Accounting Policies, by Policy (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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 consolidated 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 2010 initial public offering (the “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, and the valuation of deferred tax assets, share-based compensation and derivative instruments.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

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 (See Note 2 (p) to the Consolidated Financial Statements).

Cash and Cash Equivalents, Policy [Policy Text Block]

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, 2013 and March 31, 2014.

Receivables, Policy [Policy Text Block]

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 $7.2 million and $7.9 million as of December 31, 2013 and March 31, 2014, 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, primarily in the U.K., that have aged longer than one year as of December 31, 2013 and March 31, 2014, 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, Credit Risk, Policy [Policy Text Block]

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 months ended March 31, 2013 and 2014, no individual customer accounted for more than 10% of revenues. At December 31, 2013 and March 31, 2014 there was one individual customer that accounted for approximately 11% of the accounts receivable balance.

As of March 31, 2014, the Company had cash and cash equivalents totaling approximately $8.5 million. These amounts were held for future acquisition and working capital purposes and were held in non-interest bearing accounts, of which $1.2 million were held in the U.S. The U.S. amounts were 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]

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]

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 (using market participant assumptions), quoted market values and third-party independent appraisals, as considered necessary. At December 31, 2013 and March 31, 2014, no impairment was noted.

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

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 units are compared with their carrying values (including goodwill). If the fair value of a 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 units' 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 (using market participant assumptions). 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 2013 and it was determined that the carrying amount of goodwill was not impaired as the fair value of the reporting units substantially exceeded their carrying values and there have been no subsequent developments that would indicate impairment exists as of March 31, 2014. The goodwill impairment review will continue to be performed annually and 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]

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 of $8.3 million, of which $30,000 and $225,000 were incurred in the three months ended March 31, 2013 and 2014, respectively.  In July 2011, the Company closed a private offering of $250 million in aggregate principal amount of 9% senior notes due 2019 (the “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 therewith, of which $22,000 and were incurred in the three months ended March 31, 2013. There were no deferred financing costs incurred in relation to the Senior Unsecured Notes in the three months ended March 31, 2014.

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.

The Company amortized $580,000 and $571,000 for the three months ended March 31, 2013 and 2014, respectively, to interest expense.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Revenue related to IMEs, peer reviews, bill reviews, Medicare compliance services 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 performance, as collectability is not reasonably assured and the cash payments 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, 2013 and March 31, 2014, the Company had $5.4 million and $6.0 million, respectively, in U.K. net deferred revenues.

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

Cost of Sales, Policy [Policy Text Block]

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]

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.

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

Earnings Per Share, Policy [Policy Text Block]

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 months ended March 31, 2013 and 2014, the potentially dilutive securities include options, warrants, shares of restricted stock with a service restriction not yet satisfied and RSUs exercisable into 10.4 million and 7.8 million shares of common stock, respectively.

For the three months ended March 31, 2013 and 2014, 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]

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, restricted stock, RSUs and other equity awards. 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 the Company’s 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 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 upon the weighted average of the Company’s implied volatility, the Company’s mean reversion volatility and the median of the Company’s peer group’s most recent historical volatilities for 2014 stock option grants. Expected life assumptions are based upon the “simplified” method for those options issued in 2014, which were determined to be issued approximately 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 three months ended March 31, 2014 were as follows:

	2014
Volatility		49.01%	–	49.27%
Expected life (years)			6.00
Risk-free interest rate		1.81%	–	2.08%
Dividend yield			—
Fair value		$14.71	–	$17.26

In the three months ended March 31, 2014, the Company issued approximately 448,000 stock option awards to employees and outside consultants.  The weighted average fair value of each stock option was $15.49 per option and the aggregate fair value was $6.9 million.  All of these awards vest over a three-year period.  Additionally, a majority 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 $2.9 million and $2.8 million for the three months ended March 31, 2013 and 2014, respectively, of which $728,000 and $694,000, respectively was included in costs of revenues, and $2.2 million and $2.1 million, respectively, was recorded in SGA expenses.

At March 31, 2014, the unrecognized compensation expense related to stock option awards was $13.1 million, with a remaining weighted average life of 2.1 years.

A summary of option activity for the three months ended March 31, 2014 is as follows:

	Number of options			Weighted average exercise price		Weighted average remaining contractual life (years)		Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2013		7,334,745		$	12.33
Options granted		448,125			31.51
Options forfeited		(65,839	)		20.34
Options exercised		(973,146	)		14.58
Outstanding at March 31, 2014		6,743,885		$	13.13
Exercisable at March 31, 2014		4,992,036		$	11.20		6.7	$	118,849

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 was approximately $19.1 million during the three months ended March 31, 2014.

