Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

a)             Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on certain assumptions which they believe are reasonable in the circumstances and actual results could differ from those estimates. The more significant estimates reflected in these consolidated financial statements include the valuation of equity issued prior to the Company’s IPO, purchase price allocations, useful lives of intangible assets, potential impairment of goodwill and intangible assets, the allowance for doubtful accounts, the portion of accounts receivable deemed to be long term in nature, the valuation of deferred tax assets and the valuation of share-based compensation and derivative instruments.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

b)             Foreign Currencies

Assets and liabilities recorded in foreign currencies are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded to other comprehensive income (loss) and are reported net of the effect of income taxes on the consolidated financial statements.

Cash and Cash Equivalents, Policy [Policy Text Block]

c)              Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of December 31, 2012 and June 30, 2013.

Receivables, Policy [Policy Text Block]

d)              Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist of amounts owed to the Company for services provided in the normal course of business and are reported net of allowance for doubtful accounts, which amounted to $4.4 million and $4.1 million as of December 31, 2012 and June 30, 2013, respectively. Generally, no collateral is received from customers and additions to the allowance are based on ongoing credit evaluations of customers with general credit experience being within the range of management’s expectations. Accounts are reviewed regularly for collectability and those deemed uncollectible are written off.  The Company assumes, that on average, all accounts receivable will be collected within one year and thus classifies these as current assets; however, there are certain receivables, principally in the U.K., that have aged longer than one year, and the Company has recorded an estimate for those receivables that will not be collected within one year as long term in the Consolidated Balance Sheets.

Concentration Risk Disclosure [Text Block]

e)              Concentrations of Credit Risk

The Company routinely assesses the financial strength of its customers and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. For the three and six months ended June 30, 2012 and 2013, no individual customer accounted for more than 10% of revenues. At December 31, 2012 and June 30, 2013, there were no individual customers that accounted for greater than 10% of the accounts receivable balance.

As of June 30, 2013, the Company had cash and cash equivalents totaling approximately $9.2 million. These amounts were held for future acquisition and working capital purposes and were held in non-interest bearing accounts, of which $1.6 million were held in the U.S. The U.S. amounts are insured under standard FDIC insurance coverage for deposit accounts up to $250,000, per depositor and account ownership category, at each separately insured depository institution.

Property, Plant and Equipment, Policy [Policy Text Block]

f)              Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets and accelerated methods for income tax purposes. Leasehold improvements are amortized over the lesser of their expected useful life or the remaining lease term. Maintenance and repair costs are expensed as incurred.

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

g)              Long-Lived Assets

 In accordance with Impairment or Disposal of Long-Lived Assets, Subsections of Financial Accounting Standards Board (“FASB”) ASC Subtopic 360-10 (“ASC 360”),  Property, Plant, and Equipment — Overall, long-lived assets, such as equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. At December 31, 2012 and June 30, 2013, no impairment was noted.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

h)             Goodwill and Other Intangible Assets

Goodwill is an asset representing the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is reviewed for impairment at least annually in accordance with the provisions of FASB ASC Topic 350, Intangibles — Goodwill and Other (“ASC 350”). The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed.

The Company performed its annual impairment review of goodwill in October of 2012 and it was determined that the carrying amount of goodwill was not impaired and there have been no subsequent developments that would indicate impairment exists as of December 31, 2012 and June 30, 2013. The goodwill impairment review will continue to be performed annually or more frequently if facts and circumstances warrant a review.

ASC 350 also requires that intangible assets with definite lives be amortized over their estimated useful lives. Currently, customer relationships, trade names, covenants not-to-compete and technology are amortized using the straight-line method over estimated useful lives.

Deferred Charges, Policy [Policy Text Block]

i)              Deferred Financing Costs

In November 2010, the Company entered in to a senior secured revolving credit facility with Bank of America N.A. (“Senior Secured Revolving Credit Facility”) (see Note 10) and has incurred deferred financing costs through June 30, 2013 of $8.1 million, of which $402,000 and $30,000 were incurred in the six months ended June 30, 2012 and 2013, respectively. Additionally, in July 2011, the Company closed a private offering of $250.0 million in aggregate principal amount of 9.0% senior notes due 2019 (“Initial Notes”). In June 2012, in accordance with the registration rights granted to the original purchasers of the Initial Notes, the Company completed an exchange offer of the privately placed Initial Notes for new 9.0% Senior Notes due 2019 (the “Exchange Notes,” and together with the Initial Notes, the “Senior Unsecured Notes”) registered with the SEC with substantially identical terms to the Initial Notes. The Company has incurred deferred financing costs of $7.1 million associated with the Senior Unsecured Notes, of which $240,000 and $22,000 were incurred in the six months ended June 30, 2012 and 2013, respectively.

