ACQUISITIONS

3 Months Ended

Mar. 31, 2021

We complete acquisitions from time to time in order to pursue our strategy of increasing our market presence by expanding our service base and enhancing our position in certain geographic areas as a leading provider of home health, hospice and personal care services. The purchase price paid for acquisitions is negotiated through arm’s length transactions, with consideration based on our analysis of, among other things, comparable acquisitions and expected cash flows. Acquisitions are accounted for as purchases and are included in our condensed consolidated financial statements from their respective acquisition dates. Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets because of the expected contributions of the acquisitions to our overall corporate strategy. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets for significant acquisitions. The preliminary purchase price allocation is adjusted, as necessary, up to one year after the acquisition closing date if management obtains more information regarding asset valuations and liabilities assumed.

2020 Acquisitions

On June 1, 2020, we acquired Homecare Preferred Choice, Inc., doing business as AseraCare Hospice ("AseraCare"), a national hospice care provider with 44 locations, for an estimated purchase price of $230.4 million, net of cash acquired and inclusive of a $32 million tax asset. The closing payment for the purchase price included estimates for cash, working capital and various other items. Under the purchase agreement, the purchase price was subject to a closing payment adjustment for any differences between estimated amounts included in the closing payment and actual amounts at close, not to exceed $1.0 million. The closing payment adjustment, which was finalized in October 2020, reduced the purchase price by $0.8 million, from $230.4 million to $229.6 million.

The Company is in the process of reviewing the fair value of the assets acquired and liabilities assumed. During the three-month period ended March 31, 2021, we recorded measurement period adjustments based on changes to management's estimates and assumptions related to accounts payable and accrued expenses. The final valuation of the assets acquired and liabilities assumed will be finalized within the allowable measurement period. Based on the Company's preliminary valuation, the total estimated consideration of $229.6 million has been allocated to assets acquired and liabilities assumed as of the acquisition date as follows (amounts in millions):


	Amount
Patient accounts receivable	$	15.0
Prepaid expenses	0.7
Property and equipment	0.6
Operating lease right of use assets	5.9
Intangible assets	24.3
Other assets	0.1
Total assets acquired	46.6
Accounts payable	(6.0)
Payroll and employee benefits	(5.9)
Accrued expenses	(10.7)
Operating lease liabilities	(5.4)
Total liabilities assumed	(28.0)
Net identifiable assets acquired	18.6
Goodwill	211.0
Total estimated consideration	$	229.6

Intangible assets acquired include licenses ($8.7 million), certificates of need ($0.7 million), acquired names ($5.7 million) and non-compete agreements ($9.2 million). The acquired names will be amortized over a weighted-average period of 2.0 years and the non-compete agreements will be amortized over a weighted-average period of 1.7 years.

AseraCare contributed approximately $24.7 million in net service revenue and an operating loss of $0.6 million (inclusive of acquisition and integration costs totaling $0.6 million and intangibles amortization totaling $2.4 million) during the three-month period ended March 31, 2021.

We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.