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Acquisitions | 12 Months Ended
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Dec. 31, 2022
Business Combinations [Abstract] |
Acquisitions | 3. Acqui sitions 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 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. JourneyCare On February 1, 2022, the Company completed the acquisition of the hospice and palliative operations of JourneyCare Inc. (“JourneyCare”). The purchase price was approximately $86.6 million, including the amount of acquired excess cash held by JourneyCare at the closing of the acquisition (approximately $0.4 million) plus the finalization of net working capital payable to seller of $1.6 million. The JourneyCare acquisition was funded with a combination of a $35.0 million draw on the Company’s revolving credit facility and available cash. With the JourneyCare acquisition, the Company expanded its hospice services in the state of Illinois. The related acquisition and integration costs were $0.5 million and $4.3 million, respectively, for the year ended December 31, 2022. These costs are included in general and administrative expenses on the 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 acquired are as follows:
|  | Total (Amounts in Thousands) |
Goodwill |  | $ | 69,446 |
Identifiable intangible assets |  |  | 13,792 |
Cash |  |  | 421 |
Accounts receivable |  |  | 7,747 |
Property and equipment |  |  | 1,194 |
Operating lease assets, net |  |  | 3,728 |
Other assets |  |  | 317 |
Accrued expenses |  |  | (5,002 | )
Accrued payroll |  |  | (1,511 | )
Long-term operating lease liabilities |  |  | (3,537 | )
Total purchase price |  | $ | 86,595 |
Identifiable intangible assets acquired included $9.0 million in a trade name and $4.8 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. JourneyCare accounted for $47.2 million and $9.1 million of the Company’s net service revenues and operating income for the year ended December 31, 2022. Armada Skilled Homecare On August 1, 2021, we completed the acquisition of Armada Skilled Homecare of New Mexico LLC, Armada Hospice of New Mexico LLC and Armada Hospice of Santa Fe LLC (collectively, “Armada”) for approximately $29.7 million, including the amount of acquired excess cash held by Armada at the closing of the acquisition (approximately $0.7 million). The purchase of Armada was funded with the Company’s revolving credit facility. With the purchase of Armada, the Company expanded its home health and hospice services in the state of New Mexico. The related acquisition and integration costs were $0.4 million and $0.5 million, respectively, for the year ended December 31, 2021. These costs are included in general and administrative expenses on the Consolidated Statements of Income and were expensed as incurred. Based upon management’s final valuations, the fair values of the assets and liabilities acquired are as follows:
|  | Total (Amounts in Thousands) |
Goodwill |  | $ | 28,287 |
Identifiable intangible assets |  |  | 990 |
Cash |  |  | 676 |
Property and equipment |  |  | 40 |
Other assets |  |  | 24 |
Accounts payable |  |  | — |
Accrued payroll |  |  | (361 | )
Total purchase price |  | $ | 29,656 |
Identifiable intangible assets acquired included $0.6 million of non-competition agreements with estimated useful lives of five years and $0.4 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. Queen City Hospice On December 4, 2020, we completed the acquisition of Queen City Hospice, LLC and its affiliate Miracle City Hospice, LLC (together “Queen City Hospice”). The purchase price was approximately $194.8 million, including the amount of acquired excess cash held by Queen City Hospice at the closing of the acquisition (approximately $15.4 million). The purchase of Queen City Hospice was funded with the Company’s revolving credit facility and available cash. With the purchase of Queen City Hospice, the Company expanded its hospice services in the state of Ohio. The related acquisition costs were $1.8 million for the year ended December 31, 2021. For the year ended December 31, 2021, integration costs were $2.2 million. These costs are included in general and administrative expenses on the 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 |  | $ | 169,338 |
Identifiable intangible assets |  |  | 20,015 |
Cash |  |  | 15,444 |
Accounts receivable |  |  | 5,915 |
Property and equipment |  |  | 759 |
Operating lease assets, net |  |  | 3,028 |
Other assets |  |  | 85 |
Accounts payable |  |  | (2,285 | )
Accrued payroll |  |  | (1,555 | )
Accrued expenses |  |  | (528 | )
Government stimulus advances |  |  | (12,694 | )
Long-term operating lease liabilities |  |  | (2,765 | )
Total purchase price |  | $ | 194,757 |