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 a majority of 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 $803,000 and $2.0 million for the three months ended March 31, 2013 and 2014, respectively, all of which is included in SGA expenses.

The following is a summary of restricted share and RSU activity for the three months ended March 31, 2014:

	Number of awards			Weighted average grant date fair value
Non-vested awards at December 31, 2013		754,214		$	15.57
Awards granted		293,304			32.51
Awards vested		(139,659	)		14.12
Awards forfeited		(3,430	)		13.99
Non-vested awards at March 31, 2014		904,429		$	21.30

The total fair value of vested RSUs and shares of restricted stock during the three months ended March 31, 2014 was $2.0 million. No RSUs or shares of restricted stock vested during the three months ended March 31, 2013. At March 31, 2014, total unrecognized compensation costs related to non-vested restricted shares and RSUs was $13.5 million which is expected to be recognized over a weighted average period of 1.7 years.

During the three months ended March 31, 2013 and 2014, the Company recorded share-based compensation expense of $446,000 and $539,000, respectively, related to annual incentive compensation plans established by the Compensation Committee of the Board of Directors, all of which was recorded in SGA expenses. The 2013 obligation was settled in February 2014 via the issuance of approximately 83,000 shares of restricted stock, and the 2014 plan year obligation is recorded as accrued expenses in the accompanying Consolidated Balance Sheets.  The 2014 incentive compensation plan contains a performance metric based on the Company’s 2014 financial performance and a subsequent time-based service requirement. If the performance metric is met, the associated liability will be settled in the first quarter of 2015 with the granting of an indeterminate number of restricted shares which will vest equally on June 1, 2015 and 2016.

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

Fair Value Measurements

The Company’s financial assets and (liabilities), which are measured at fair value on a recurring basis, are categorized using the fair value hierarchy at December 31, 2013 and March 31, 2014, and are as follows (in thousands):

	Level 1		Level 2			Level 3			Total
As of December 31, 2013
Financial instruments:
Contingent consideration	$	—	$	—		$	(4,834	)	$	(4,834	)
Foreign currency derivative asset		—		61			—			61
Foreign currency derivative liability		—		(683	)		—			(683	)
As of March 31, 2014
Financial instruments:
Contingent consideration	$	—	$	—		$	(11,285	)	$	(11,285	)
Foreign currency derivative liability		—		(1,000	)		—			(1,000	)

The contingent consideration relates to earnout provisions recorded in conjunction with certain acquisitions completed in 2009, 2010, 2013 and 2014 (see Note 3). Of the total increase in fair value of the contingent consideration of $6.5 million in 2014, $7.1 million was added as the result of a 2014 acquisition and, $83,000 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. These increases were offset by a purchase accounting adjustment to a 2013 acquisition in the amount of $373,000 for the change in the fair value of the contingent consideration, $333,000 settled as cash consideration to satisfy an installment related to a 2009 acquisition, and approximately $110,000 of the change in value relates to the release of a restriction associated with shares previously issued related to a 2009 acquisition.

The fair value of the foreign currency derivative was determined using observable market inputs such as foreign currency exchange rates and considers nonperformance risk of the Company and that of its counterparties.

Comprehensive Income, Policy [Policy Text Block]

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 accumulated 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 and U.K. subsidiaries. Accumulated other comprehensive income (loss) consists of the following (in thousands):

	Foreign Currency Translation			Net investment hedge - foreign exchange contract			Net investment hedge - Australian denominated debt		Total
Balance at December 31, 2013	$	(6,625	)	$	483		$	205	$	(5,937	)
Change during 2014:
Before-tax amount		3,279			(3,734	)		—		(455	)
Tax (expense) benefit		(1,847	)		1,477			—		(370	)
Total activity in 2014		1,432			(2,257	)		—		(825	)
Balance at March 31, 2014	$	(5,193	)	$	(1,774	)	$	205	$	(6,762	)

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncements

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”) which amends accounting guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or tax credit carryforward exists. This new guidance requires entities, if certain criteria are met, to present an unrecognized tax benefit, or portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward when such items exist in the same taxing jurisdiction. The provisions of ASU 2013-11 are effective for fiscal years and interim periods beginning after December 15, 2013 and are to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company adopted these provisions effective January 1, 2014 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 and 2014 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.