Goodwill

6 Months Ended

Jun. 30, 2012

Goodwill

Goodwill

Note 4.                   Goodwill

Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist. The date of our annual impairment test is October 1. A summary of changes to goodwill during the six months ended June 30, 2012 is as follows:

	Residential		ResCare		Youth		Workforce
	Services		HomeCare		Services		Services		Total
Balance at December 31, 2011	$	147,648	$	62,500	$	24,829	$	32,720	$	267,697
Goodwill added through acquisitions	5,664		—		—		—		5,664
Other	17		—		—		—		17
Balance at June 30, 2012	$	153,329	$	62,500	$	24,829	$	32,720	$	273,378

In February 2012, we were informed by the New York Human Resources Administration that our Workforce Services’ Wellness, Comprehensive Assessment, Rehabilitation and Employment (“WeCARE”) contract had been awarded to another operator through the competitive bid process. Our performance is scheduled to continue under a contract extension until December 2012. Annual revenues for this contract are approximately $28 million. Our formal protest was denied and we filed two lawsuits in the second quarter of 2012 to challenge the contract award and the bid process. During the three months ended March 31, 2012, we considered this to be an indicator of potential impairment and performed an interim analysis on the Workforce Services reporting unit and concluded that its goodwill was not impaired at March 31, 2012. That interim analysis did indicate that Workforce Services’ excess of fair value over its carrying value had decreased to approximately a three percent margin.  During the three months ended June 30, 2012, we continued to monitor this reporting unit.  While operating results are still below original projected levels, we believe margins will improve in the second half of 2012 due to measures that have been implemented within this operation.  Based on our review of the three months ended June 30, 2012, we have concluded there were no impairment indicators  and no impairment of goodwill.  If our performance improvement measures are not successful, further deterioration of this business could lead to an impairment in the future.