Identifiable intangible assets acquired included $11.0 million in trade names, $1.5 million of non-competition agreements with estimated useful lives of fifteen years and five years, respectively, and $7.5 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. County Homemakers On November 1, 2020, we completed the acquisition of County Homemakers. The purchase price was approximately $15.8 million, including the amount of acquired excess cash held by County Homemakers at the closing of the acquisition (approximately $1.1 million). The purchase of County Homemakers was funded with the Company’s available cash. With the purchase of County Homemakers, the Company expanded its personal care services in the state of Pennsylvania. The related integration and acquisition costs were $0.2 million and $0.3 million for the year ended December 31, 2020, respectively. These costs are included in general and administrative expenses on the 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 |  | $ | 13,502 |
Identifiable intangible assets |  |  | 474 |
Cash |  |  | 1,104 |
Accounts receivable |  |  | 1,357 |
Property and equipment |  |  | 52 |
Operating lease assets, net |  |  | 485 |
Other assets |  |  | 40 |
Accounts payable |  |  | (85 | )
Accrued payroll |  |  | (586 | )
Accrued expenses |  |  | (37 | )
Long-term operating lease liabilities |  |  | (485 | )
Total purchase price |  | $ | 15,821 |
Identifiable intangible assets acquired included approximately $0.3 million in state licenses and $0.1 million in trade names with estimated useful lives of eight years and one year, 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. 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 $14.5 million, including the amount of acquired excess cash held by A Plus at the closing of the acquisition (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 and integration costs were $0.4 million and $0.3 million, respectively, for the year ended December 31, 2020. These costs are included in general and administrative expenses on the 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 |  | $ | 9,732 |
Identifiable intangible assets |  |  | 1,523 |
Cash |  |  | 2,819 |
Accounts receivable |  |  | 1,009 |
Operating lease assets, net |  |  | 180 |
Other assets |  |  | 26 |
Accounts payable |  |  | (34 | )
Accrued payroll |  |  | (275 | )
Accrued expenses |  |  | (353 | )
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 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. Other Acquisitions On October 1, 2022, we completed the acquisition of Apple Home HealthCare LTD (“Apple Home”) for approximately $12.7 million, with funding provided by drawing on the Company’s revolving credit facility. In addition to the initial consideration, the total purchase price also includes potential additional contingent consideration to the previous owners of Apple Home of up to approximately $2 million. The contingent consideration will vary based upon performance relative to certain agreed upon earnings targets in 2022 and 2023. With the purchase of Apple Home, the Company expanded clinical services for its home health segment in Illinois and recorded goodwill of $8.9 million. On October 1, 2021, we completed the acquisition of Summit Home Health, LLC (“Summit”) for approximately $8.1 million, with funding provided by available cash. With the purchase of Summit, we added clinical services to our home health segment in Illinois and recorded goodwill of $6.5 million. For the year ended December 31, 2022, the following table contains unaudited pro forma Consolidated Income Statement information of the Company as if the acquisition of JourneyCare closed on January 1, 2021. For the year ended December 31, 2021, the following table contains unaudited pro forma Consolidated Income Statement information of the Company as if the acquisition of Armada closed on January 1, 2020. For the year ended December 31, 2020, the following table contains unaudited pro forma Consolidated Income Statement information of the Company as if each of the acquisitions of Queen City Hospice, A Plus and County Homemakers closed on January 1, 2020.
|  | For the Years Ended December 31, (Amounts in Thousands, Unaudited) |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Net service revenues |  | $ | 956,333 |  |  | $ | 936,601 |  |  | $ | 831,290 |
Operating income from continuing operations |  |  | 67,201 |  |  |  | 69,081 |  |  |  | 45,555 |
Net income from continuing operations |  |  | 44,959 |  |  |  | 47,622 |  |  |  | 34,564 |
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. 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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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