Goodwill And Other Intangible Assets, Net

12 Months Ended

Dec. 31, 2011

Goodwill And Other Intangible Assets, Net [Abstract]

Goodwill And Other Intangible Assets, Net

5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

As of September 30, 2011 and prior to our October 31 annual impairment test, we concluded that impairment indicators existed based upon our decline in market capitalization, third quarter results and recent forecasts which required us to perform an interim impairment test. As a result, we performed step one of the goodwill impairment test as prescribed by Accounting Standard Codification ("ASC") Topic 350 "Intangibles – Goodwill and Other," which indicated that the fair value of the home health reporting unit was less than the book value of its net assets and the fair value of the hospice reporting unit was greater than the book value of its net assets. Therefore, the required second step of the assessment for the home health reporting unit was performed, in which the implied fair value of the home health reporting unit's goodwill was compared to the book value of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, that is, the estimated fair value of the reporting unit is allocated to all of those assets and liabilities of that unit (including both recognized and unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit's goodwill is greater than the implied fair value of that reporting unit's goodwill, an impairment loss is recognized in the amount of the excess and is charged to operations. We determined the fair value of the reporting unit using discounted estimated future cash flows as well as a market approach that compared the home health reporting unit's earnings and revenue multiples to those of comparable public companies. We were required to allocate a significant portion of the fair value to unrecorded intangibles assets such as the Amedisys trade name and Medicare and CON licenses, but in accordance with GAAP, were not permitted to record these assets on our balance sheet.

As a result of our interim impairment assessment, we recognized an estimated non-cash goodwill impairment charge of $565.0 million as of September 30, 2011. In addition, at this interim date and prior to our annual goodwill testing, we also reviewed the carrying value of the other identifiable intangible assets to determine whether they were impaired. As a result of the preliminary assessment, we recorded an additional estimated $9.1 million non-cash other intangibles impairment charge as of September 30, 2011, due to a change in the fair values of various licenses, which are not being amortized, associated with certain prior year acquisitions. A deferred tax benefit of $139.5 million was recognized as of September 30, 2011, as a result of the total amount of estimated impairment charges. The impairments primarily result from lower forecasted revenues as a result of recent reimbursement cuts, declining growth rates and lower operating margins from our home health reporting unit. These impairments did not have any impact on our compliance with our debt covenants or on our cash flows.

During the fourth quarter of 2011, we finalized our interim impairment test of goodwill and as a result, recognized an additional non-cash goodwill impairment charge of $5.8 million. A deferred tax benefit of $2.0 million was also recognized as a result of the additional impairment charge.

As a result of the completion of our interim impairment test of goodwill, we recognized the following during the fiscal year 2011: a non-cash goodwill impairment charge of $570.8 million, a non-cash other intangibles impairment charge of $9.1 million and a deferred tax benefit of $141.5 million. In the fourth quarter of 2011, we performed our annual impairment test of goodwill as of October 31, 2011. There have been no significant changes that we believe would have a meaningful impact on our cash flow estimates and other significant assumptions used in the interim test performed in the third quarter of 2011. Accordingly, no additional goodwill impairment existed at the annual impairment test date.

The fair value valuation of our home health reporting unit's assets and liabilities in the second step of the assessment fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our most recent forecasts and other estimates.

The following table summarizes the activity related to our goodwill for 2011, 2010 and 2009 (amounts in millions):


	Goodwill
	Home Health			Hospice			Total
Balances at December 31, 2008	$	682.3		$	51.6		$	733.9
Additions		42.3			15.7			58.0
Adjustments related to acquisitions		(4.7	)		(0.3	)		(5.0	)

Balances at December 31, 2009		719.9			67.0			786.9
Additions		3.4			1.1			4.5

Balances at December 31, 2010		723.3			68.1			791.4
Additions		—			114.1			114.1
Impairment		(570.8	)		—			(570.8	)

Balances at December 31, 2011	$	152.5		$	182.2		$	334.7

During 2009, we adjusted goodwill by $5.0 million primarily in association with our completion of purchase accounting adjustments for our 2008 acquisition of TLC Health Care Services, Inc. ("TLC"), where we allocated an additional $7.5 million to the estimated fair value of Medicare licenses acquired and decreased the estimated fair value of the deferred tax liability assumed by $2.9 million.

The following table summarizes the activity related to our other intangible asset, net for 2011, 2010 and 2009 (amounts in millions):


	Other Intangible Assets, Net
	Certificates of Need and Licenses			Acquired Names of Business (1)			Non-Compete Agreements & Reacquired Franchise Rights (2)			Total
Balances at December 31, 2008	$	32.7		$	3.3		$	6.4		$	42.4
Additions		3.4			1.4			7.0			11.8
Adjustments related to acquisitions		7.3			—			(0.1	)		7.2
Amortization		—			—			(3.8	)		(3.8	)

Balances at December 31, 2009		43.4			4.7			9.5			57.6
Additions		0.5			0.1			2.7			3.3
Write-off		(2.2	)		—			—			(2.2	)
Amortization		—			(0.1	)		(5.2	)		(5.3	)

Balances at December 31, 2010		41.7			4.7			7.0			53.4
Additions		2.5			7.3			0.5			10.3
Write-off		(1.1	)		—			—			(1.1	)
Impairment		(9.1	)		—			—			(9.1	)
Amortization		—			(0.2	)		(3.3	)		(3.5	)

Balances at December 31, 2011	$	34.0		$	11.8		$	4.2		$	50.0

(1)	Acquired Name of Business includes $11.7 million of unamortized acquired names and $0.1 million of amortized acquired names which have a weighted-average amortization period of 2.2 years.

(2)	The weighted-average amortization period of our non-compete agreements and reacquired franchise rights is 2.0 and 1.5 years, respectively.

See Note 3 for further details on additions to goodwill and other intangible assets, net.

The estimated aggregate amortization expense for each of the five succeeding years is as follows (amounts in millions):


2012	$	2.7
2013		1.4
2014		0.2
2015		—
2016		—

	$	4.3

- 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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