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Acquisitions | 3 Months Ended
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Sep. 30, 2023
Business Combinations [Abstract] |
Acquisitions | 4. 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, with the difference between the consideration transferred, excluding transaction costs, and the fair values of the assets acquired and liabilities assumed 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. Tennessee Quality Care On August 1, 2023, we completed the acquisition of American Home Care, LLC, a Tennessee limited liability company (“AHC”), and its subsidiaries, Homecare, LLC, a Tennessee limited liability company (“Homecare”), Tennessee Valley Home Care, LLC (d/b/a Tennessee Quality Care – Home Health), a Tennessee limited liability company (“TQC – Home Health”), and Tri-County Home Health and Hospice, LLC (d/b/a Tennessee Quality Care - Hospice), a Tennessee limited liability company (“TQC – Hospice”, and collectively with AHC, Homecare, and TQC – Home Health “Tennessee Quality Care”). The purchase price was approximately $111.2 million, including the amount of acquired excess cash held by Tennessee Quality Care at the closing of the acquisition (approximately $2.4 million), and is subject to the completion of working capital and related adjustments. The Tennessee Quality Care acquisition was funded with a combination of a $110.0 million draw on the Company’s revolving credit facility and available cash. With the purchase of Tennessee Quality Care, the Company expanded its services within its hospice and home health segments in Tennessee. The related acquisition and integration costs were $0.5 million and $2.1 million for the three and nine months ended September 30, 2023, respectively. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expen sed as incurred. Based upon management’s valuations, which are preliminary and subject to the completion of working capital and related adjustments, the fair values of the assets and liabilities acquired are as follows:
|  | Total (Amounts in Thousands) |
Goodwill |  | $ | 79,318 |
Identifiable intangible assets |  |  | 26,740 |
Cash |  |  | 2,368 |
Accounts receivable |  |  | 5,593 |
Property and equipment |  |  | 307 |
Operating lease assets, net |  |  | 194 |
Other assets |  |  | 200 |
Accrued expenses |  |  | (1,115 | )
Accrued payroll |  |  | (2,303 | )
Long-term operating lease liabilities |  |  | (73 | )
Total purchase price |  | $ | 111,229 |
Identifiable intangible assets acquired included $7.5 million in a trade name and $19.2 million of indefinite-lived state licenses. 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 Tennessee Quality Care acquisition accounted for $6.9 million of net service revenues and $1.5 million of operating income for each of the three and nine months ended September 30, 2023, 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, 2023 as if the Tennessee Quality Care acquisition closed on January 1, 2022.
|  | For the Three Months Ended September 30, (Amounts in Thousands) |  |  | For the Nine Months Ended September 30, (Amounts in Thousands) |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Net service revenues |  | $ | 274,559 |  |  | $ | 249,262 |  |  | $ | 808,408 |  |  | $ | 730,227 |
Operating income |  |  | 25,310 |  |  |  | 18,871 |  |  |  | 68,951 |  |  |  | 53,049 |
Net income |  |  | 17,512 |  |  |  | 11,755 |  |  |  | 46,031 |  |  |  | 32,695 |
Net income per common share |  |  |  |  |  |  |  |  |  |  |  |
Basic income per share |  | $ | 1.09 |  |  | $ | 0.74 |  |  | $ | 2.88 |  |  | $ | 2.06 |
Diluted income per share |  | $ | 1.08 |  |  | $ | 0.73 |  |  | $ | 2.82 |  |  | $ | 2.03 |
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 the operations of Tennessee Quality Care had been acquired effective January 1, 2022. 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://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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