XML 19 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
ACQUISITIONS OF BUSINESSES
 3 Months Ended
Mar. 31, 2017
ACQUISITIONS OF BUSINESSES [Abstract]  
ACQUISITIONS OF BUSINESSES
2. ACQUISITIONS OF BUSINESSES

On January 1, 2017, the Company acquired a 70% interest in a seventeen-clinic physical therapy practice.  The purchase price for the 70% interest was $10.7 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 January 2018 and 2019.

On March 23, 2017, (effective March 1, 2017 for accounting purposes) the Company acquired a 55% in a company which is a leading provider of workforce performance solutions. Services provided include onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers including a number of Fortune 500 companies. Other clients include large insurers and their contractors. The purchase price for the 55% interest was $6.2 million in cash and $0.4 million in a seller note that is payable, principal plus accrued interest, in September 2018.
 
The purchase price for the 2017 acquisitions has been preliminarily allocated as follows (in thousands):

Cash paid, net of cash acquired
 
$
15,670
 
Seller notes
  
900
 
Total consideration
 
$
16,570
 
Estimated fair value of net tangible assets acquired:
    
Total current assets
 
$
3,971
 
Total non-current assets
  
1,251
 
Total liabilities
  
(1,761
)
Net tangible assets acquired
 
$
3,461
 
Referral relationships
  
2,320
 
Non-compete
  
1,042
 
Tradename
  
2,444
 
Goodwill
  
17,586
 
Fair value of non-controlling interest (classified as mandatorily redeemable non-controlling interest)
  
(10,283
)
  
$
16,570
 

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, one of which was paid in February 2017 and one of which is due in February 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 prices for the 2016 acquisitions have 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
 
$
1,658
 
Total non-current assets
  
1,202
 
Total liabilities
  
(398
)
Net tangible assets acquired
 
$
2,462
 
Referral relationships
  
4,919
 
Non-compete
  
847
 
Tradename
  
3,802
 
Goodwill
  
31,473
 
Fair value of non-controlling interest (classified as mandatorily redeemable non-controlling interest)
  
(18,880
)
  
$
24,623
 

For the acquisition that occurred in the first quarter of 2016, 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 fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions that occurred after March 31, 2016, 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 2017 and 2016 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 2017 and 2016 have not been included as the results were not material to current operations.