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Goodwill and Intangible Assets
12 Months Ended
Dec. 31, 2021
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

A summary of goodwill and related adjustments is provided below:

 

 

 

Goodwill

 

 

 

Hospice

 

 

Personal Care

 

 

Home Health

 

 

Total

 

 

 

(Amounts In Thousands)

 

Goodwill at December 31, 2019

 

$

146,983

 

 

$

126,577

 

 

$

1,808

 

 

$

275,368

 

Additions for acquisitions

 

 

169,207

 

 

 

24,660

 

 

 

 

 

 

193,867

 

Divestiture

 

 

(1,167

)

 

 

 

 

 

 

 

 

(1,167

)

Adjustments to previously recorded goodwill

 

 

(190

)

 

 

1,211

 

 

 

(17

)

 

 

1,004

 

Goodwill at December 31, 2020

 

 

314,833

 

 

 

152,448

 

 

 

1,791

 

 

 

469,072

 

Additions for acquisitions

 

 

13,370

 

 

 

115

 

 

 

21,579

 

 

 

35,064

 

Adjustments to previously recorded goodwill

 

 

131

 

 

 

125

 

 

 

 

 

 

256

 

Goodwill at December 31, 2021

 

$

328,334

 

 

$

152,688

 

 

$

23,370

 

 

$

504,392

 

 

In connection with the acquisition of Armada, the Company recognized goodwill in its hospice and home health segments of $13.4 million and $15.0 million, respectively, and $6.5 million with the acquisition of Summit in our home health segment in 2021.

In 2020, the Company recognized goodwill in the hospice segment of $169.2 million related to the acquisition of Queen City Hospice. Additionally, in connection with the acquisitions of County Homemakers, A Plus and SunLife for the year ended December 31, 2020, the Company recognized goodwill of approximately $24.7 million in the personal care segment. In 2020, the Company divested certain branches and their related net assets including $1.2 million of related goodwill. The Company recognized a $0.3 million loss on the disposition, reflected in general and administrative expense for the year ended December 31, 2020.

Goodwill adjustments to previously recorded goodwill are generally related to accounts receivable and accrued expenses based on the final valuations. See Note 4 to the Notes to Consolidated Financial Statements for additional information regarding the acquisitions made by the Company in 2020 and 2021.

The Company’s identifiable intangible assets consist of customer and referral relationships, trade names and trademarks, non-competition agreements and state licenses. Amortization is computed using straight-line and accelerated methods based upon the estimated useful lives of the respective assets, which range from one to twenty-five years. Customer and referral relationships are amortized systematically over the periods of expected economic benefit, which range from five to ten years.

Goodwill and certain state licenses are not amortized pursuant to ASC Topic 350. We test intangible assets with indefinite useful lives for impairment at the reporting unit level on an annual basis, as of October 1, or whenever potential impairment triggers occur, such as a significant change in business climate or regulatory changes that would indicate that an impairment may have occurred. The Company estimates the fair value of the reporting unit using both a discounted cash flow model as well as a market multiple model. The cash flow forecasts are adjusted by an appropriate discount rate based on the Company’s estimate of a market

participant’s weighted-average cost of capital. These models are both based on the Company’s best estimate of future revenues and operating costs and are reconciled to the Company’s consolidated market capitalization, with consideration of the amount a potential acquirer would be required to pay, in the form of a control premium. The determination of fair value in the Company’s goodwill impairment analysis is based on an estimate of fair value for each reporting unit utilizing known and estimated inputs at the evaluation date. Some of those inputs include, but are not limited to, the most recent price of the Company’s common stock and fair value of long term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates and cost of invested capital. Significant assumptions used in the analysis included an 8.5% discount rate and long-term revenue growth rates that ranged from 3.0% to 5.0%. For the fiscal year 2021 impairment test, the fair value of the reporting units exceeded their respective carrying values (commonly referred to as “headroom”) by at least 100% in the personal care and home health segments, and by 20% in the hospice segment. The Company did not record any impairment charges for the years ended December 31, 2021, 2020 or 2019.

The carrying amount and accumulated amortization of each identifiable intangible asset category consisted of the following at December 31, 2021 and 2020:

 

 

 

Customer

and referral

relationships

 

 

Trade

names and

trademarks

 

 

Non-

competition

agreements

 

 

State Licenses

 

 

Total

 

 

 

(Amounts in Thousands)

 

Intangible assets with indefinite lives

 

$

 

 

$

 

 

$

 

 

$

21,124

 

 

$

21,124

 

Intangible assets subject to amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

 

44,672

 

 

 

42,926

 

 

 

6,785

 

 

 

12,508

 

 

 

106,891

 

Accumulated amortization

 

 

(36,342

)

 

 

(18,494

)

 

 

(3,831

)

 

 

(5,027

)

 

 

(63,694

)

Intangible assets subject to amortization, net

 

 

8,330

 

 

 

24,432

 

 

 

2,954

 

 

 

7,481

 

 

 

43,197

 

Net balance at December 31, 2021

 

$

8,330

 

 

$

24,432

 

 

$

2,954

 

 

$

28,605

 

 

$

64,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets with indefinite lives

 

$

 

 

$

 

 

$

 

 

$

20,791

 

 

$

20,791

 

Intangible assets subject to amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

 

44,672

 

 

 

42,926

 

 

 

6,225

 

 

 

12,507

 

 

 

106,330

 

Accumulated amortization

 

 

(34,439

)

 

 

(15,191

)

 

 

(2,887

)

 

 

(3,055

)

 

 

(55,572

)

Intangible assets subject to amortization, net

 

 

10,233

 

 

 

27,735

 

 

 

3,338

 

 

 

9,452

 

 

 

50,758

 

Net balance at December 31, 2020

 

$

10,233

 

 

$

27,735

 

 

$

3,338

 

 

$

30,243

 

 

$

71,549

 

 

During the year ended December 31, 2021, the Company acquired indefinite lived state licenses and non-competition agreements of $0.4 million and $0.6 million, respectively, related to the acquisition of Armada. During the year ended December 31, 2020, the Company acquired (i) indefinite lived state licenses, trade names and non-competition agreements of $7.5 million, $11.0 million and $1.5 million, respectively, related to the acquisition of Queen City Hospice, (ii) state licenses, subject to amortization of $0.3 million and $0.1 million in trade names related to the acquisition of County Homemakers, and (iii) a trade name of $1.4 million related to the acquisition of A Plus.

Amortization expense related to the identifiable intangible assets amounted to $8.5 million, $7.1 million and $6.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The weighted average remaining useful lives of identifiable intangible assets as of December 31, 2021 is 9.3 years.

The estimated future intangible amortization expense is as follows:

 

For the year ended December 31,

 

Total

(Amount in

Thousands)

 

2022

 

$

6,660

 

2023

 

 

6,176

 

2024

 

 

5,933

 

2025

 

 

4,310

 

2026

 

 

3,686

 

Thereafter

 

 

16,432

 

Total, intangible assets subject to amortization

 

$

43,197