Acquisitions and Disposals

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Acquisitions and Disposals

3. Acquisitions and Disposals

2014 Acquisitions

Pursuant to the Company’s strategy for becoming the leading provider of post-acute health care services in the United States, the Company acquired 46 home-based agencies, 6 hospice agencies and 6 community-based services agencies during the twelve months ended December 31, 2014. The Company maintains an ownership interest in the acquired businesses as set forth below:

Acquired Businesses	Ownership Percentage			State of Operations	Acquisition Date
EAMC - Lanier Home Health		75	%	Alabama	2/1/2014
Lifeline Home Health		100	%	Kentucky	2/1/2014
Louisiana Hospice & Palliative Care of New Orleans		100	%	Louisiana	3/1/2014
West Virginia Home Health		100	%	West Virginia	4/1/2014
St. Joseph’s Hospice		100	%	West Virginia	4/1/2014
Northwestern Illinois Home Health		100	%	Illinois	4/1/2014
Deaconess-Lifeline Home Health		100	%	Kentucky	4/1/2014
Deaconess HomeCare		100	%	Mississippi	4/1/2014
Deaconess HomeCare		100	%	Tennessee	4/1/2014
Deaconess Hospice		100	%	Mississippi	4/1/2014
Elk Valley Health Services, LLC		100	%	Tennessee	4/1/2014
North Carolina Home Health		100	%	North Carolina	5/1/2014
Professional Nursing Services		100	%	North Carolina	5/1/2014
Life Care at Home		100	%	Massachusetts	9/1/2014
Life Care at Home of Tennessee		100	%	Tennessee	9/1/2014
Life Care at Home		100	%	Utah	9/1/2014
Life Care at Home		100	%	Arizona	9/1/2014
At Home Healthcare		100	%	Colorado	9/1/2014
Life Care at Home		100	%	Washington	9/1/2014
Life Care at Home		100	%	Rhode Island	11/1/2014
Troy Regional Medical Center Home Health		54	%	Alabama	11/1/2014

Each of the acquisitions was accounted for under the acquisition method of accounting, and, accordingly, the accompanying financial information includes the results of operations of each acquired entity from the date of acquisition.

The total aggregate purchase price for the Company’s acquisitions was $75.5 million, of which $73.9 million was paid in cash. The purchase prices are determined based on the Company’s analysis of comparable acquisitions and the target market’s potential future cash flows. The Company paid $1.0 million in acquisition-related costs, which was recorded in general and administrative expenses.

The Company’s home-based services segment recognized aggregate goodwill of $40.0 million for the acquisitions and hospice services segment recognized aggregate goodwill of $5.3 million. Goodwill generated from the acquisitions was recognized based on the expected contributions of each acquisition to the overall corporate strategy. The Company expects its portion of goodwill to be fully tax deductible. The following table summarizes the aggregate consideration paid for the acquisitions and the amounts of the assets acquired and liabilities assumed at the acquisition dates, as well as the fair value at the acquisition dates of the noncontrolling interest acquired (amounts in thousands):

Consideration
Cash	$	73,933
Fair value of total consideration transferred	73,933
Recognized amounts of identifiable assets acquired and liabilities assumed
Trade name	13,950
Certificates of need/licenses	8,615
Other identifiable intangible assets	441
Accounts receivable	8,667
Fixed assets	495
Accounts payable	(867		)
Other assets and (liabilities), net	(2,456		)
Total identifiable assets	28,845
Noncontrolling interest	238
Goodwill, including noncontrolling interest of $75	$	45,326

Trade names, certificates of need and licenses are indefinite-lived assets and, therefore, not subject to amortization. Acquired trade names that are not being used actively are amortized over the estimated useful life on the straight line basis. The other identifiable assets include non-compete agreements that are amortized over the life of the agreements, ranging from two to five years. Noncontrolling interest is valued at fair value by applying a discount to the value of the acquired entity for lack of control.

The following table contains unaudited pro forma consolidated income statement information assuming the 2014 acquisitions closed January 1, 2013 (amount in thousands, except earnings per share):

	2014		2013
Net service revenue	$	771,750	$	760,669
Operating income	46,230		47,399
Net income	22,299		22,698
Basic earnings per share	1.29		1.33
Diluted earnings per share	1.29		1.32

The pro forma information presented above includes adjustments for (i) depreciation expense, (ii) amortization of identifiable intangible assets, (iii) income tax provision using the Company’s effective tax rate and (iv) estimate of additional costs to provide administrative costs for these locations. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred. In addition, future results may vary significantly from the results reflected in the pro forma information.

2013 Acquisitions

The total aggregate purchase price for the Company’s acquisitions, which closed in the twelve months ended December 31, 2013, was $27.3 million, of which $26.9 million was paid in cash and $0.4 million in assumed liabilities. Purchase prices are determined based on an analysis of comparable acquisitions and the target market’s potential future cash flows. The company paid $0.6 million in acquisition-related costs, which was recorded in general and administrative expenses.

The Company’s home-based services segment recognized aggregate goodwill of $23.2 million for acquisitions, including $0.6 million of noncontrolling goodwill and hospice services segment recognized aggregate goodwill of $2.5 million. Goodwill generated from the acquisitions was recognized based on the expected contributions of each acquisition to the overall corporate strategy. The Company expects its portion of goodwill to be fully tax deductible.

During the twelve months ended December 31, 2013, the Company purchased membership interests in six of its equity joint ventures. The total purchase price for the additional ownership from these equity transactions was $1.9 million, resulting in the Company reducing noncontrolling interest-redeemable by $0.6 million and additional paid in capital by $1.3 million.