Goodwill And Intangible Assets

9 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2014 are as follows (in thousands):



Balance at December 31, 2013	$	1,758,970
Goodwill acquired, including post acquisition adjustments	1,557,032
Goodwill disposed, including impact of deconsolidation transactions	(12,184		)
Balance at September 30, 2014	$	3,303,818

Although the determination of goodwill generated as a result of the Sheridan transaction is still preliminary as of September 30, 2014, the ambulatory services segment and the physician services segment had approximately $1.8 billion and $1.5 billion, respectively, of goodwill. During the nine months ended September 30, 2014, goodwill increased $75.6 million for the ambulatory services segment due to acquisitions of centers, including those purchased as part of Sheridan, net of dispositions and deconsolidations. During the nine months ended September 30, 2014, all goodwill included in the physician services segment was generated as a result of the Sheridan acquisition. For the nine months ended September 30, 2014 and 2013, respectively, approximately $25.1 million and $56.2 million of goodwill recorded was deductible for tax purposes. The acquisition of Sheridan did not result in tax deductible goodwill.

Intangible assets at September 30, 2014 and December 31, 2013 consisted of the following (in thousands):



	September 30, 2014							December 31, 2013
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization			Net
Amortizable intangible assets:
Customer relationships with hospitals	$	957,000	$	(9,969	)	$	947,031	$	—	$	—		$	—
Deferred financing cost	59,441		(3,086		)	56,355		15,814		(4,953		)	10,861
Capitalized software	37,519		(17,716		)	19,803		21,036		(14,831		)	6,205
Agreements, contracts and other	3,448		(2,680		)	768		3,448		(2,472		)	976
Total amortizable intangible assets	1,057,408		(33,451		)	1,023,957		40,298		(22,256		)	18,042
Non-amortizable intangible assets:
Trade name	228,000		—			228,000		—		—			—
Restrictive covenant arrangements	9,995		—			9,995		9,825		—			9,825
Total non-amortizable intangible assets	237,995		—			237,995		9,825		—			9,825
Total intangible assets	$	1,295,403	$	(33,451	)	$	1,261,952	$	50,123	$	(22,256	)	$	27,867

As a result of the financing for the Sheridan acquisition, the Company recorded an additional $52.9 million of deferred financing costs during the three months ended September 30, 2014. The Company amortizes the deferred loan costs to interest expense over the life of the respective debt instrument. Approximately $1.2 billion of intangible assets, primarily customer relationships and trade names, were recorded during the three months ended September 30, 2014, of which approximately $1.0 billion are estimated to be amortized over a weighted average period of 20 years with no expected residual values. These acquired intangibles represent the Company’s initial estimate of the fair value of the intangible assets related to the customer relationships with hospitals, capitalized software and Sheridan's trade name obtained in the Sheridan acquisition. As previously discussed, this estimated amount is subject to change pending the completion of the valuation and appraisal analysis currently in process.

Amortization of intangible assets for the three months ended September 30, 2014 and 2013 was $13.7 million and $1.2 million, respectively, and $16.2 million and $3.4 million for the nine months ended September 30, 2014 and 2013, respectively. During the three months ended September 30, 2014, the Company recorded $12.8 million in interest expense on the accompanying statements of operations related to fees paid to obtain a commitment for bridge financing in order to effect the Sheridan transaction. During the three months ended September 30, 2014, the Company was able to obtain permanent financing and therefore expensed the commitment fee.

Estimated amortization of intangible assets for the remainder of 2014 and each of the following five years and thereafter is $16.1 million, $64.2 million, $63.5 million, $58.4 million, $56.7 million, $55.7 million and $709.4 million, respectively. The Company expects to recognize amortization of all intangible assets over a weighted average period of 18.7 years with no expected residual values.

- 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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