3. Acquisitions

Effective February 23, 2016, the Company acquired certain assets of Lutheran Social Services of Illinois ("LSSI") for approximately $0.1 million, in order to expand its adult day services business within the State of Illinois. The results of operations from the acquisition of LSSI is included in the Company's Consolidated Statements of Income from the date of the acquisition. The LSSI acquisition accounted for $1.0 million of net service revenues from continuing operations and $0.1 million of net income from continuing operations for the year ended December 31, 2016.

On April 24, 2015, Addus HealthCare entered into a Securities Purchase Agreement with Margaret Coffey and Carol Kolar (the "South Shore Sellers"), South Shore Home Health Service Inc. ("South Shore") and Acaring Home Care, LLC ("Acaring"), pursuant to which Addus HealthCare agreed to acquire all of the issued and outstanding securities of each of South Shore and Acaring. On February 5, 2016, Addus HealthCare completed its acquisition of all the outstanding securities of South Shore and Acaring for a total purchase price of $20.0 million (the "South Shore Purchase Price"). The related acquisition costs, included in general and administrative expenses on the Consolidated Statements of Income, were $1.3 million and were expensed as incurred. The results of operations from South Shore and Acaring are included in the Company's Consolidated Statements of Income from the date of the acquisition. Acaring was dissolved on March 1, 2016, and its assets were transferred to South Shore.

The Company's acquisition of South Shore and Acaring has been accounted for in accordance with ASC Topic 805, "Business Combinations," and the resulting goodwill and other intangible assets was accounted for under ASC Topic 350 " Goodwill and Other Intangible Assets." The acquisition was recorded at its fair value as of February 5, 2016. Under business combination accounting, the South Shore Purchase Price was $20.0 million and was allocated to South Shore's net tangible and identifiable intangible assets based on their estimated fair values. Based upon management's valuation, the total purchase price has been allocated as follows:


		Total
		(Amounts in
		Thousands)
Goodwill	$	5,265
Identifiable intangible assets		9,957
Accounts receivable		6,807
Other current assets		858
Accrued liabilities		(1,593	)
Accounts payable		(1,268	)
Total purchase price allocation	$	20,026

Management's assessment of qualitative factors affecting goodwill for South Shore includes: estimates of market share at the date of purchase; ability to grow in the market; synergy with existing Company operations and the presence of managed care payors in the market.

Identifiable intangible assets acquired consist of trade names and trademarks, customer relationships and non-compete agreements. The estimated fair value of identifiable intangible assets was determined by the Company's management. It is anticipated that the net intangible and identifiable intangible assets, including goodwill, are deductible for tax purposes.

The South Shore acquisition accounted for $51.7 million of net service revenues from continuing operations and $0.8 million net loss of net income from continuing operations for the year ended December 31, 2016.

Effective November 9, 2015, the Company acquired certain assets of Five Points Healthcare of Virginia, LLC ("Five Points"), in order to further expand the Company's presence in the State of Virginia. The total consideration for the transaction was comprised of $4.1 million in cash. The related acquisition costs, included in general and administrative expenses on the Consolidated Statements of Income, were $0.4 million and were expensed as incurred. The results of operations from this acquired entity are included in the Company's Consolidated Statements of Income from the date of the acquisition.

The Company's acquisition of Five Points has been accounted for in accordance with ASC Topic 805, "Business Combinations," and the resulting goodwill and other intangible assets was accounted for under ASC Topic 350 "Goodwill and Other Intangible Assets." The acquisition of Five Points was recorded at its fair value as of November 9, 2015. The total purchase price was $4.1 million. Under business combination accounting, the total purchase price was allocated to Five Points' net tangible and identifiable intangible assets based on their estimated fair values. Based upon management's valuation, the total purchase price has been allocated as follows:

		Total
		(Amounts in
		Thousands)
Goodwill	$	2,885
Identifiable intangible assets		920
Accounts receivable		472
Accrued liabilities		(155	)
Accounts payable		(7	)
Total purchase price allocation	$	4,115

Management's assessment of qualitative factors affecting goodwill for Five Points includes: estimates of market share at the date of purchase; ability to grow in the market; synergy with existing Company operations and the presence of managed care payors in the market.

