ACQUISITIONS

9 Months Ended

Sep. 30, 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, personal care and high acuity 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.

2021 Acquisitions

On May 1, 2021, we acquired the regulatory assets of a home health provider in Randolph County, North Carolina for a purchase price of $2.5 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we recorded goodwill of $2.4 million and other intangibles (certificate of need) of $0.1 million in connection with the acquisition.

On July 1, 2021, we acquired Visiting Nurse Association ("VNA"), a home health and hospice provider with locations in Nebraska and Iowa for a purchase price of $20.1 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we recorded goodwill of $19.4 million and other intangibles (licenses) of $0.7 million in connection with the acquisition.

On July 12, 2021, we acquired the regulatory assets of a home health provider in New York for a purchase price of $1.5 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we recorded goodwill of $1.4 million and other intangibles (certificate of need) of $0.1 million in connection with the acquisition.

On August 1, 2021, we acquired Contessa, a leader in hospital-at-home and skilled nursing facility ("SNF") at-home services for an estimated purchase price of $240.7 million, net of cash acquired. With the addition of Contessa’s risk-based model and claims analytics capabilities, we will be able to bring the essential elements of inpatient hospital and SNF care to patients’ homes, allowing us to become a risk-bearing, home-based care delivery organization, expanding well beyond traditional home health and hospice. Contessa operates as a wholly-owned division of Amedisys and is reported as a separate operating segment. Under the purchase agreement, the purchase price is subject to a net working capital adjustment, whereby the purchase price will be adjusted to the extent the actual net working capital of Contessa as of the closing differs from the required net working capital under the purchase agreement.

The Company is in the process of reviewing the fair value of the assets acquired and liabilities assumed. Based on the Company's preliminary valuation, the total estimated consideration of $240.7 million has been allocated to assets acquired and liabilities assumed as of the acquisition date as follows (amounts in millions):


	Amount
ASSETS
Patient accounts receivable	$	1.5
Prepaid expenses	0.3
Other current assets	0.1
Property and equipment	0.3
Operating lease right of use assets	0.8
Intangible assets	55.2
Other assets	3.3
Total assets acquired	$	61.5
LIABILITIES AND EQUITY
Accounts payable	$	(0.1)
Payroll and employee benefits	(0.6)
Accrued expenses	(3.4)
Operating lease liabilities	(0.8)
Deferred income taxes	(3.1)
Current portion of long-term obligations	(0.9)
Other long-term obligations	(0.2)
Total liabilities assumed	(9.1)
Noncontrolling interests	(42.1)
Total equity assumed	(42.1)
Total liabilities and equity assumed	$	(51.2)
Net identifiable assets acquired	$	10.3
Goodwill	230.4
Total consideration	$	240.7

Intangible assets acquired include acquired names ($28.6 million), technology ($19.9 million) and non-compete agreements ($6.7 million). The non-compete agreements will be amortized over a weighted-average period of 2.0 years and the technology will be amortized over a weighted-average period of 7.0 years. The preliminary fair value of noncontrolling interest was determined using a discounted cash flow analysis and an income approach.

Contessa contributed $1.5 million in net service revenue and an operating loss of $3.8 million (inclusive of technology intangibles amortization totaling $0.5 million) during the three-month period ended September 30, 2021.

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 finalized its valuation of the assets acquired and liabilities assumed during the three-month period ended June 30, 2021. The total 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
ASSETS
Patient accounts receivable	$	15.3
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	$	46.9
LIABILITIES
Accounts payable	$	(6.3)
Payroll and employee benefits	(5.9)
Accrued expenses	(11.9)
Operating lease liabilities	(5.4)
Total liabilities assumed	$	(29.5)
Net identifiable assets acquired	$	17.4
Goodwill	212.2
Total 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.

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