Note 6 - Goodwill and Intangibles
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]
6.
Goodwill and Intangibles
 
Impairment
 
During the
fourth
quarter of
2016,
the Company reviewed WD Services for impairment, primarily due to
lower than expected volumes and unfavorable service mix shifts under a large contract in the United Kingdom (“UK”) impacting future projections; additional clarity into the anticipated size and structure of the Work and Health Programme in the UK; the absence of additional details regarding the restructuring of the offender rehabilitation contract in the UK; and a change in senior management at WD Services during the
fourth
quarter. As a result, the Company performed a quantitative test comparing the fair value of the asset groupings comprising WD Services with the carrying amounts and recorded an asset impairment charge of
$4,381
to definite-lived customer relationship intangible assets, which is recorded in “Asset impairment charge” on the Company’s consolidated statement of operations. In addition, the Company reviewed the carrying value of goodwill of WD Services, noting the carrying value exceeded the fair value. Therefore, the Company performed the
second
step of the impairment test, in which the fair value of the reporting unit is allocated to all of the assets and liabilities, on a fair value basis, with any excess representing the implied value of goodwill of the reporting unit. The fair value was determined using an income approach, which estimates the present value of future cash flows based on management’s forecast of revenue growth rates and operating margins, working capital requirements and capital expenditures. Based on this analysis, the carrying value of goodwill of the WD Services reporting unit exceeded the implied fair value and the Company recorded an asset impairment charge of
$5,224,
which is included in “Asset impairment charge” on the Company’s consolidated statement of operations.
 
The Company reviewed the carrying value of other long-lived assets and goodwill, and noted no indicators of impairment for NET Services or the Matrix Investment.
 
Goodwill
 
Changes in goodwill were as follows:
 
 
 
NET
 
 
WD
 
 
Consolidated
 
 
 
Services
 
 
Services
 
 
Total
 
Balances at December 31, 2014
                        
Goodwill
   $
191,215
    $
42,662
    $
233,877
 
Accumulated impairment losses
    
(96,000
 )    
(6,041
 )    
(102,041
 )
     
95,215
     
36,621
     
131,836
 
                         
Foreign currency translation adjustment
    
-
     
(1,878
 )    
(1,878
 )
Balances at December 31, 2015
                        
Goodwill
    
191,215
     
40,784
     
231,999
 
Accumulated impairment losses
    
(96,000
 )    
(6,041
 )    
(102,041
 )
     
95,215
     
34,743
     
129,958
 
                         
Asset impairment charge
    
-
     
(5,224
 )    
(5,224
 )
Foreign currency translation adjustment
    
-
     
(5,110
 )    
(5,110
 )
Balances at December 31, 2016
                        
Goodwill
    
191,215
     
35,674
     
226,889
 
Accumulated impairment losses
    
(96,000
 )    
(11,265
 )    
(107,265
 )
    $
95,215
    $
24,409
    $
119,624
 
 
 
The total amount of goodwill that was deductible for income tax purposes related to acquisitions as of
December
 
31,
2016
and
2015
was
$
4,222
.
 
Intangible Assets
 
Intangible assets are comprised of acquired customer relationships, trademarks and trade names, and developed technology. Intangible assets consisted of the following:
 
     
December 31,
  
     
2016
  
2015
  
 
Estimated
 
Gross
 
 
 
 
Gross
 
 
 
 
 
 
Useful
 
Carrying
 
 
Accumulated
 
 
Carrying
 
 
Accumulated
 
 
Life (Yrs)
 
Amount
 
 
Amortization
 
 
Amount
 
 
Amortization
 
Customer relationships
15
   $
48,020
    $
(29,941
 )   $
47,973
    $
(26,804
 )
Customer relationships
10
    
27,915
     
(8,147
 )    
38,688
     
(6,126
 )
Trademarks and Trade Names
10
    
13,282
     
(3,431
 )    
15,936
     
(2,523
 )
Developed technology
5
    
2,951
     
(1,525
 )    
3,541
     
(1,121
 )
Total
   $
92,168
    $
(43,044
 )   $
106,138
    $
(36,574
 )
 
 
The gross carrying amount as of
December
31,
2016
includes the asset impairment charge of
$4,381
to definite-lived customer relationship intangible assets of WD Services. The weighted-average amortization period at
December
31,
2016
for intangibles with a definite life was
12.4
years.
No
significant residual value is estimated for these intangible assets. Amortization expense from continuing operations was
$8,566,
$9,510
and
$6,973
for the years ended
December
 
31,
2016,
2015
and
2014,
respectively. The total amortization expense is estimated to be as follows for the next
five
years and thereafter as of
December
 
31,
2016
based upon the applicable foreign exchange rates as of
December
31,
2016:
 
 
 
Year
 
Amount
 
2017
   $
7,682
 
2018
    
7,682
 
2019
    
7,338
 
2020
    
7,092
 
2021
    
7,017
 
Thereafter
    
12,313
 
Total
   $
49,124