Identifiable intangible assets acquired consist of trade names and trademarks, customer relationships and non-compete agreements. The estimated fair value of identifiable intangible assets was determined by the Company's management. The net intangible and identifiable intangible assets, including goodwill, are deductible for tax purposes.

The Five Points acquisition accounted for $4.1 million of net service revenues from continuing operations and $0.0 million of net income from continuing operations for the year ended December 31, 2016 and $0.7 million of net service revenues from continuing operations and $0.0 million net loss of net income from continuing operations for the year ended December 31, 2015.

Effective January 1, 2015, the Company acquired Priority Home Health Care, Inc. ("PHHC"), in order to further expand the Company's presence in the State of Ohio. The total consideration for the transaction was comprised of $4.3 million in cash. The related acquisition costs, included in general and administrative expenses on the Consolidated Statements of Income, were $0.5 million and were expensed as incurred. The results of operations from this acquired entity are included in the Company's Consolidated Statements of Income from the date of the acquisition.

The Company's acquisition of PHHC has been accounted for in accordance with ASC Topic 805, "Business Combinations," and the resultant goodwill and other intangible assets will be accounted for under ASC Topic 350 "Goodwill and Other Intangible Assets." The acquisition was recorded at its fair value as of January 1, 2015. The total purchase price is $4.3 million. Under business combination accounting, the total purchase price was allocated to PHHC's net tangible and identifiable intangible assets based on their estimated fair values. Based upon management's valuation, the total purchase price has been allocated as follows:


		Total
		(Amounts in
		Thousands)
Goodwill	$	1,862
Identifiable intangible assets		1,930
Accounts receivable		951
Furniture, fixtures and equipment		58
Other current assets		8
Accrued liabilities		(339	)
Accounts payable		(220	)
Total purchase price allocation	$	4,250

Management's assessment of qualitative factors affecting goodwill for PHHC includes: estimates of market share at the date of purchase; ability to grow in the market; synergy with existing Company operations and the presence of managed care payors in the market.

The PHHC acquisition accounted for $7.5 million of net service revenues from continuing operations and $0.3 million of net income from continuing operations for the year ended December 31, 2016 and $9.0 million of net service revenues from continuing operations and $0.1 million of net income from continuing operations for the year ended December 31, 2015.

Effective June 1, 2014, the Company acquired Cura Partners, LLC, which conducts business under the name Aid & Assist at Home, LLC ("Aid & Assist"), in order to further expand the Company's presence in the State of Tennessee. The total consideration for the transaction was $8.2 million, comprised of $7.1 million in cash and $1.0 million, representing the estimated fair value of contingent earn-out obligation. The related acquisition costs, included in general and administrative expenses on the Consolidated Statements of Income, were $0.6 million and were expensed as incurred. The results of operations from this acquired entity are included in the Company's Consolidated Statements of Income from the date of the acquisition.

The Company's acquisition of Aid & Assist has been accounted for in accordance with ASC Topic 805, "Business Combinations," and the resultant goodwill and other intangible assets will be accounted for under ASC Topic 350 "Goodwill and Other Intangible Assets." The acquisition was recorded at its fair value as of June 1, 2014. The total purchase price is $8.2 million and is comprised of:


		Total
		(Amounts in
		Thousands)
Cash	$	7,172
Contingent earn-out obligation		1,020
Total purchase price	$	8,192

As of June 1, 2014, the contingent earn-out obligation was recorded at its fair value of $1.0 million, which was the present value of the Company's obligation to pay up to $1.2 million based on probability-weighted estimates of the achievement of certain performance targets, as defined in the earn-out agreement between the parties. As of December 31, 2014, the Company revalued this liability at $0.2 million. As of December 31, 2016 and 2015, based on its valuations, the Company believes a liability does not exist for this contingent earn-out obligation. These declines in the fair value of the contingent earn-out obligation reflects the acquisition's failure to achieve performance targets expected at the date of acquisition for 2014, 2015 and 2016. The contingent earn-out obligation expired December 31, 2016.

