible for tax purposes. The VIP acquisition accounted for $13.2 million and $17.6 million of net service revenues for the three and nine months ended September 30, 2019, respectively and $0.4 million and $0.1 million of operating loss for the three and nine months ended September 30, 2019, respectively. Ambercare Corporation On May 1, 2018, the Company completed the acquisition of all the issued and outstanding securities of Ambercare Corporation (“Ambercare”). The purchase price was approximately $39.6 million, plus the amount of excess cash held by Ambercare at closing (approximately $12.0 million). The purchase of Ambercare was funded by a delayed draw term loan under the Company’s credit facility. With the purchase of Ambercare, the Company expanded its New Mexico personal care operations and entered into its hospice and home health segments in the state of New Mexico. The related acquisition costs were $0.6 million for the nine months ended September 30, 2018. The related integration costs were $0.3 million for the nine months ended September 30, 2019, and $0.7 million and $0.8 million for the three and nine months ended September 30, 2018, respectively. These costs were included in general and administrative expenses on the Condensed Consolidated Statements of Income and were expensed as incurred. The results of Ambercare are included on the Condensed Consolidated Statements of Income from the date of the acquisition. The Company’s acquisition of Ambercare has been accounted for in accordance with ASC Topic 805, Business Combinations Goodwill and Other Intangible Assets Based upon management’s valuations, which are now final, the total purchase price has been allocated as follows: Total (Amounts in Thousands) Goodwill $ 28,831 Cash 12,028 Identifiable intangible assets 9,944 Accounts receivable 6,512 Other assets 442 Property and equipment 154 Accrued expenses (4,073 ) Deferred tax liability (2,138 ) Financing lease (75 ) Accounts payable (3 ) Total purchase price allocation $ 51,622 Management’s assessment of qualitative factors affecting goodwill for Ambercare includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market. The Company acquired all of the outstanding stock of Ambercare. Identifiable intangible assets acquired consist of trade names and customer relationships, with estimated useful lives ranging from three to fifteen years, as well as indefinite lived state licenses. The estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The goodwill and intangible assets acquired are non-deductible for tax purposes. The Ambercare acquisition accounted for $17.3 million and $47.8 million of net service revenues for the three and nine months ended September 30, 2019, respectively, and $13.4 million and $22.6 million of net service revenues for each of the three and nine months ended September 30, 2018, respectively. $2.0 million and $3.8 million of for the three and nine months ended September 30, 2018, respectively. Arcadia Home Care & Staffing On April 1, 2018, the Company acquired certain assets of Arcadia Home Care & Staffing (“Arcadia”), expanding its personal care services. The total consideration for the transaction was $18.9 million, and was funded by a delayed draw term loan under the Company’s credit facility. The related acquisition costs was $0.6 million for the nine months ended September 30, 2018 and the integration costs were $0.7 million and $0.8 million for the three and nine months ended September 30, 2018, respectively. These costs were included in general and administrative expenses on the Condensed Consolidated Statements of Income and were expensed as incurred. The results of operations from this acquired entity are included in the Condensed Consolidated Statements of Income from the date of the acquisition. The Company’s acquisition of Arcadia has been accounted for in accordance with ASC Topic 805 and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350. The acquisition was recorded at its fair value as of April 1, 2018. Under business combination accounting, the Arcadia purchase price was $18.9 million and was allocated to Arcadia’s net tangible and identifiable intangible assets based on their estimated fair values. Based upon management’s valuations, which are now final, the total purchase price has been allocated as follows: Total (Amounts in Thousands) Goodwill $ 13,072 Accounts receivable 5,317 Identifiable intangible assets 2,264 Property and equipment 155 Other assets 92 Accrued expenses (1,540 ) Accounts payable (508 ) Total purchase price allocation $ 18,852 Management’s assessment of qualitative factors affecting goodwill for Arcadia includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market. Identifiable intangible assets acquired consist of trade name, customer relationships and state licenses, with estimated useful lives ranging from seven to fifteen years. The estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The goodwill and intangible assets acquired are deductible for tax purposes. The Arcadia acquisition accounted for $11.6 million and $32.9 million of net service revenues for the three and nine months September 30, 2019, respectively, and $10.9 million and $21.7 million $1.6 million and $3.2 million of for each of the three and nine months ended September 30, 2018, respectively LifeStyle Options, Inc. Effective January 1, 2018, the Company acquired certain assets of LifeStyle Options, Inc. (“LifeStyle”) in order to expand private pay services in Illinois. The total consideration for the transaction was $4.1 million, comprised of $3.3 million in cash and $0.8 million, representing the estimated fair value of contingent consideration, subject to the achievement of certain performance targets set forth in an earn-out agreement. As of December 31, 2018, the performance targets were not met and the contingent consideration was remeasured to zero. The Company’s acquisition of LifeStyle has been accounted for in accordance with ASC Topic 805 and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350. The acquisition was recorded at its fair value as of January 1, 2018. Under business combination accounting, the LifeStyle purchase price was $4.1 million and was allocated to LifeStyle’s net tangible and identifiable intangible assets based on their estimated fair values. Based upon management’s valuations, which are now final, the total purchase price is final and has been allocated as follows: Total (Amounts in Thousands) Goodwill $ 2,751 Identifiable intangible assets 1,152 Accounts receivable 573 Other assets 32 Property and equipment 18 Accrued expenses (291 ) Accounts payable (105 ) Total purchase price allocation $ 4,130 Management’s assessment of qualitative factors affecting goodwill for LifeStyle includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations, and the payor profile in the market. Identifiable intangible assets acquired consist of trade name and customer relationships, with estimated useful lives ranging from ten to fifteen years. The estimated fair value of identifiable intangible assets was determined, using Level 3 inputs as defined under ASC Topic 820, with the assistance of a valuation specialist. The goodwill and intangible assets acquired are deductible for tax purposes. The LifeStyle acquisition accounted for $1.2 million and $3.7 million of net service revenues for the three and nine months ended September 30, 2019, respectively, and $1.5 million and $4.5 million for the three and nine months ended September 30, 2018, respectively. for the three and nine months ended September 30, 2019, was $0.1 million and $0.4 million of for the three and nine months ended September 30, 2018, respectively . The following table contains unaudited pro forma condensed consolidated income statement information of the Company had the acquisitions of Alliance, VIP, Ambercare and Arcadia closed on January 1, 2018. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2019 2018 2019 2018 (Amounts in Thousands) (Amounts in Thousands) Net service revenues $ 171,432 $ 160,899 $ 494,796 $ 465,258 Operating income 8,146 8,458 22,213 31,799 Net income from continuing operations 6,393 3,904 16,527 20,261 Net loss from discontinued operations (574 ) — (574 ) — Net income $ 5,819 $ 3,904 $ 15,953 $ 20,261 Net income per common share Basic income per share Continuing operations $ 0.46 $ 0.32 $ 1.25 $ 1.73 Discontinued operations (0.04 ) — (0.04 ) — Basic income per share $ 0.42 $ 0.32 $ 1.21 $ 1.73 Diluted income per share Continuing operations $ 0.45 $ 0.31 $ 1.21 $ 1.68 Discontinued operations (0.04 ) — (0.04 ) — Diluted income per share $ 0.41 $ 0.31 $ 1.17 $ 1.68 The pro forma disclosures in the table above include adjustments for amortization of intangible assets, tax expense and acquisition costs to reflect results that are more representative of the combined results of the transactions as if Alliance, VIP, Ambercare and Arcadia had been acquired effective January 1, 2018. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred. In addition, future results may vary significantly from the results reflected in the pro forma information. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, such as anticipated cost savings from operating synergies. |