The deferred financing costs associated with the Senior Secured Revolving Credit Facility and the Senior Unsecured Notes are being amortized to interest expense over the five-year term of the facility, as amended, and the eight-year term of the notes, respectively, using the straight-line method which approximates the effective interest method.

For the three months ended June 30, 2012 and 2013, the Company amortized $534,000 and $502,000 to interest expense, respectively. For the six months ended June 30, 2012 and 2013, the Company amortized $1.0 million and $1.1 million to interest expense, respectively.

Revenue Recognition, Policy [Policy Text Block]

j)              Revenue Recognition

Revenue related to IMEs, peer reviews, bill reviews and administrative support services is recognized at the time services have been performed and the report is shipped to the end user. The Company believes that recognizing revenue at the time the report is shipped is appropriate because the Company’s revenue policies meet the following four criteria in accordance with ASC 605-10-S25, Revenue Recognition: Overall,  (i) persuasive evidence that arrangement exists, (ii) shipment has occurred, (iii) the price is fixed and determinable and (iv) collectability is reasonably assured. The Company reports revenues net of any sales, use and value added taxes.

Revenue related to other IME services, including litigation support services and medical record retrieval services, where no report is generated, is recognized at the time the service is performed. The Company believes that recognizing revenue at the time the service is performed is appropriate because the Company’s revenue policies meet the following four criteria in accordance with ASC 605-10-S25, (i) persuasive evidence that arrangement exists, (ii) services have been rendered, (iii) the price is fixed and determinable and (iv) collectability is reasonably assured.

Certain agreements with customers in the U.K. include provisions whereby collection of the amounts billed are contingent on the favorable outcome of the claim.  The Company has deemed these provisions to preclude revenue recognition at the time of sale, as collectability is not reasonably assured and the sales are contingent, and is deferring these revenues, net of estimated costs, until the case has been settled, the contingency has been resolved and the cash has been collected.   As of December 31, 2012, the Company had deferred $12.6 million in contingent revenues and $9.1 million in costs and expenses associated with the contingent revenues. For the six months ended June 30, 2013, the Company deferred an additional $4.2 million in contingent revenues and $3.1 million in costs and expenses associated with contingent revenues.

Should changes in conditions cause management to determine these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected.

Cost of Sales, Policy [Policy Text Block]

k)            Costs of Revenues

Costs of revenues are comprised of fees paid to members of the Company’s medical panel; other direct costs including transcription, film and medical record obtainment and transportation; and other indirect costs including labor and overhead related to the generation of revenues.

Income Tax, Policy [Policy Text Block]

l)              Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company applies the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (included in FASB ASC Subtopic 740-10,  Income Taxes — Overall ), and recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Prior to the adoption of FASB Interpretation No. 48, the Company recognized the effect of income tax positions only if such positions were probable of being sustained.

The Company records interest and penalties related to unrecognized tax benefits in income tax expense.

Earnings Per Share, Policy [Policy Text Block]

m)             Loss Per Common Share

Basic loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during each period. Diluted loss per common share is calculated by dividing net loss, adjusted on an “as if converted” basis, by the weighted-average number of actual shares outstanding and, when dilutive, the share equivalents that would arise from the assumed conversion of convertible instruments. The effect of potentially dilutive stock options, warrants, shares of restricted stock with service restrictions that have not yet been satisfied and unvested restricted stock units (“RSUs”) is calculated using the treasury stock method.

For the three and six months ended June 30, 2012, the potentially dilutive securities include options and warrants exercisable into 9.9 million shares of common stock and 68,000 shares of common stock issuable, at the holder’s option, to settle a subordinated unsecured note. For the three and six months ended June 30, 2013, the potentially dilutive securities include options, warrants, unvested RSUs and shares of restricted stock with a service restriction not yet satisfied exercisable into 9.9 million shares of common stock.

