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Acquisitions | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Acquisitions | 5. Acquisitions The Company’s acquisitions have been accounted for in accordance with ASC Topic 805, Business Combinations, and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350, Goodwill and Other Intangible Assets. Under business combination accounting, the assets and liabilities are generally recognized at their fair values and the difference between the consideration transferred, excluding transaction costs, and the fair values of the assets and liabilities is recognized as goodwill. The results of each business acquisition are included on the Unaudited Condensed Consolidated Statements of Income from the date of the acquisition. Management’s assessment of qualitative factors affecting goodwill for each acquisition 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 markets. A Plus Health Care On July 1, 2020, we completed the acquisition of A Plus Health Care, Inc. (“A Plus”). The purchase price was approximately $12.2 million plus the amount of excess cash held by A Plus at closing (approximately $2.8 million). The purchase of A Plus was funded with the Company’s available cash. With the purchase of A Plus, the Company expanded its personal care services in the state of Montana. The related acquisition costs were $0.3 million for the three and nine months ended September 30, 2020. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred. Based upon management’s valuations, which are preliminary and subject to completion of working capital adjustments, the fair values of the assets and liabilities are as follows:
|  | Total (Amounts in Thousands) |
Goodwill |  | $ | 11,252 |
Identifiable intangible assets |  |  | 1,523 |
Cash |  |  | 2,819 |
Accounts receivable |  |  | 1,075 |
Operating lease assets, net |  |  | 180 |
Other assets |  |  | 23 |
Accounts payable |  |  | (18 | )
Accrued expenses |  |  | (202 | )
Accrued payroll |  |  | (303 | )
Current portion of long-term debt |  |  | (577 | )
Long-term debt |  |  | (1,145 | )
Long-term operating lease liabilities |  |  | (100 | )
Total purchase price |  | $ | 14,527 |
Identifiable intangible assets acquired included $1.4 million in trade names with an estimated useful life of fifteen years. The preliminary estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. 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 A Plus acquisition accounted for $2.6 million of net service revenues and $0.5 million of operating income for the three and nine months ended September 30, 2020, respectively. Hospice Partners On October 1, 2019, the Company completed the acquisition of the assets of Hospice Partners of America, LLC (“Hospice Partners”). The purchase price was approximately $135.6 million. The purchase of Hospice Partners was funded through a portion of the net proceeds of our public offering of an aggregate 2,300,000 shares of common stock, par value $0.001 per share, including 300,000 shares of common stock sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares at a public offering price of $79.50 per share, which the Company completed on September 9, 2019 (the “Public Offering”). With the purchase of Hospice Partners, we expanded our hospice operations through 21 locations in Idaho, Kansas, Missouri, Oregon, Texas and Virginia. The related integration costs were $1.5 million for the nine months ended September 30, 2020. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred. Based upon management’s final valuations, the fair values of the assets and liabilities are as follows:
|  | Total (Amounts in Thousands) |
Goodwill |  | $ | 111,674 |
Identifiable intangible assets |  |  | 18,090 |
Cash |  |  | 5,489 |
Property and equipment |  |  | 164 |
Accounts receivable |  |  | 6,411 |
Operating lease assets, net |  |  | 2,425 |
Other assets |  |  | 702 |
Accounts payable |  |  | (1,737 | )
Accrued expenses |  |  | (3,503 | )
Accrued payroll |  |  | (1,110 | )
Deferred tax liability |  |  | (1,422 | )
Long-term operating lease liabilities |  |  | (1,615 | )
Total purchase price |  | $ | 135,568 |
Identifiable intangible assets acquired consist of $9.5 million in trade names with estimated useful lives of fifteen years, $2.5 million in non-competition agreements with estimated useful lives of three to five years and $6.1 million of indefinite lived state licenses. The estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. 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 Hospice Partners acquisition accounted for $13.0 million and $40.3 million of net service revenues and $3.5 million and $9.5 million of operating income for the three and nine months ended September 30, 2020, respectively. 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 and available cash. 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 were $0.3 million for the three and nine months ended September 30, 2019. The related integration costs were $0.2 million for the nine months ended September 30, 2020. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred. Based upon management’s final valuations, the fair values of the assets and liabilities are as follows:
