Quarterly report pursuant to sections 13 or 15(d)

Goodwill And Intangible Assets

Goodwill And Intangible Assets
6 Months Ended
Jun. 30, 2011
Goodwill And Intangible Assets  
Goodwill And Intangible Assets
5. Goodwill and Intangible Assets

In accordance with the provisions of ASC 350, "Intangibles—Goodwill and Other, " we apply a fair value based impairment test to the net book value of goodwill and indefinite-lived assets on an annual basis and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. The analysis of potential impairments of goodwill requires a two-step process. The first step is an estimation of fair value of the Company. If step one indicates that impairment potentially exists, the second step is performed to measure the amount of impairment, if any. Impairment exists when the fair value of goodwill or indefinite-lived assets is less than the carrying value.

As of June 30, 2011, based on a combination of factors, including a decline in our market capitalization, updated business forecasts, and the expiration of our warrants, we concluded that there were sufficient indicators to require us to perform an interim goodwill and indefinite lived intangibles impairment analysis. For the purposes of this analysis, our estimates of fair value are based on a combination of the income approach, which estimates the fair value based on the future discounted cash flows, and the market approach, which estimates the fair value based on comparable market prices. As of the filing of our Quarterly Report on Form 10-Q for the second quarter of fiscal 2011, we had not completed this analysis due to the complexities involved in determining the implied fair value of the goodwill and indefinite-lived intangibles. However, based on the work performed to date, we have concluded that an impairment loss is probable and can be reasonably estimated. Accordingly, we have recorded a $44.2 million non-cash asset impairment charge, representing our best estimate of the impairment loss for the quarter ended June 30, 2011.

Based on the preliminary impairment analysis performed by the Company as of June 30, 2011, the following table outlines the impairment charges by asset category (in thousands). :


     Goodwill     Trade Names  

Value as of December 31, 2010

   $ 64,092      $ 5,500   

Impairment charge

     (42,813     (1,400







Value as of June 30, 2011

   $ 21,279      $ 4,100   







These impairment charges are based on a preliminary analysis and may be subject to further adjustments. The analysis will be finalized and any further adjustment will be included in the next reporting period.

The following tables present the methods used to establish fair value measurements for each of the intangibles (in thousands):


            Fair Value Measurements at Reporting Date Using  


   June 30,
     Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
(Level 2)
(Level 3)


   $ 21,279       $ —         $ —         $ 21,279   


     4,100         —           —           4,100   














   $ 25,379       $ —         $ —         $ 25,379   













In accordance with ASC 820, Fair Value Measurements and Disclosures, the estimated fair values of the goodwill and trade names were estimated based primarily upon discounted cash flow methodologies reflecting the Company's own assumptions resulting in a Level 3 classification.

Identifiable Intangible Assets

The carrying amount and accumulated amortization of intangible assets as of June 30, 2011 and December 31, 2010 were as follows (in thousands):


     June 30,
    December 31,

Nonamortizable intangible assets


Trade names

   $ 4,100      $ 5,500   

Amortizable intangible assets


Physician and customer relationships

     32,865        32,400   

Non-competition agreements

     848        760   


     1,371        980   







Total nonamortizable and amortizable intangible assets

     39,184        39,640   

Less accumulated amortization

     (7,715     (6,388







Total identifiable intangible assets

   $ 31,469      $ 33,252   







Amortization expense for intangible assets for the three and six months ended June 30, 2011 was $663 thousand and $1,309 thousand, respectively. Amortization expense for intangible assets for the three and six months ended June 30, 2010 was $534 thousand and $991 thousand, respectively. The expenses for all periods were recorded in operating expenses. Expected annual amortization expense for intangible assets recorded as of June 30, 2011 is as follows (in thousands):


     2011      2012      2013      2014      2015  

Amortization expense

   $ 2,809       $ 2,766       $ 2,635       $ 2,360       $ 2,343