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ACQUISITIONS OF BUSINESSES | 9 Months Ended
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Sep. 30, 2019
ACQUISITIONS OF BUSINESSES [Abstract] |
ACQUISITIONS OF BUSINESSES | 2. ACQUISITIONS OF BUSINESSES On April 11, 2019, the Company acquired a company that is a provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offer employment testing, functional capacity evaluations and return-to-work services. It performs these services across a network in 45 states including onsite at eleven client locations. The business was then combined with Briotix Health, the Company’s industrial injury prevention operation, increasing the Company’s ownership position in the Briotix Health partnership to approximately 76.0%. The purchase price for the acquired company was $23.6 million, which consisted of $19.6 million in cash, (of which $0.5 million remained payable at September 30, 2019 to certain shareholders), and a $4.0 million seller note. The note accrues interest at 5.5% and the principal and accrued interest is payable, on April 9, 2021. On September 30, 2019, the Company acquired a 67% interest in an eleven-clinic physical therapy practice. The purchase price for the 67% interest was $12.4 million, of which $12.1 million was paid in cash and $0.3 million in a seller note that is payable in two principal installments totaling $150,000 each, plus accrued interest in September 2020 and September 2021. The note accrues interest at 5.0% per annum. The purchase price for the 2019 acquisitions has been preliminarily allocated as follows (in thousands):
Cash paid, net of cash acquired |  | $ | 30,365 |
Payable to shareholders of seller |  |  | 502 |
Seller note |  |  | 4,300 |
Total consideration |  | $ | 35,167 |
Estimated fair value of net tangible assets acquired: |  |  |  |
Total current assets |  | $ | 2,824 |
Total non-current assets |  |  | 2,924 |
Total liabilities |  |  | (3,034 | )
Net tangible assets acquired |  | $ | 2,714 |
Referral relationships |  |  | 3,000 |
Non-compete |  |  | 1,290 |
Tradename |  |  | 4,100 |
Goodwill |  |  | 30,293 |
Fair value of non-controlling interest (classified as redeemable non-controlling interests) |  |  | (6,230 | )
|  | $ | 35,167 |
The purchase prices plus the fair value of the non-controlling interests for the acquisition in 2019 was 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 estimated fair values at the acquisition date, with the amount in excess of fair values being recorded as goodwill. The Company is in the process of completing its formal valuation analysis of the acquisitions, 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 September 30, 2019 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. The Company does not expect the adjustments to be material. For the acquisitions in 2019, 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 amortization period is 11.0 years. For non-compete agreements, the amortization period is 6.0 years. The values assigned to tradenames are tested annually for impairment. For the 2019 acquisitions, a majority of total current assets primarily represents accounts receivable. Total non-current assets are fixed assets and equipment used in the practice. On August 31, 2018, the Company acquired a 70% interest in a four-clinic physical therapy practice. The purchase price for the 70% interest was $7.3 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. The first installment was paid in cash in August 2019 and the second installment remains payable in August 2020. In March 2017, the Company acquired a 55% interest in the initial industrial injury prevention business. The purchase price for the 55% interest was $6.2 million in cash and $0.4 million in a seller note that was paid in September 2018. On April 30, 2018, the Company acquired a 65% interest in another business in the industrial injury prevention sector. The aggregate purchase price for the 65% interest was $8.6 million in cash and $400,000 in a seller note that was paid on April 30, 2019. On April 30, 2018, the Company combined the two businesses. After the combination, the Company owned a 59.45% interest in the combined business, Briotix Health, the Company’s industrial injury prevention operation. See discussion above regarding an additional acquisition on April 30, 2019 in the industrial injury prevention business. Services provided include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacity evaluations 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 Company performs these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and highly specialized certified athletic trainers (ATCs). In addition, during 2018, the Company, through several of its majority owned Clinic Partnerships, acquired five separate clinic practices. These practices operate as satellites of the existing Clinic Partnership. The aggregate purchase price was $1.0 million inclusive of cash of $850,000 and a note payable of $150,000. The note accrued interest at 4.5% and the principal and accrued interest, was paid in cash on August 31, 2019. 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 2018 acquisitions has been allocated as follows (in thousands):
Cash paid, net of cash acquired |  | $ | 16,367 |
Seller notes |  |  | 950 |
Total consideration |  | $ | 17,317 |
Estimated fair value of net tangible assets acquired: |  |  |  |
Total current assets |  | $ | 1,633 |
Total non-current assets |  |  | 305 |
Total liabilities |  |  | (525 | )
Net tangible assets acquired |  | $ | 1,413 |
Referral relationships |  |  | 2,926 |
Non-compete |  |  | 298 |
Tradename |  |  | 990 |
Goodwill |  |  | 19,835 |
Fair value of non-controlling interest (classified as redeemable non-controlling interests) |  |  | (8,145 | )
|  | $ | 17,317 |
The purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2018 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. The Company has completed its formal valuation analyses for the acquisitions in 2018 with immaterial changes to the values. For the acquisitions in 2018, 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 weighted average amortization period was 10.54 years at December 31, 2018. For non-compete agreements, the weighted average amortization period was 6.00 years at December 31, 2018. The values assigned to tradenames are tested annually for impairment. For the 2018 acquisitions, total current assets primarily represent 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 the 2019 and 2018 acquisitions have not been included as the results, individually and in the aggregate, were not material to current operations.

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