Business Combinations

3 Months Ended

Mar. 31, 2015

Business Combinations [Abstract]

Business Combinations

Business Combinations

In March 2015, we acquired Integrity Home Health Care, Inc. (“Integrity”), a home health company with two locations in the Las Vegas, Nevada area. The acquisition, which was funded with cash on hand, was not material to our financial position, results of operations, or cash flows. As a result of this transaction, Goodwill increased by $6.0 million.

This acquisition was made to enhance our position and ability to provide post-acute healthcare services to patients in Las Vegas, Nevada and its surrounding area. All of the goodwill resulting from this transaction is deductible for federal income tax purposes. The goodwill reflects our expectations of favorable growth opportunities based on positive demographic trends in this market.

We accounted for this transaction under the acquisition method of accounting and reported the results of operations of Integrity from the date of acquisition. Assets acquired were recorded at their estimated fair values as of the acquisition date. The fair values of identifiable intangible assets were based on valuations using the cost and income approaches. The cost approach is based on amounts that would be required to replace the asset (i.e., replacement cost). The income approach is based on management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired was recorded as goodwill.

The fair value of the assets acquired at the acquisition date were as follows (in millions):

Identifiable intangible assets:
Noncompete agreement (useful life of 2 to 5 years)	$	0.3
Trade name (useful life of 1 year)	0.1
License (useful life of 10 years)	0.9
Goodwill	6.0
Total assets acquired	$	7.3

Our reported Net operating revenues and Net income for the three months ended March 31, 2015 include operating results for Integrity from the acquisition date through March 31, 2015. The following table summarizes the results of operations of the above mentioned entity from the date of acquisition included in our consolidated results of operations and the results of operations of the combined entity had the date of the acquisition been January 1, 2014 (in millions):

	Net Operating Revenues		Net Income Attributable to HealthSouth
Acquired entity only: Actual from acquisition date to March 31, 2015	$	0.5	$	—
Combined entity: Supplemental pro forma from 01/01/2015-03/31/15	741.8		42.6
Combined entity: Supplemental pro forma from 01/01/2014-03/31/14	592.8		46.9

Information regarding the net cash paid for all acquisitions during each period presented is as follows (in millions):

	Three Months Ended March 31, 2015
Fair value of assets acquired	$	1.3
Goodwill	6.0
Net cash paid for acquisitions	$	7.3

See Note 2, Business Combinations, to the consolidated financial statements accompanying the 2014 Form 10-K for information regarding acquisitions completed in 2014.