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Acquisitions of Businesses
 12 Months Ended
Dec. 31, 2016
Acquisitions of Businesses [Abstract]  
Acquisitions of Businesses
3. Acquisitions of Businesses

During 2016, 2015 and 2014, the Company completed the following multi-clinic acquisitions of physical therapy practices:

 
Date   
% Interest Acquired
  
Number of Clinics
 
         
 
2016       
February 2016 Acquisition
February  29
   
55
%
  
8
 
November 2016 Acquisition
November 30
   
60
%
  
12
 
           
 2015
         
January 2015 Acquisition
January 31
   
60
%
  
9
 
April 2015 Acquisition
April 30
   
70
%
  
3
 
June 2015 Acquisition
June 30
   
70
%
  
4
 
December 2015 Acquisition
December 31
   
59
%
  
4
 
           
 
2014         
April 2014 Acquisition
April 30
   
70
%
  
13
 
August 2014 Acquisition
August 1
   
100
%
  
3
 
 
In addition to the multi-clinic acquisitions, the Company acquired two single clinic practices in separate transactions during 2016.  During 2015, the Company acquired a 60% interest in a single clinic practice and, during 2014, the Company acquired four individual clinics in separate transactions.

On November 30, 2016, the Company acquired a 60% interest in a 12 clinic physical therapy practice.  The purchase price for the 60% interest was $11.0 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 November 2017 and 2018.  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 of $250,000 each, plus accrued interest, in February 2017 and 2018. During 2016, two subsidiaries of the Company each acquired a single clinic therapy practice for an aggregate purchase price of $75,000.

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

Cash paid, net of cash acquired
 
$
23,623
 
Seller notes
  
1,000
 
Total consideration
 
$
24,623
 
Estimated fair value of net tangible assets acquired:
    
Total current assets
 
$
1,712
 
Total non-current assets
  
1,202
 
Total liabilities
  
(398
)
Net tangible assets acquired
 
$
2,516
 
Referral relationships
  
4,919
 
Non-compete
  
847
 
Tradename
  
3,802
 
Goodwill
  
31,419
 
Fair value of non-controlling interest
  
(18,880
)
  
$
24,623
 

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 were payable in two principal installments of an aggregate of $200,000 each, plus accrued interest. The first payment was paid in December 2016 and the second installment is due December 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 was payable in two principal installments of $75,000 each, plus accrued interest. The first payment was paid in April 2016 and the second installment 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.  This note was paid in full 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 was paid in August 2016.

The purchase prices for the 2015 acquisitions have been 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
 
$
1,952
 
Total non-current assets
  
1,068
 
Total liabilities
  
(1,067
)
Net tangible assets acquired
 
$
1,953
 
Referral relationships
  
3,655
 
Non-compete
  
594
 
Tradename
  
3,417
 
Goodwill
  
23,437
 
Fair value of non-controlling interest
  
(12,291
)
  
$
20,765
 

The purchase price for the 70% interest in the April 2014 Acquisition was $10.6 million in cash and a $400,000 seller note, that was paid in two principal installments totaling $200,000 each, plus accrued interest, in April 2015 and 2016. The purchase price for the August 2014 Acquisition was $1.0 million in cash. In addition, during 2014, the Company acquired three individual clinic practices for an aggregate of $595,000.

The purchase prices for the 2014 acquisitions have been 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
  
330
 
Tradename
  
1,600
 
Goodwill
  
13,327
 
Fair value of non-controlling interest
  
(4,725
)
  
$
12,670
 

The purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2015 and 2014 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, i.e. trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions in 2016, 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 at December 31, 2016 based on additional information obtained and completion of the valuation of the identifiable intangible assets. Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets 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 acquisitions in 2015 and 2014, 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 range of the estimated lives was 4½ to 13 years, and for non-compete agreements the estimated lives was five to six years. Generally, the values assigned to tradenames are tested annually for impairment, however with regards to one acquisition in 2013, the tradename was being amortized over the term of the six year agreement in which the Company has acquired the rights to use the specific tradename. In 2016, the remaining value of the tradename was charged to earnings as the Company decided to combine two acquired operations in Georgia; therefore, the tradename under this six year agreement will no longer be used. The values assigned to goodwill are tested annually for impairment.

For the 2016, 2015 and 2014 acquisitions, total current assets primarily represent patient accounts receivable. Total non-current assets are fixed assets, primarily equipment, used in the practices.

The consideration paid for each of the acquisitions was derived through arm’s length negotiations. Funding for the cash portions was derived from proceeds from the Company’s revolving credit facility. The results of operations of the acquisitions have been included in the Company’s consolidated financial statements since their respective date of acquisition. Unaudited proforma consolidated financial information for the acquisitions in 2016, 2015 and 2014 acquisitions have not been included as the results, individually and in the aggregate, were not material to current operations.