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Acquisitions of Businesses | 12 Months Ended
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Dec. 31, 2017
Acquisitions of Businesses [Abstract] |
Acquisitions of Businesses |
3. | Acquisitions of Businesses
During 2017, 2016 and 2015, the Company acquired a majority interest in the following multi-clinic physical therapy practices:
|  | Date |  | % Interest Acquired |  | Number of Clinics
|  | 2017 |  |  |  |
January 2017 Acquisition |  | January 1 |  | 70% |  | 17
May 2017 Acquisition |  | May 31 |  | 70% |  | 4
June 2017 Acquisition |  | June 30 |  | 60% |  | 9
October 2017 Acquisition |  | October 31 |  | 70% |  | 9
|  | 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
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 was payable in two principal installments totaling $250,000 each, plus accrued interest. The first installment was paid in January 2018 and the second installment is due in January 2019. On May 31, 2017, the Company acquired a 70% interest in a four-clinic physical therapy practice. The purchase price for the 70% interest was $2.3 million in cash and $250,000 in a seller note that is payable in two principal installments totaling $125,000 each, plus accrued interest, in May 2018 and 2019. On June 30, 2017, the Company acquired a 60% interest in a nine-clinic physical therapy practice. The purchase price for the 60% interest was $15.8 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 June 2018 and 2019. On October 31, 2017, the Company acquired a 70% interest in a nine-clinic physical therapy practice and two management contracts with third party providers. The purchase price for the 70% interest was $4.0 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 October 2018 and 2019. In addition to the above, as previously mentioned in March 2017, the Company acquired a 55% interest in a company which is a leading provider of workforce performance solutions. 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. Also, in 2017, the Company purchased the assets and business of two physical therapy clinics in separate transactions. One clinic was consolidated with an existing clinic and the other operates as a satellite clinic of one of the existing partnerships. The results of operations of the acquired clinics have been included in the Company’s consolidated financial statements since the date of their respective acquisition. The Company intends to continue to pursue additional acquisition opportunities, develop new clinics and open satellite clinics. The purchase price for the 2017 acquisitions has been preliminarily allocated as follows (in thousands):
Cash paid, net of cash acquired |  | $ | 36,682 |
Seller notes |  |  | 2,150 |
Total consideration |  | $ | 38,832 |
Estimated fair value of net tangible assets acquired: |  |  |  |
Total current assets |  | $ | 6,248 |
Total non-current assets |  |  | 1,818 |
Total liabilities |  |  | (2,909 | )
Net tangible assets acquired |  | $ | 5,157 |
Referral relationships |  |  | 3,885 |
Non-compete |  |  | 1,224 |
Tradename |  |  | 8,439 |
Goodwill |  |  | 44,292 |
Fair value of non-controlling interest (classified as redeemable non-controlling interests) |  |  | (13,883 | )
Fair value of non-controlling interest (originally classified as mandatorily redeemable non-controlling interests) |  |  | (10,282 | )
|  | $ | 38,832 |
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. The first installment was paid in November 2017 and the second installment is due in November 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. The first installment was paid in February 2017 and the second was paid 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 price for the 2016 acquisitions were allocated as follows (in thousands):
Cash paid, net of cash acquired |  | $ | 23,623 |
Seller notes |  |  | 1,000 |
Total consideration |  | $ | 24,623 |
Fair value of net tangible assets acquired: |  |  |  |
Total current assets |  | $ | 1,372 |
Total non-current assets |  |  | 839 |
Total liabilities |  |  | (399 | )
Net tangible assets acquired |  | $ | 1,812 |
Referral relationships |  |  | 4,919 |
Non-compete |  |  | 847 |
Tradename |  |  | 3,802 |
Goodwill |  |  | 32,123 |
Fair value of non-controlling interest (originally classified as mandatorily redeemable non-controlling interests) |  |  | (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 was paid in 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 was paid 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 plus accrued interest that 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 |
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 prices plus the fair value of the non-controlling interests for the acquisition in January 2017 and for the years ended December 31, 2016 and 2015 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 are finalized. For the acquisitions occurring on or after February 1, 2017, 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, 2017 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 2016 and 2015, 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 7½ 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. For the 2017, 2016 and 2015 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 2017, 2016 and 2015 acquisitions have not been included as the results, individually and in the aggregate, were not material to current operations.

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