For the three and six months ended June 30, 2012 and 2013, all of the potentially dilutive securities were excluded from the calculation of shares applicable to loss per share, because their inclusion would have been anti-dilutive.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

n)             Share-Based Compensation

The Company has an Amended and Restated 2008 Stock Incentive Plan, as amended, (the “Plan”) that provides for granting of stock options, shares of restricted stock and RSUs. The Company accounts for share-based awards in accordance with ASC Topic 718, Compensation — Stock Compensation (“ASC 718”). ASC 718 requires measurement of compensation cost for all share-based awards at fair value on the grant date (or measurement date if different) and recognition of compensation expense, net of forfeitures, over the requisite service period for awards expected to vest.

Stock Options

The fair value of stock option grants is determined using the Black-Scholes valuation model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics not present in these employee stock options. Additionally, option valuation models require the input of highly subjective assumptions, including the expected volatility of the stock price. Because the Company’s employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimates, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of its share-based awards. The Company’s expected volatility assumptions are based on the weighted average of the Company’s peer group’s median implied volatility, the Company’s mean reversion volatility and the median of the Company’s peer group’s most recent historical volatilities for 2013 stock option grants. Expected life assumptions are based upon the “simplified” method for those options issued in the first six months of 2013 which were determined to be issued at-the-money. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued.

The assumptions utilized for stock option grants during the six months ended June 30, 2013 were as follows:

	Six months ended June 30, 2013
Volatility		48.66	to	48.83	%
Expected life (years)			6.00
Risk-free interest rate		0.97	to	1.02	%
Dividend yield			—
Fair value	$	6.63	to	8.39

In the six months ended June 30, 2013, the Company issued approximately 426,000 stock option awards to certain employees and outside consultants, and the aggregate fair value was $3.0 million.  All of these awards vest over a three-year period. Additionally, all these options could vest earlier in the event of a change in control or merger or other acquisition.  Share-based compensation expense related to stock option awards was $3.0 million and $6.0 million for the three and six months ended June 30, 2012, of which $750,000 and $1.5 million was included in costs of revenues, respectively, and $2.3 million and $4.5 million was recorded in SGA expenses, respectively. Share-based compensation expense related to stock option awards was $2.9 million and $5.8 million for the three and six months ended June 30, 2013, of which $719,000 and $1.4 million was included in costs of revenues, respectively, and $2.2 million and $4.4 million was recorded in SGA expenses, respectively.

At June 30, 2013, the unrecognized compensation expense related to stock option grants was $15.5 million, with a remaining weighted average life of 1.5 years.

A summary of option activity for the six months ended June 30, 2013 is as follows:

		Number of		Weighted average exercise		Weighted average remaining contractual		Aggregate intrinsic value
	options			price		life (years)		(in thousands)
Outstanding at December 31, 2012		9,463,657		$	11.76
Options granted		425,800			14.91
Options forfeited		(268,883	)		15.61
Options exercised		(727,181	)		8.32
Outstanding at June 30, 2013		8,893,393		$	12.09		7.7	$	84,991
Exercisable at June 30, 2013		5,246,938		$	11.30		7.2	$	54,529

Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the fiscal period in excess of the weighted average exercise price multiplied by the number of options outstanding or exercisable. The total intrinsic value of stock options exercised during the six months ended June 30, 2013 was $6.3 million.

Restricted Stock and Restricted Stock Units

The Company has granted members of the Board of Directors, certain employees and outside consultants, time lapse restricted stock and RSUs which vest after a stipulated number of years from the grant date depending on the terms of the issue. The fair value of shares of restricted stock and RSUs is determined based upon the market price of the underlying common stock as of the date of grant. Time lapse restricted shares issued and RSUs vest over one, two and three-year periods. The agreements under which the restricted stock and RSUs are issued provide that shares awarded may not be sold or otherwise transferred until restrictions established under the stock plans have been satisfied. The restriction on these awards could expire earlier than the stipulated time frame in the event of a change in control or merger or other acquisition. Share-based compensation expense related to shares of restricted stock and RSUs was $149,000 and $298,000 in the three and six months ended June 30, 2012, respectively, all of which is included in SGA expenses. Share-based compensation expense related to shares of restricted stock and RSUs was $961,000 and $1.8 million in the three and six months ended June 30, 2013, respectively, all of which is included in SGA expenses.

