Assets Held for Sale and Discontinued Operations

The clinical trial services business segment provided clinical trial, drug safety, and regulatory professionals and services on a contract staffing and outsourced basis to companies in the pharmaceutical, biotechnology and medical device industries, as well as to contract research organizations, primarily in the United States, and also in Canada and Europe. During the fourth quarter of 2012, the Company’s Board of Directors approved a plan to exit the clinical trial services business as a result of an extensive review of its business and the changing landscape in the pharmaceutical outsourcing industry. Classification of a disposal group as held for sale occurs when sufficient authority to sell the disposal group has been obtained, the disposal group is available for immediate sale, an active program to sell the disposal group has been initiated and its sale is probable within one year. Accordingly, the assets to be disposed of are presented as assets held for sale and the liabilities to be disposed of are presented as liabilities related to assets held for sale on the Company’s consolidated balance sheets as of December 31, 2012.

On February 15, 2013, the Company completed the sale of its clinical trial services business to ICON Clinical Research, Inc. and ICON Clinical Research UK Limited (Buyer) for an aggregate $52,000,000 in cash, subject to certain adjustments. At closing, the total amount paid was reduced by approximately $100,000 for the amount the Targeted Net Working Capital exceeded the Estimated Net Working Capital. During the fourth quarter of 2013, the Company paid an additional $200,000 to the Buyer to finalize the Net Working Capital adjustment, pursuant to the agreement which reduced the gain on the sale included in discontinued operations.

The agreement included a provision for an earn-out of up to $3,750,000 related to certain performance-based milestones. The maximum earn-out amount of $3,750,000 was deposited in escrow by Buyer as security for the earn-out payment, if any. The $3,750,000 earn-out related to certain performance-based milestones was treated as contingent consideration and the Company assigned no fair value to this earn-out as of December 31, 2013 based on recent information available to the Company. In addition, a portion of the performance-based milestones was not earned, and as a result $1,500,000 of the original escrow was released to the Buyer in the second quarter of 2013, leaving a balance of $2,250,000 as of December 31, 2013 (see Note 9 – Fair Value Measurements for more information).

Of the $52,000,000 purchase price paid at closing, $3,750,000 was also placed in escrow for a period of 18 months following the closing to provide partial security to the Buyer in the event of any breach of the representations, warranties and covenants of the Company. The Company recorded the $3,750,000 indemnity escrow funds as an escrow receivable, and will adjust the amount, each reporting period, based on any known information that may arise that would be reasonable and estimable. As of December 31, 2013 there was no known information about any indemnity claims.

As a result of the disposal, the underlying operations and cash flows of the clinical trial services business have been eliminated from the Company’s continuing operations and the Company no longer has the ability to influence the operating and/or financial policies of the disposal group. In addition, continuing cash flows from the disposed business resulting from a short-term transitional services agreement were not expected to be significant and did not constitute a material continuing financial interest in the clinical trial services business. As a result, pursuant to generally accepted accounting principles, the historical financial results of operations, except for disclosures related to cash flows, have been presented as discontinued operations for all periods presented.

The following table presents the revenues and the components of discontinued operations, net of tax:



	Years Ended December 31,
	2013			2012			2011
Revenue	$	7,939,150		$	67,626,715		$	64,608,763

Income (loss) from discontinued operations before gain on sale and income taxes	433,915			(30,973,520		)	4,613,260
Gain on sale of discontinued operations	3,968,714			—			—
Income tax (expense) benefit	(2,121,941		)	9,496,992			(2,063,050		)
Income (loss) from discontinued operations, net of income taxes	$	2,280,688		$	(21,476,528	)	$	2,550,210

For the year ended December 31, 2012, the loss before income taxes is comprised of $34,000,000 of goodwill impairment charges described previously, $1,400,000 of a trade name impairment charge, and results from operations of approximately $4,426,000.

Consistent with the approach described in Note 4 - Goodwill, Trade Names and Other Identifiable Intangible Assets, the Company used the income approach and the market approach to evaluate the potential impairment of goodwill related to the clinical trial services staffing reporting unit. Discounted cash flows served as the primary basis for the income approach. Pricing multiples derived from publicly-traded guideline companies that are comparable served as the basis for the market approach. Pursuant to the second step of the Company’s third quarter interim impairment testing, the Company was required to calculate an implied fair value of goodwill based on a hypothetical purchase price allocation. The Company recorded a pre-tax goodwill impairment charge of approximately $22,100,000 as of September 30, 2012. In addition, in the fourth quarter of 2012, in conjunction with the Company’s evaluation of its assets held for sale, an additional impairment charge was recorded of approximately $11,900,000. The Company considered the sale price from the buyer as its best indication of fair value as of December 31, 2012.

The following table represents the major classes of assets and liabilities related to assets held for sale as of December 31, 2012.



	December 31, 2012
Assets:
Accounts receivable, net	$	12,553,056
Other prepaid expenses	485,840
Other current assets	13,771
Property and Equipment, net	364,972
Goodwill	28,175,772
Other intangible assets, net	5,335,816
Other long-term assets	41,737
Total assets held for sale	$	46,970,964
Liabilities:
Accounts payable and accrued expenses	$	354,453
Accrued employee compensation and benefits	1,478,638
Other current liabilities	984,978
Other non-current liabilities	16,447
Total liabilities related to assets held for sale	$	2,834,516