Goodwill

9 Months Ended

Sep. 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 nine months ended September 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	13,621		70		—		—		13,691
Other	181		—		—		—		181
Balance at September 30, 2012	$	161,450	$	62,570	$	24,829	$	32,720	$	281,569

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 21, 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. These two lawsuits were unsuccessful and we have ceased legal remedies in attempts to retain the contract.

During the three months ended March 31, 2012, we considered the loss of the WeCARE contract 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. However, the 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 and September 30, 2012, we continued to monitor this reporting unit.  While operating results are still below original projected levels, margins have improved since March 31, 2012 due to measures that have been implemented within this reporting unit.  Based on our review of the three months ended September 30, 2012, we have concluded there were no impairment indicators present and therefore, no impairment analysis was performed.  If our ongoing performance improvement measures are not successful or sustainable, or we lose additional significant contracts, further deterioration of this business could lead to impairment in the future.