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ACQUISITIONS OF BUSINESSES
 9 Months Ended
Sep. 30, 2015
ACQUISITIONS OF BUSINESSES [Abstract]  
ACQUISITIONS OF BUSINESSES
3. ACQUISITIONS OF BUSINESSES

On August 31, 2015, the Company acquired a 60% interest in a single physical therapy clinic. The purchase price was $150,000 in cash. On June 30, 2015, the Company acquired a 70% interest in a four-clinic physical therapy practice. The purchase price was $3.6 million in cash and $0.7 million in seller notes that are payable plus accrued interest, in June 2018. On April 30, 2015, the Company acquired a 70% interest in a three-clinic physical therapy practice. The purchase price was $4.7 million in cash and $150,000 in a seller note that is payable in two principal installments of $75,000 each, plus accrued interest, in April 2016 and 2017. On January 31, 2015, the Company acquired a 60% interest in a nine-clinic physical therapy practice.  The purchase price for the 60% interest was $6.7 million in cash and $0.5 million in a seller note that is payable in two principal installments of $250,000 each, plus accrued interest, in January 2016 and 2017.

The purchase prices for the 2015 acquisitions have been preliminarily allocated as follows (in thousands):

Cash paid, net of cash acquired
 
$
14,434
 
Seller notes
  
1,350
 
Total consideration
 
$
15,784
 
Estimated fair value of net tangible assets acquired:
    
Total current assets
 
$
1,401
 
Total non-current assets
  
1,207
 
Total liabilities
  
(748
)
Net tangible assets acquired
 
$
1,860
 
Goodwill
  
22,731
 
Fair value of non-controlling interest
  
(8,807
)
 
 
$
15,784
 

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 $10.6 million in cash and $0.4 million 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 100% interest in a 3-clinic physical therapy practice. The purchase price for the 100% interest was $1.0 million in cash.   In addition, during 2014, the Company acquired four individual clinic practices for an aggregate of $595,000 in cash.

The purchase prices for the 2014 acquisitions were allocated as follows (in thousands):

Cash paid, net of cash acquired
 
$
12,270
 
Seller notes
  
400
 
Total consideration
 
$
12,670
 
Estimated fair value of net tangible assets acquired:
    
Total current assets
 
$
1,213
 
Total non-current assets
  
1,051
 
Total liabilities
  
(406
)
Net tangible assets acquired
 
$
1,858
 
Referral relationships
  
280
 
Non-compete agreements
  
330
 
Tradename
  
1,600
 
Goodwill
  
13,327
 
Fair value of non-controlling interest
  
(4,725
)
 
 
$
12,670
 

The consideration for each transaction was agreed upon through arm’s length negotiations. Funding for the cash portion of the purchase price for the 2015 and 2014 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 2015 acquisitions, the purchase prices plus the fair value of the non-controlling interest was allocated to the fair value of certain assets acquired (patient accounts receivable, equipment and prepaids and deposits) and liabilities assumed (accounts payable and accrued employee benefits) 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 (tradename, non-compete agreements and referral relationships) and the liabilities assumed. Thus, the final allocation of each purchase price will 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.

For the 2014 acquisitions, the purchase prices plus the fair value of the non-controlling interest were allocated to the fair value of the assets acquired and liabilities assumed based on the estimates of the fair values at the acquisition date, with the amount exceeding the estimated fair values being recorded as goodwill. The values assigned to the referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives.  For referral relationships, the estimated life was 4.5 years, and for non-compete agreements the estimated life was six years. The values assigned to tradenames and goodwill is tested annually for impairment.

Unaudited proforma consolidated financial information for acquisitions occurring in 2015 and 2014 have not been included as the results were not material to current operations.