The following is a summary of non-vested restricted share and RSU activity for the six months ended June 30, 2013:

	Number of awards			Weighted average grant date fair value
Non-vested awards at December 31, 2012		189,412		$	13.68
Awards granted		589,010			14.59
Awards vested		(36,850	)		14.24
Awards forfeited		(19,090	)		14.06
Non-vested awards at June 30, 2013		722,482		$	14.38

The total fair value of vested RSUs and shares of restricted stock during the six months ended June 30, 2013 was $525,000 and there were no RSUs or restricted shares that vested during the six months ended June 30, 2012. At June 30, 2013, total unrecognized compensation cost related to non-vested restricted shares and RSUs was $8.0 million, which is expected to be recognized over a weighted average period of 2.6 years.

During the three and six months ended June 30, 2013, the Company has recorded share-based compensation expense of $446,000 and $892,000 related to a 2013 incentive compensation plan, all of which was recorded in SGA expenses. This accrual is recorded within the Company’s accrued expenses in its Consolidated Balance Sheets. The compensation plan has both a 2013 annual performance metric and subsequent service requirement. If the performance metric is met, the associated liability will be settled in the first quarter of 2014 with an indeterminate number of restricted shares which will vest equally on June 1, 2014 and June 1, 2015.

Fair Value of Financial Instruments, Policy [Policy Text Block]

o)             Fair Value Measurements

The Company’s financial liabilities, which are measured at fair value on a recurring basis, in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), are categorized using the fair value hierarchy at December 31, 2012 and June 30, 2013, and are as follows (in thousands):

	Level 1		Level 2		Level 3		Total
As of December 31, 2012
Financial instruments:
Interest rate swap	$	—	$	101	$	—	$	101
Contingent consideration		—		—		846		846
As of June 30, 2013
Financial instruments:
Interest rate swap	$	—	$	7	$	—	$	7
Contingent consideration		—		—		863		863

The fair value of the interest rate swap is determined using observable market inputs, such as current interest rates, and considers nonperformance risk of the Company and that of its counterparties.

The contingent consideration relates to earnout provisions recorded in conjunction with certain acquisitions completed in 2009 and 2010. The total increase in fair value of the contingent consideration of $17,000 in the six months ended June 30, 2013 was recorded in interest and other expenses, net in the Consolidated Statements of Comprehensive Loss due to changes in the fair value of the contingent consideration.  

In February 2007, the FASB issued authoritative guidance codified as ASC Topic 825 Financial Instruments (“ASC 825”), which permits entities to choose to measure many financial instruments and certain other items at fair value. This provision of ASC 825 is effective for fiscal years beginning after November 15, 2007. As the Company did not elect the fair value option, the adoption of this provision of ASC 825 did not have a material impact on its financial position, results of operations and cash flows.

Comprehensive Income, Policy [Policy Text Block]

p)            Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) refers to revenues, expenses, gains and losses that under U.S. GAAP are recorded as a component of stockholders’ equity but are excluded from net loss. The Company’s other comprehensive income (loss) consists of foreign currency translation adjustments, reported net of tax as appropriate, from those subsidiaries not using the U.S. dollar as their functional currency and unrealized gains and losses, reported net of tax as appropriate, resulting from its net investment hedge of its Australian subsidiaries.

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

q)             Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements 

In February 2013 the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This update amends Accounting Standards Codification (ASC) Topic 220, “Comprehensive Income,” to require reporting entities to provide information about the amounts reclassified from accumulated other comprehensive income by component. In addition, reporting entities are required to present, either on the face of the statement of operations or in the footnotes to the financial statements, significant amounts reclassified from accumulated other comprehensive income by statement of operations line item. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. The Company adopted these provisions effective January 1, 2013 and the adoption of these provisions did not have a material impact on its financial position, results of operations and cash flows.

There were various other accounting standards and interpretations issued during 2013 the Company has not yet been required to adopt, none of which are expected to have a material impact on its financial position, results of operations and cash flows.