Goodwill, Trade Names and Other Identifiable Intangible Assets

As of December 31, 2013 and 2012, the Company had the following acquired intangible assets:



	December 31, 2013						December 31, 2012
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Databases	$	15,925,000	$	12,102,685	$	3,822,315	$	12,525,000	$	11,954,630	$	570,370
Customer relationships	37,304,000		15,125,076		22,178,924		26,904,000		13,089,055		13,814,945
Non-compete agreements	3,603,000		3,406,334		196,666		3,403,000		3,296,333		106,667
	$	56,832,000	$	30,634,095	$	26,197,905	$	42,832,000	$	28,340,018	$	14,491,982

Intangible assets not subject to amortization:
Goodwill					$	77,265,907					$	62,712,109
Trade Names					42,301,331						48,701,331
					$	119,567,238					$	111,413,440

As of December 31, 2013, estimated annual amortization expense for continuing operations is as follows:



Year Ending December 31:
2014	$	3,063,146
2015	2,906,222
2016	2,906,222
2017	2,861,481
2018	2,776,667
Thereafter	11,684,167
	$	26,197,905

The changes in the carrying amount of goodwill by segment are as follows:



	Nurse and Allied Staffing Segment			Physician Staffing Segment		Other Human Capital Management Services Segment		Total
Balances as of December 31, 2012
Aggregate goodwill acquired	$	259,732,408		$	43,405,047	$	19,307,062	$	322,444,517
Accumulated impairment loss (a)	(259,732,408		)	—		—		(259,732,408		)
Goodwill, net of impairment loss	—			43,405,047		19,307,062		62,712,109
Changes to aggregate goodwill in 2013
Goodwill acquired (b)	14,553,798			—		—		14,553,798
Balances as of December 31, 2013
Aggregate goodwill acquired	274,286,206			43,405,047		19,307,062		336,998,315
Accumulated impairment loss	(259,732,408		)	—		—		(259,732,408		)
Goodwill, net of impairment loss	$	14,553,798		$	43,405,047	$	19,307,062	$	77,265,907

_______________

(a)

A non-cash pretax impairment charge of approximately $241,000,000 was recorded to reduce the carrying value of goodwill to its estimated fair value in the fourth quarter of 2008 for its nurse and allied staffing business segment. The majority of the goodwill impairment was attributable to the Company’s initial capitalization in 1999, which was accounted for as an asset purchase (see Note 1 – Organization and Basis of Presentation), and subsequent nurse staffing acquisitions made through 2003. In addition, in the second quarter of 2012, a non-cash pretax impairment charge of approximately $18,732,000 was recorded for the Company’s nurse and allied staffing reporting unit. See impairment review disclosures that follow.


(b)	Goodwill acquired from the acquisition of On Assignment's allied health business. See Note 5 - Acquisitions.

2013 annual impairment testing results

The Company performed its annual impairment test as of December 31, 2013. Upon completion of the fourth quarter 2013 impairment testing, the Company determined that the estimated fair value of the Company’s reporting units, exceeded their respective carrying values. Accordingly, no goodwill impairment charges were warranted for these reporting units as of December 31, 2013.

In the fourth quarter of 2013, in conjunction with the annual testing of trade names, the Company recorded a pre-tax non-cash impairment charge of approximately $6,400,000 of which $6,174,000 related to the physician staffing segment and $226,000 related to the nurse and allied staffing segment. The Company reduced its long term revenue forecast for these businesses in the fourth quarter and as a result, the calculation of estimated fair value was less than the carrying amount of the trade names, resulting in an impairment charge.

The assessment was impacted by a then recent reduction in locum tenens usage and the overall physician staffing needs of the Company's customers. Based on the impact those trends had on the long term revenue forecast, the calculation of estimated fair value using the projected revenue stream indicated the carrying amount of the trade names may not have been fully recoverable.

2012 annual impairment testing results

During the second quarter of 2012, the Company’s stock price declined further from December 31, 2011. In addition, slower than expected booking momentum and reduced contribution income in the Company’s nurse and allied staffing segment resulted in a downward revision to this segment’s forecast. Additionally, the Company was closely monitoring the performance of the clinical trial services and physician staffing reporting units due to a small margin between the carrying amount and fair value of those respective reporting units as of the December 31, 2011 annual impairment testing and the small margin between the carrying amount and fair value of the nurse and allied staffing reporting unit as of the March 31, 2012 interim impairment testing. These factors warranted impairment testing in the second quarter of 2012.

The discounted cash flows for each reporting unit that served as the primary basis for the income approach were based on discrete financial forecasts developed by the Company for planning purposes and consistent with those distributed within the Company and externally. A number of significant assumptions and estimates were involved in the application of the income methodology including forecasted revenue, margins, operating cash flows, discount rate, and working capital changes. Cash flows beyond the discrete forecast period of ten years were estimated using a terminal value calculation. A terminal value growth rate of 2.5% was used for each reporting unit. The income approach valuations included reporting unit cash flow discount rates, representing each of the reporting unit’s weighted average cost of capital, ranging from 11% to 18.7%.

The market approach generally applied pricing multiples derived from publicly-traded guideline companies that are comparable to the Company’s respective reporting units, and other specific data points, to determine their value. The Company utilized total enterprise value/revenue multiples ranging from 0.43 to 1.00, and total enterprise value/Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) multiples ranging from 4.17 to 10.00.

The reporting units’ values based on the market approach were determined assuming a 50% weighting to revenue multiples and a 50% weighting to EBITDA multiples for for its physician staffing, clinical trial services and retained search reporting units; and a 100% weighting to the EBITDA multiples for the education and training reporting unit.

The total fair value of the Company’s reporting units was reconciled to its June 30, 2012 market capitalization. The reasonableness of the resulting control premium was assessed based on a review of comparative market transactions and other qualitative factors that might have influenced the Company’s stock price. The Company’s market capitalization was also considered in assessing the reasonableness of the fair values of the reporting units. In performing the reconciliation of the Company’s market capitalization to fair value, the Company considered both quantitative and qualitative factors which supported the implied control premium. The Company believes that a reasonable buyer would offer a control premium for the business that would adequately cover the difference between its market price at June 30, 2012 and its book value.

Upon completion of the second quarter 2012 interim impairment testing, the Company determined that the estimated fair value of the Company’s reporting units, with the exception of nurse and allied staffing, exceeded their respective carrying values. As a result of the June 30, 2012 interim impairment testing, the Company determined that the fair value of the nurse and allied staffing reporting unit was lower than the respective carrying value. The decrease in value was due to slower than expected booking momentum and reduced contribution income in the Company’s second quarter of 2012 which lowered the anticipated growth trend used for goodwill impairment testing. Pursuant to the second step of the interim impairment testing the Company was required to calculate an implied fair value of goodwill based on a hypothetical purchase price allocation. Based on these results, the Company wrote off the remaining goodwill which resulted in a pre-tax goodwill impairment charge of approximately $18,732,000 as of June 30, 2012.

In conjunction with the 2012 annual testing of indefinite-lived intangible assets, no additional impairments of indefinite-lived intangible assets were identified.

2011 annual impairment testing results

Upon completion of the annual impairment assessment as of December 31, 2011 the Company determined that no impairment was indicated.

In conjunction with the 2011 annual testing of indefinite-lived intangible assets, no additional impairments of indefinite-lived intangible assets were identified.