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ACQUISITIONS OF BUSINESSES
 9 Months Ended
Sep. 30, 2014
ACQUISITIONS OF BUSINESSES [Abstract]  
ACQUISITIONS OF BUSINESSES
3. ACQUISITIONS OF BUSINESSES

On April 30, 2014, the Company acquired a 70% interest in a 13-clinic physical therapy practice.  The purchase price for the 70% interest was $10,625,000 in cash and $400,000 in a seller note that is payable in two principal installments totaling $200,000 each, plus accrued interest, in April 2015 and 2016. On August 1, 2014, the Company acquired all of the interest in a 3-clinic physical therapy practice. The purchase price for the 100% interest was $1,050,000 in cash.   In addition, during the nine months ended September 30, 2014, the Company acquired three individual clinic practices for an aggregate of $565,000 in cash.
 
The purchase prices for the 2014 acquisitions have been preliminarily allocated as follows (in thousands):
 
Cash paid, net of cash acquired
 $ 
12,240
 
Seller notes
  
400
 
Total consideration
  
12,640
 
Estimated fair value of net tangible assets acquired:
    
Total current assets
  
1,273
 
Total non-current assets
  
1,200
 
Total liabilities
  
(374
)
Net tangible assets acquired
  
2,099
 
Referral relationships
  
-
 
Non-competition agreements
  
-
 
Tradename
  
-
 
Goodwill
  
15,266
 
Fair value of non-controlling interest
  
(4,725
)
  $ 
12,640
 

During 2013, the Company completed the following multi-clinic acquisitions of physical therapy practices:

    
%
Interest
  
Number
of
 
Acquisition
Date
 
Acquired
  
Clinics
 
      
February 2013 Acquisition
February 28
  
72%
  
9
 
April 2013 Acquisition
April 30
  
50%
  
5
 
May 2013 Acquisition
May 24
  
80%
  
5
 
December 9, 2013 Acquisition
December 9
  
60%
  
12
 
December 13, 2013 Acquisition
December 13
  
90%
  
11
 

In addition to the five multi-clinic acquisitions detailed above, in 2013, the Company acquired three individual clinics in separate transactions.
 
The purchase price for the 72% interest in the February 2013 Acquisition was $4.3 million in cash and $400,000 in a seller note, that is payable in two principal installments totaling $200,000 each, plus accrued interest, in February 2014 and 2015. The purchase price for the 50% interest in the April 2013 Acquisition was $2.4 million in cash and $200,000 in a seller note, that is payable in two principal installments totaling $100,000 each, plus accrued interest, in April of 2014 and 2015. The purchase price for the 80% interest in the May 2013 Acquisition was $3.6 million in cash and $200,000 in a seller note, that is payable in two principal installments totaling $100,000 each, plus accrued interest, in May of 2014 and 2015. The purchase price for the 60% interest in the December 9, 2013 Acquisition was $1.7 million in cash. The purchase price for the 90% interest in the December 13, 2013 Acquisition was $35.5 million in cash and $500,000 in a seller note, that is payable in two principal installments totaling $250,000 each, plus accrued interest, in December 2014 and 2015.
 
On February 1, 2013, through a subsidiary, the Company acquired a 100% interest in a clinic for $5,000. On June 1, 2013, the Company acquired a 100% interest in a clinic for $95,000. On September 16, 2013, the Company acquired a 100% interest in a clinic for $130,000.
 
The purchase prices for the 2013 acquisitions have been preliminarily allocated as follows (in thousands):
 
Cash paid, net of cash acquired
 
$
46,598
 
Seller notes
  
1,300
 
Total consideration
 
$
47,898
 
Estimated fair value of net tangible assets acquired:
    
Total current assets
 
$
3,712
 
Total non-current assets
  
1,971
 
Total liabilities
  
(1,082
)
Net tangible assets acquired
  
4,601
 
Referral relationships
  
6,140
 
Non-competition agreements
  
1,000
 
Tradename
  
3,200
 
Goodwill
  
43,498
 
Fair value of non-controlling interest
  
(10,541
)
  
$
47,898
 

The consideration for each transaction was agreed upon through arm’s length negotiations. Funding for the cash portion of the purchase price for the 2014 and 2013 acquisitions was derived from proceeds under the Credit Agreement.
 
The results of operations of these acquisitions have been included in the Company’s consolidated financial statements since acquired.
 
For the 2014 acquisitions and the two acquisitions which occurred in December, 2013, the purchase price plus the fair value of the non-controlling interest for those two acquisitions was allocated to the fair value of the assets acquired and liabilities assumed based on the preliminary estimates of the fair values at the acquisition date, with the amount exceeding the estimated fair values being recorded as goodwill. The Company is in the process of completing its formal valuation analysis to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates used based on additional information obtained. Changes in the estimated valuation of the tangible and intangible assets acquired and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill.
 
Except for the December 13, 2013 Acquisition, unaudited proforma consolidated financial information for acquisitions occurring in 2014 and 2013 have not been included as the results were not material to current operations.
 
Unaudited proforma net revenue and net income from continuing operations for the Company as if the December 13, 2013 Acquisition occurred as of January 1, 2013 is as follows (in thousands, except per share data):

  
Three Months Ended
  
Nine Months Ended
 
  
September 30, 2013
  
September 30, 2013
 
     
Net revenues
 $ 
69,174
  $ 
204,198
 
Net income attributable to common shareholders from continuing operations
 $ 
5,273
  $ 
15,023
 
         
Earnings per share:
        
Basic - net income attributable to common shareholders from continuing operations
 $ 
0.44
  $ 
1.25
 
Diluted - net income attributable to common shareholders from continuing operations
 $ 
0.44
  $ 
1.24
 
         
Shares used in computation:
        
Basic - net income attributable to common shareholders from continuing operations
  
12,106
   
12,050
 
Diluted - net income attributable to common shareholders from continuing operations
  
12,120
   
12,069