Under business combination accounting, the total purchase price was allocated to Aid & Assist's net tangible and identifiable intangible assets based on their estimated fair values. Based upon management's valuation, the total purchase price has been allocated as follows:


		Total
		(Amounts in
		Thousands)
Goodwill	$	4,317
Identifiable intangible assets		3,950
Accounts receivable		521
Furniture, fixtures and equipment		65
Other current assets		60
Accrued liabilities		(553	)
Accounts payable		(168	)
Total purchase price allocation	$	8,192

Management's assessment of qualitative factors affecting goodwill for Aid & Assist includes: estimates of market share at the date of purchase; ability to grow in the market; synergy with existing Company operations and the presence of managed care payors in the market.

Identifiable intangible assets acquired consist of trade names and trademarks, customer relationships and non-compete agreements. The estimated fair value of identifiable intangible assets was determined by the Company's management. The net intangible and identifiable intangible assets, including goodwill, are deductible for tax purposes.

The Aid and Assist acquisition accounted for $8.8 million of net service revenues from continuing operations and $0.3 million net loss of net income from continuing operations for the year ended December 31, 2016, $10.7 million of net service revenues from continuing operations and $0.1 million net loss of net income from continuing operations for the year ended December 31, 2015 and $7.5 million of net service revenues from continuing operations and $0.2 million of net income from continuing operations for the year ended December 31, 2014.

The following table contains unaudited pro forma consolidated income statement information assuming the South Shore acquisition closed on January 1, 2015, the Five Points and PHHC acquisitions closed on January 1, 2014, and Aid and Assist acquisitions closed on January 1, 2013.


	For the Years Ended December 31,
	(Amounts in Thousands)
		2016		2015		2014
Net service revenues	$	405,524	$	392,887	$	334,517
Operating income from continuing operations		14,437		20,383		19,458
Net income from continuing operations		11,409		14,135		12,893
Earnings from discontinued operations		97		270		280
Net income	$	11,506	$	14,405	$	13,173
Net income per common share
Basic income per share
Continuing operations	$	1.01	$	1.29	$	1.18
Discontinued operations		0.01		0.02		0.03
Basic income per share	$	1.02	$	1.31	$	1.21
Diluted income per share
Continuing operations	$	1.00	$	1.27	$	1.16
Discontinued operations		0.01		0.02		0.03
Diluted income per share	$	1.01	$	1.29	$	1.19

The pro forma disclosures in the table above include adjustments for, amortization of intangible assets and tax expense and acquisition costs to reflect results that are more representative of the combined results of the transactions as if the South Shore acquisition had closed on January 1, 2015, the Five Points and PHHC acquisitions closed on January 1, 2014, and the Aid and Assist acquisition closed on January 1, 2013. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operation 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.

For the acquisition of Coordinated Home Health Care, LLC on December 1, 2013, a contingent earn-out obligation was recorded at its fair value of $1.1 million, which was the present value of the Company's obligation to pay up to $2.3 million based on probability-weighted estimates of the achievement of certain performance targets, as defined in the earn-out agreement between the parties. As of December 31, 2014, the Company revalued this liability at $1.9 million. This increase in the fair value of the contingent earn-out obligation reflected the acquisition's excess achievement of performance targets for the year ended December 31, 2014 as a result of higher than anticipated rate of conversion to managed care organizations in the State of New Mexico. $1.0 million of the liability, which was recorded as the current portion at December 31, 2014, was subsequently paid during the second quarter of 2015. As of December 31, 2015, the remaining contingent earn-out obligation was recorded at its fair value of $1.3 million which is the maximum earn-out obligation based on probability-weighted estimates of the achievement of certain performance targets, as defined in the earn-out agreement between the parties. The obligation was paid during the second quarter of 2016. The contingent earn-out obligation expired December 31, 2015.