Acquisitions

9 Months Ended

Sep. 30, 2024

3.	Acquisitions

The Company’s growth strategy involves periodically acquiring institutional pharmacies servicing LTCFs and their residents as well as residents in other care settings. The Company’s strategy includes the acquisition of freestanding institutional pharmacy businesses as well as other assets, generally less significant in size, which are combined with existing pharmacy operations to augment internal organic growth.

During the nine months ended September 30, 2024, the Company completed acquisitions of various pharmacy operations (the “Acquisitions”). Total consideration for the Acquisitions included cash of $12,460, an inventory payment payable of $722, based on the fair value of inventory on the acquisition date, and contingent earnout payments of up to $2,700 if certain revenue and earnings targets are achieved by certain acquired entities during the

two-year

period subsequent to the

respective

acquisition dates. The fair value of the contingent consideration arrangement at the acquisition dates and at September 30, 2024 was $2,700 (see the Fair Value Measurements Note 5 for more information). The total preliminary purchase consideration for the Acquisitions was $15,882.

The Acquisitions included

non-controlling

interests, for which the fair value was estimated to be $4,989 at the time of the Acquisitions. The fair value of the

non-controlling

interests was estimated by utilizing the implied fair value of the

non-controlling

interests, determined based on the acquisition price, and considering discounts necessary due to the lack of marketability and lack of control associated with the

non-controlling

interest. During 2024, we incurred an immaterial amount of acquisition costs in connection with the Acquisitions.

The Acquisitions were treated as a purchase in accordance with ASC 805, Business Combinations, which requires recognition of the estimated fair values of assets acquired and liabilities assumed in a transaction. Our recognition of the assets acquired and liabilities assumed was based on management’s judgement after evaluating several factors, including a preliminary valuation assessment. This recognition is preliminary and subject to changes, which could be material, as additional information becomes available and the valuation of assets and liabilities is finalized. There were no material measurement period adjustments recognized in periods subsequent to the Acquisitions.

The preliminary recognition of the assets and liabilities of the Acquisitions as of September 30, 2024 is as follows:


(in thousands)	Fair Value
Total preliminary purchase consideration	$	15,882
Net assets acquired:
Inventory		2,261
Other assets		2,138
Intangible Assets		5,607
Other liabilities		(1,508	)
Non-controlling interest equity		(4,989	)

Net assets acquired		3,509

Goodwill	$	12,373

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable net assets acquired in the Acquisitions. Goodwill represents future economic benefits expected to arise from the Company’s expanded presence in the long-term care pharmacy industry, the assembled workforce acquired, expected revenue synergies, as well as operating efficiencies and cost savings. Of the $12,373 of goodwill recorded related to the Acquisitions, $9,256 is expected to be deductible for tax purposes.

Intangible assets are comprised of customer lists and trademarks. The fair values and the weighted average useful lives for the customer lists and trademarks were $5,057 and $550, and 10 years and 5 years, respectively.

Consolidated Results of Operations

The results of operations for the Acquisitions have been included in the consolidated financial statements since the date of acquisition. During the three and nine months ended September 30, 2024, the Company’s consolidated statements of operations included $16,563 and $32,434, respectively, of revenue associated with the Acquisitions. Net income associated with the Acquisitions is not material to the consolidated financial statements.

The comparable prior period results of operations associated with the Acquisitions are not material to the consolidated financial statements, and as such, supplemental pro forma financial information is not presented.