Fair Value Measurements

The Fair Value Measurements and Disclosures Topic of the FASB ASC, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Fair Value Measurements and Disclosures Topic also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Items Measured at Fair Value on a Recurring Basis:

At December 31, 2013 and December 31, 2012, the Company’s financial assets/liabilities required to be measured on a recurring basis were its deferred compensation liability included in other long-term liabilities and contingent consideration receivable related to the sale of its clinical trial services business.

Deferred compensation —The Company utilizes Level 1 inputs to value its deferred compensation liability. The Company’s deferred compensation liability is measured using publicly available indices that define the liability amounts, as per the plan documents.

Contingent Consideration Receivable—The earn out related to the Company’s sale of its clinical trial services business is treated as a contingent consideration receivable for accounting purposes. The Company utilizes Level 3 inputs to value its contingent consideration receivable as significant unobservable inputs are used in the calculation of its fair value and are related to future performance of the disposed business. The fair value of the contingent consideration receivable will be adjusted to its fair value on a quarterly basis with the adjustment to the related receivable and the gain/loss on the sale of assets (included in discontinued operations). The future performance of the disposed business directly impacts the contingent consideration that could be paid to the Company, thus performance that exceeds target could result in a higher payout, and a performance under target could result in a lower payout. As of December 31, 2013, the Company assigned no value to the performance earn-out based on recent information available to the Company. See Note 3- Assets Held for Sale and Discontinued Operations for further information. The Company had no performance earn-outs as of December 31, 2012.

The table below summarizes the estimated fair values, which approximate their carrying value, of the Company’s financial assets and liabilities measured on a recurring basis as of December 31, 2013 and 2012:

Fair Value Measurements



	December 31, 2013				December 31, 2012
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial Liabilities:
Deferred compensation	$	1,638,334	$	1,638,334	$	1,471,091	$	1,471,091

Items Measured at Fair Value on a Nonrecurring Basis:

The Company’s assets held for sale, liabilities related to assets held for sale and goodwill and other identifiable intangible assets are measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3) described in Note 3 – Assets Held For Sale and Discontinued Operations, Note 4 – Goodwill, Trade Names and Other Identifiable Intangible Assets and Note 2 – Summary of Significant Accounting Policies.

Goodwill and other identifiable intangible assets with indefinite lives are reviewed for impairment annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Long-lived assets and identifiable intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that amounts may not be recoverable. If the testing performed indicates that impairment has occurred, the Company records a noncash impairment charge for the difference between the carrying amount of the goodwill or other intangible assets and the implied fair value of the goodwill or other intangible assets in the period the determination is made.

In the fourth quarter of 2013, in conjunction with the annual testing of indefinite-lived intangible assets not subject to amortization, the Company recorded a pre-tax non-cash impairment charge of approximately $6,400,000 related to its MDA acquisition (see Note 4 – Goodwill, Trade Names and Other Identifiable Intangible Assets). 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 table below presents the fair value of the MDA trade names as of December 31, 2013.

At December 31, 2012, all the assets and liabilities that were held for sale are stated at fair value with the exception of other intangible assets whose carrying value was below fair value. For those assets and liabilities except for goodwill, fair value approximates their carrying amount due to their short-term nature. The following table presents the fair value of goodwill, which is the most significant component of the assets held for sale, measured on a non-recurring basis for the Company’s clinical trial services reporting unit included in assets held for sale as of December 31, 2012:

Fair Value Measurements



	December 31, 2013		December 31, 2012
(Level 3)
MDA trade names	$	28,836,000	n/a
Clinical trial services segment goodwill	n/a		$	28,175,722

n/a - Not applicable

Other Fair Value Disclosures:

Financial instruments not measured or recorded at fair value in the accompanying consolidated balance sheets consist of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and short and long-term debt. The estimated fair value of accounts receivable, accounts payable and accrued expenses approximate their carrying amount due to the short-term nature of these instruments. The fair value of the Company’s term loan and revolver credit facility included in the current portion of long term debt on its consolidated balance sheet is estimated using Level 2 inputs utilizing interest rates that were indirectly observable in markets for similar liabilities. The estimated fair value of the Company’s debt was calculated using discounted cash flow analysis and appropriate valuation methodologies using Level 2 inputs available market information.

The Company recorded the $3,750,000 indemnity escrow funds related to the sale of its clinical trial services business as an escrow receivable (see Note 3 - Assets Held for Sale and Discontinued Operations for more information), and will adjust the amount to the estimated fair value, each reporting period, based on any known information. As of December 31, 2013, the fair value of the escrow receivable was calculated using Level 2 inputs and reflecting a discount for the time value of money.

The following table represents the carrying amounts and estimated fair values of the Company’s significant financial instruments that were not measured at fair value:



	December 31, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
(Level 2)
Financial Assets:
Escrow Receivable	$	3,750,000	$	3,700,373	$	—	$	—
Financial Liabilities:
Term loan and revolver credit facility	$	—	$	—	$	33,125,000	$	32,654,213
Asset-based revolving credit facility (a)	$	8,400,000	$	8,400,000	$	—	$	—

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(a)	Carrying value of the asset-based revolving credit facility approximates estimated fair value based on the short-term nature and the pricing at varying interest rates.

Concentration of Risk:

The Company has invested its excess cash in highly rated overnight funds and other highly rated liquid accounts. The Company has been exposed to credit risk associated with these investments. The Company minimizes its credit risk relating to these positions by monitoring the financial condition of the financial institutions involved and by primarily conducting business with large, well established financial institutions and diversifying its counterparties.

The Company generally does not require collateral and mitigates its credit risk by performing credit evaluations and monitoring at-risk accounts. The allowance for doubtful accounts represents the Company’s estimate of uncollectible receivables based on a review of specific accounts and the Company’s historical collection experience. The Company writes off specific accounts based on an ongoing review of collectability as well as past experience with the customer. The Company’s contract terms typically require payment between 15 to 60 days from the date services are provided and are considered past due based on the particular negotiated contract terms. Overall, based on the large number of customers in differing geographic areas, primarily throughout the United States and its territories, the Company believes the concentration of credit risk is limited.