Goodwill, Trade Names, and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Trade Names, and Other Intangible Assets

As of December 31, 2016 and 2015, the Company had the following acquired intangible assets:



	December 31, 2016						December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(amounts in thousands)
Intangible assets subject to amortization:
Databases	$	31,609	$	16,147	$	15,462	$	31,225	$	14,150	$	17,075
Customer relationships	41,724		23,316		18,408		47,204		20,734		26,470
Non-compete agreements	3,619		3,527		92		3,603		3,486		117
Trade names, definite-lived	3,216		343		2,873		3,200		49		3,151
	$	80,168	$	43,333	$	36,835	$	85,232	$	38,419	$	46,813
Intangible assets not subject to amortization:
Trade names					35,402						36,101
					$	72,237					$	82,914

As of December 31, 2016, estimated annual amortization expense is as follows:



Years Ending December 31:	(amounts in thousands)
2017	$	4,248
2018	4,148
2019	4,111
2020	4,007
2021	3,799
Thereafter	16,522
	$	36,835

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
	(amounts in thousands)
Balances as of December 31, 2015
Aggregate goodwill acquired	$	302,005		$	43,405		$	19,307		$	364,717
Sale of CCE (a)	—			—			(9,889		)	(9,889		)
Accumulated impairment loss	(259,732		)	—			—			(259,732		)
Goodwill, net of impairment loss	42,273			43,405			9,418			95,096

Changes to aggregate goodwill in 2016
Goodwill acquired (b)	2,272			—			—			2,272
Impairment charges	—			(17,720		)	—			(17,720		)

Balances as of December 31, 2016
Aggregate goodwill acquired	304,277			43,405			19,307			366,989
Sale of CCE (a)	—			—			(9,889		)	(9,889		)
Accumulated impairment loss	(259,732		)	(17,720		)	—			(277,452		)
Goodwill, net of impairment loss	$	44,545		$	25,685		$	9,418		$	79,648

_______________


(a)	See Note 4 - Disposal and Discontinued Operations.


(b)	Goodwill acquired from the acquisition of USR. See Note 3 - Acquisitions.

2016 Impairment Charges

During an evaluation of goodwill, trade names, and other intangible assets at June 30, 2016, the Company determined that indicators were present in the Physician Staffing reporting unit which would suggest the fair value of the reporting unit may have declined below the carrying value. The Physician Staffing reporting unit continued to under-perform relative to management’s expectations. The lower than expected revenue was driven by lower booking volumes partly due to the loss of customers, and margins that were negatively impacted from continued investments in the business all through the first half of 2016. The Company considered these factors to be impairment indicators that warranted impairment testing of goodwill, trade names, and other intangible assets.

As a result, an interim impairment test of goodwill, trade names, and other intangible assets was performed as of June 30, 2016 in accordance with the Intangibles-Goodwill and Other and Property, Plant, and Equipment Topics of the FASB ASC. The evaluation resulted in the carrying value of goodwill, trade names, and other intangible assets for Physician Staffing to exceed the estimated fair value. As a result, the Company recorded pre-tax impairment charges totaling $24.3 million: $17.7 million related to goodwill, $0.6 million related to trade names, and $6.0 million related to customer relationships.

Goodwill

In order to determine the fair value of the Physician Staffing reporting unit, the Company used a combination of an income and a market approach to calculate the fair value of the Physician Staffing reporting unit. The discounted cash flow that served as the primary basis for the income approach was based on the Company’s discrete financial forecast of revenue, gross profit margins, operating costs and cash flows. It also considered historical and estimated future results, general economic and market conditions, as well as the impact of planned business and operational strategies. The assumptions used in the income approach included a discount rate of 13.5% and a terminal value growth rate of 3.0% for cash flows beyond the discrete forecast period of ten years. Assumptions used in the market approach included valuation multiples based on an analysis of multiples for comparable public companies. The Company utilized total enterprise value/Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) multiples ranging from 7.5 to 8.5. A 50% weighting was applied to the components of each approach to estimate the total fair value of goodwill. This weight is an estimate by management and was developed based on the specific characteristics, risks and uncertainties of the Physician Staffing reporting unit. As a result of the testing, the Company compared the implied fair value of goodwill to its carrying amount and recorded a non-cash pre-tax goodwill impairment charge of $17.7 million at June 30, 2016.

Trade Names

The Company valued the Physician Staffing trade names based on a Relief From Royalty methodology using projected cash flows of an estimated royalty fee. The royalty rate was determined by a blended rate using the Market Royalty Rate Method and the Apportionment of Profit Method. The calculated value of the trade names was compared to its carrying amount and, as a result, the Company recorded a non-cash pre-tax impairment charge of $0.6 million at June 30, 2016.

Customer Relationships

The Company valued the Physician Staffing customer relationships based on the Multi-Period Excess Earnings Method (MPEEM). The MPEEM estimates the fair value based on the present value of the allocated future economic benefits. The inputs include the projected revenue and associated expenses from the customers, an estimated attrition rate, and a discount rate of 13.5%. The Company performed a recoverability test on the asset group which customers are a part of and deemed customer relationships to be impaired. As a result, the calculated value of customer relationships was compared to its carrying amount and the Company recorded a non-cash pre-tax impairment charge of $6.0 million at June 30, 2016.

2016 Annual Impairment Testing

The Company performed its annual impairment test as of October 1, 2016. Upon completion of the impairment testing, the Company determined that no additional impairment of goodwill, trade names, or other intangible assets was warranted.

2015 and 2014 Impairment Charges

The Company performed its annual impairment test as of October 1, 2015 and 2014. Upon completion of the impairment testing, the Company determined that the estimated fair value of its reporting units exceeded their respective carrying values. Accordingly, no goodwill impairment charges were warranted for these reporting units as of December 31, 2015 and 2014.

However, in conjunction with the annual impairment testing of trade names in the fourth quarter of 2015 and 2014, the Company reduced its long-term revenue forecast for the business segment in the fourth quarter of each year and as a result, the calculation of estimated fair value was less than the carrying amount of the trade names. As a result, the Company recorded pre-tax non-cash impairment charges of $2.1 million and $10.0 million, respectively, related to the Physician Staffing segment.

The reduced long-term revenue forecast for 2015 was impacted by lower projected volume resulting from an under-investment in new revenue producers to keep pace with attrition. The reduced long-term revenue forecast for 2014 was impacted by lower projected volume resulting from a delay in changing to a more scalable business model. The Company valued the trade name based on discounted cash flows using projected cash flows of an estimated royalty fee. The royalty rate was determined by a blended rate using the Market Royalty Rate Method and the Apportionment of Profit Method and has been applied consistently since the date of acquisition. No additional impairments of indefinite-lived intangible assets were identified.

The Company based its fair value estimates on assumptions it believed to be reasonable, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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