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ACQUISITIONS OF BUSINESSES
 6 Months Ended
Jun. 30, 2016
ACQUISITIONS OF BUSINESSES [Abstract]  
ACQUISITIONS OF BUSINESSES
3. ACQUISITIONS OF BUSINESSES

On February 29, 2016, the Company acquired a 55% interest in an eight-clinic physical therapy practice.  The purchase price for the 55% interest was $13.2 million in cash and $0.5 million in a seller note that is payable in two principal installments totaling $250,000 each, plus accrued interest, in February 2017 and 2018. On June 1, 2016, a subsidiary of the Company acquired a single clinic therapy practice for $50,000.

The purchase price for the 2016 acquisitions has been preliminarily allocated as follows (in thousands):

Cash paid, net of cash acquired
 
$
12,958
 
Seller notes
  
500
 
Total consideration
 
$
13,458
 
Estimated fair value of net tangible assets acquired:
    
Total current assets
 
$
1,009
 
Total non-current assets
  
239
 
Total liabilities
  
(417
)
Net tangible assets acquired
 
$
831
 
Referral relationships
  
1,915
 
Non-compete
  
525
 
Tradename
  
2,164
 
Goodwill
  
19,213
 
Fair value of non-controlling interest
  
(11,190
)
  
$
13,458
 
 
On December 31, 2015, the Company acquired a 59% interest in a four-clinic physical therapy practice. The purchase price was $4.6 million in cash and $400,000 in seller notes payable that are payable in two principal installments of an aggregate of $200,000 each, plus accrued interest, in December 2016 and 2017. 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, one of which was paid in April 2016 and the other is due in April 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, one of which was paid in January 2016 and the other is due in January 2017. In addition to the multi-clinic acquisitions, on August 31, 2015, the Company acquired a 60% interest in a single physical therapy clinic for $150,000 in cash and $50,000 in a seller note payable that is payable plus accrued interest in August 2016.

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

Cash paid, net of cash acquired
 
$
18,965
 
Seller notes
  
1,800
 
Total consideration
 
$
20,765
 
Estimated fair value of net tangible assets acquired:
    
Total current assets
 
$
1,969
 
Total non-current assets
  
1,070
 
Total liabilities
  
(1,040
)
Net tangible assets acquired
 
$
1,999
 
Referral relationships
  
3,070
 
Non-compete
  
734
 
Tradename
  
3,317
 
Goodwill
  
23,937
 
Fair value of non-controlling interest
  
(12,292
)
  
$
20,765
 

For the 2016 and 2015 acquisitions that occurred after June 30, 2015, the purchase price plus the fair value of the non-controlling interests was allocated to the fair value of certain assets acquired (patient accounts receivable, equipment, prepaid expenses and deposits, tradename, non-compete agreements and referral relationships) and liabilities assumed (accounts payable and accrued employee salary and 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. Thus, the final allocation of the 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 above acquisitions, total current assets primarily represent patient accounts receivable.  Total non-current assets are fixed assets, primarily equipment, used in the practices.  The estimated 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 range of the estimated lives was 12 to 13 years, and for non-compete agreements the estimated lives was six years. The values assigned to tradenames and goodwill is tested annually for impairment.

The consideration for each transaction was agreed upon through arm’s length negotiations. Funding for the cash portion of the purchase price for the 2016 and 2015 acquisitions was derived from proceeds under the Amended Credit Agreement.

The results of operations of these acquisitions have been included in the Company’s consolidated financial statements since acquired.  Unaudited proforma consolidated financial information for acquisitions occurring in 2016 and 2015 have not been included as the results were not material to current operations.