|  | Total (Amounts in Thousands) |
Goodwill |  | $ | 17,062 |
Identifiable intangible assets |  |  | 5,422 |
Cash |  |  | 177 |
Accounts receivable |  |  | 1,754 |
Accounts payable |  |  | (316 | )
Other liabilities |  |  | (641 | )
Total purchase price |  | $ | 23,458 |
Identifiable intangible assets acquired consist of $1.1 million in state licenses, subject to amortization, with an estimated useful life of ten years and $4.3 million of indefinite lived state licenses. The estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. 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 $3.3 million and $3.4 million of net service revenues for the three months ended September 30, 2020 and 2019, respectively, and $12.0 million and $3.4 million for the nine months ended September 30, 2020 and 2019, respectively. Operating income accounted for $0.7 million and $0.8 million for the three months ended September 30, 2020 and 2019, respectively, and $2.7 million and $0.8 million for the nine months ended September 30, 2020 and 2019, respectively. 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 $0.3 million for the nine months ended September 30, 2019. The related integration costs were $0.2 million for the nine months ended September 30, 2020, and $0.2 million and $0.3 million for the three and nine months ended September 30, 2019, respectively. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred. Based upon management’s valuations, the fair values of the assets and liabilities are as follows:
|  | Total (Amounts in Thousands) |
Goodwill |  | $ | 11,936 |
Identifiable intangible assets |  |  | 15,370 |
Cash |  |  | 130 |
Accounts receivable |  |  | 4,730 |
Operating lease assets, net |  |  | 2,278 |
Other assets |  |  | 30 |
Property and equipment |  |  | 27 |
Accounts payable |  |  | (540 | )
Accrued expenses |  |  | (770 | )
Accrued payroll |  |  | (1,742 | )
Long-term operating lease liabilities |  |  | (1,531 | )
Total purchase price |  | $ | 29,918 |
Identifiable intangible assets acquired consist of $10.7 million in state licenses, subject to amortization, and $4.7 million in customer relationships, with estimated useful lives of six and eight years, respectively. The estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. 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 VIP acquisition accounted for $9.7 million and $13.2 million of net service revenues for the three months ended September 30, 2020 and 2019, respectively, and $30.5 million and $17.6 million for the nine months ended September 30, 2020 and 2019, respectively, and $0.4 million of operating loss for each of the three months ended September 30, 2020 and 2019, and $1.1 million and $0.1 million of operating loss for the nine months ended September 30, 2020 and 2019, respectively. The following table contains unaudited pro forma condensed consolidated income statement information of the Company for the three and nine months ended September 30, 2020 and 2019 as if each of the acquisitions of Hospice Partners, Alliance, VIP and A Plus closed on January 1, 2019.
|  | For the Three Months Ended September 30, (Amounts in Thousands) |  |  | For the Nine Months Ended September 30, (Amounts in Thousands) |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net service revenues |  | $ | 193,987 |  |  | $ | 187,846 |  |  | $ | 573,917 |  |  | $ | 541,646 |
Operating income from continuing operations |  |  | 12,269 |  |  |  | 9,291 |  |  |  | 32,136 |  |  |  | 26,328 |
Net income from continuing operations |  |  | 9,458 |  |  |  | 6,922 |  |  |  | 25,663 |  |  |  | 20,518 |
Net income per common share from continuing operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic income per share |  | $ | 0.61 |  |  | $ | 0.50 |  |  | $ | 1.65 |  |  | $ | 1.55 |
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 Hospice Partners, Alliance, VIP and A Plus had been acquired effective January 1, 2019. 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.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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- References No definition available. + Details
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