Acquisitions

3 Months Ended

Mar. 31, 2020

The Company's subsidiaries acquisition focus is to purchase or lease operations that are complementary to the current affiliated operations, accretive to the business or otherwise advance the Company's strategy. The results of all operating subsidiaries are included in the accompanying Interim Financial Statements subsequent to the date of acquisition. Acquisitions are accounted for using the acquisition method of accounting. The Company's affiliated operations also enter into long-term leases that may include options to purchase the facilities. As a result, from time to time, the affiliated operations will acquire the real estate of facilities that have been operating under third-party leases.

2020 Acquisitions

During the three months ended March 31, 2020, the Company expanded its operations through a combination of long-term leases and real estate purchases, with the addition of three stand-alone skilled nursing operations and one stand-alone independent living operation. The addition of these operations added a total of 247 operational skilled nursing beds and 162 operational senior living units to be operated by the Company's affiliated operating subsidiaries. The aggregate purchase price for these acquisitions during the three months ended March 31, 2020 was $14,054.

For the acquisitions made through long-term leases, the Company did not acquire any material assets or assume any liabilities other than the tenant's post-assumption rights and obligations under the long-term lease. The Company entered into a separate operations transfer agreement with the prior operator as part of each transaction.

The fair value of assets for all four of the acquisitions was concentrated in property and equipment and as such, these transactions were classified as asset acquisitions. The purchase price for the asset acquisitions was $14,054. As of the date of this filing, the preliminary allocation of the purchase price for the acquisitions made during the first quarter was not finalized as necessary valuation information was not yet available.

During the first quarter of 2020, the Company entered into a long-term lease agreement to transfer two senior living operations to Pennant. Ensign affiliates retained ownership of the real estate for these two senior living communities.

2019 Acquisitions

During the first quarter of 2019, the Company expanded its operations through a combination of a long-term lease and a real estate purchase, with the addition of two stand-alone skilled nursing operations. For the acquisitions made through long-term leases, the Company did not acquire any material assets or assume any liabilities other than the tenant's post-assumption rights and obligations under the long-term lease. The addition of these operations added a total of 218 operational skilled nursing beds to be operated by the Company's affiliated operating subsidiaries. The Company also invested in a new ancillary services that are complementary to its existing businesses. The Company entered into a separate operations transfer agreement with the prior operator as part of each transaction. The aggregate purchase price for these acquisitions during the three months ended March 31, 2019 was $13,191.

The fair value of assets for the two acquisitions was concentrated in property and equipment and as such, these transactions were classified as asset acquisitions. The purchase price for the two asset acquisitions was $5,763. The fair value of assets for the one acquisition was concentrated in goodwill and as such, the transaction was classified as a business combination in accordance with ASC 805. The purchase price for the business combination was $7,428. The Company also entered into a note payable with the seller of $924.

In connection with the Spin-Off, the Company transferred the assets of one home health agency and one hospice agency that were purchased for an aggregate price of $1,500.

The Company’s acquisition strategy has been focused on identifying both opportunistic and strategic acquisitions within its target markets that offer strong opportunities for return. The operating subsidiaries acquired by the Company are frequently underperforming financially and can have regulatory and clinical challenges to overcome. Financial information, especially with underperforming operating subsidiaries, is often inadequate, inaccurate or unavailable. Consequently, the Company believes that prior operating results are not a meaningful representation of the Company’s current operating results or indicative of the integration potential of its newly acquired operating subsidiaries. The businesses acquired during the three months ended March 31, 2020 were not material acquisitions to the Company individually or in the aggregate. Accordingly, pro forma financial information is not presented. These acquisitions have been included in the March 31, 2020 condensed consolidated balance sheets of the Company, and the operating results have been included in the condensed consolidated statements of operations of the Company since the dates the Company gained effective control.

The table below presents the allocation of the purchase price for the operations acquired during the three months ended March 31, 2020 and 2019, excluding assets that were contributed to Pennant that occurred during the Spin-Off.


	Three Months Ended March 31,
	2020		2019
Land	$	4,080	$	475
Building and improvements	9,669		5,033
Equipment, furniture, and fixtures	236		1,614
Assembled occupancy	69		28
Definite-lived intangible assets	—		440
Goodwill	—		5,431


Other indefinite-lived intangible assets	—		170

Total acquisitions	$	14,054	$	13,191