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Goodwill | 12 Months Ended
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Dec. 31, 2013
Goodwill | 4. Goodwill
|  | December 31, |  |  | December 31, |
|  | 2013 |  |  | 2012 |
|  | (in thousands) |
Opening goodwill |  | $ | 315,441 |  |  | $ | 253,393 |
Current year acquisitions |  |  | 36,922 |  |  |  | 55,759 |
Prior year acquisitions |  |  | - |  |  |  | 1,382 |
Foreign exchange movement |  |  | 5,160 |  |  |  | 4,907 |
Closing goodwill |  | $ | 357,523 |  |  | $ | 315,441 |
The Company has made a number of strategic acquisitions since its inception to enhance its capabilities and experience in certain areas of the clinical development process. Goodwill arising on acquisition represents the excess of the cost of acquired entities over the net amounts assigned to assets acquired and liabilities assumed. Goodwill primarily comprises acquired workforce in place which does not qualify for recognition as an asset apart from goodwill. The Company tests goodwill annually for any impairments or whenever events occur which may indicate impairment. The results of the Company’s goodwill impairment testing during the year ended December 31, 2013, indicated the existence of sufficient headroom such that a reasonably possible change to the key assumptions used would be unlikely to result in an impairment of the related goodwill. (a) Acquisition of Clinical Trial Services Division of Cross Country Healthcare, Inc. On February 15, 2013 the Company acquired the clinical trial services division of Cross Country Healthcare Inc. for an initial cash consideration of $51.9 million. The agreement provided for further consideration of up to $3.75 million which could become payable if certain performance milestones were achieved during the period ended December 31, 2013. Cross Country Healthcare’s Clinical Trial Services division includes US resourcing providers, ClinForce and Assent Consulting, whose services include contract staffing, permanent placement and functional service provision. The division also includes AKOS, a leading US and EU provider of pharmacovigilance and drug safety services. ClinForce and Assent will be combined with ICON’s functional service provision (“FSP”) division, DOCS, creating a leader in global resourcing and FSP, while AKOS will enhance the services offered by ICON’s medical and safety services team. Certain operating margin perfomance milestones in relation to ClinForce and Assent Consulting were not achieved during the period ended December 31, 2013 resulting in a reduction of $3.75 million to the contingent consideration. The acquisition agreement also provided for certain working capital targets to be achieved by the clinical trial services division of Cross Country Healthcare, Inc on completion. In October 2013 the Company received $0.2 million on completion of this review. The acquisition of the clinical trial services division of Cross Country Healthcare, Inc has been accounted for as a business combination in accordance with FASB ASC 805 Business Combinations. The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed:
|  | February 15 |
|  | 2013 |
|  | (in thousands) |
Property, plant and equipment |  | $ | 339 |
Goodwill* |  |  | 36,922 |
Intangible asset – customer relationships |  |  | 3,300 |
Intangible asset – order backlog |  |  | 600 |
Cash and cash equivalents |  |  | 1,039 |
Accounts receivable |  |  | 9,200 |
Unbilled revenue |  |  | 2,128 |
Prepayments and other current assets |  |  | 465 |
Non-current assets |  |  | 6 |
Other liabilities |  |  | (2,285 | )
Non-current other liabilities |  |  | (16 | )
Net assets acquired |  | $ | 51,698 |
Cash consideration |  | $ | 51,897 |
Working capital adjustment |  |  | (199 | )
Net assets acquired |  | $ | 51,698 |
* Goodwill represents the acquisition of an established workforce with experience in the clinical research industry, thereby allowing the Company to enhance its capabilities in global resourcing and FSP and also medical and safety services. Goodwill related to the US portion of the business acquired is tax deductible. The proforma effect of the clinical trial services division of Cross Country Healthcare, Inc acquisition if completed on January 1, 2012 would have resulted in net revenue, net income and earnings per share for the fiscal years ended December 31, 2012 and December 31, 2013 as follows:
|  | Year Ended |
|  | December 31, |
|  | 2013 |  |  | 2012 |
|  | (in thousands) |
Net revenue |  | $ | 1,343,996 |  |  | $ | 1,182,734 |
Net income |  | $ | 103,133 |  |  | $ | 58,944 |
Basic earnings per share |  | $ | 1.69 |  |  | $ | 0.98 |
Diluted earnings per share |  | $ | 1.66 |  |  | $ | 0.98 |
(b) Acquisition of PriceSpective On February 28, 2012 the Company acquired 100% of the common stock of PriceSpective LLC (PriceSpective) strategy consulting company for an initial cash consideration of $37.1 million. Headquartered in Philadelphia, and with offices in London, Los Angeles, San Diego, Raleigh and Boston, PriceSpective is a premier consultancy that has a strong reputation for excellence in strategic pricing, market access, Health Economics and Outcomes Research (“HEOR”), due diligence support and payer engagement services. Since PriceSpective’s incorporation in 2003, it has developed strategies for dozens of new product launches, and hundreds of development and in-market products, across 40+ disease areas. Further consideration of up to $15.0 million was payable if certain performance milestones were achieved in respect of periods up to December 31, 2012. On August 13, 2012 the Company paid $5.0 million in relation to performance milestones for the year ended December 31, 2011. On May 29, 2013 the Company paid $10.0 million in relation to the remaining performance milestones for the year ended December 31, 2012. The following table summarizes the Company’s estimates of the fair values of assets acquired and the liabilities assumed:
|  | February 28 |
|  | 2012 |
|  | (in thousands) |
Property, plant and equipment |  | $ | 256 |
Goodwill* |  |  | 42,247 |
Intangible asset – customer relationships |  |  | 10,237 |
Intangible asset – order backlog |  |  | 405 |
Intangible asset – non-compete arrangements |  |  | 392 |
Cash and cash equivalents |  |  | 2,311 |
Accounts receivable |  |  | 2,662 |
Unbilled revenue |  |  | 1,140 |
Other current assets |  |  | 236 |
Current liabilities |  |  | (7,788 | )
Liability arising from contingent consideration arrangement |  |  | (15,000 | )
Net assets acquired |  | $ | 37,098 |
Cash consideration |  | $ | 37,199 |
Working capital adjustment |  |  | (101 | )
Contingent consideration |  |  | 15,000 |
Amount of total consideration |  |  | 52,098 |
Liabilities included in preliminary purchase price allocation re contingent consideration |  |  | (15,000 | )
Net assets acquired |  | $ | 37,098 |
* Goodwill represents the acquisition of an established workforce with experience in strategic pricing, market access, HEOR, due diligence support and payer engagement services. Goodwill related to the US portion of the business acquired is tax deductible. The proforma effect of the PriceSpective acquisition if completed on January 1, 2011 would have resulted in net revenue, net income and earnings per share for the fiscal years ended December 31, 2011 and December 31, 2012 as follows:
|  | Year Ended |
|  | December 31, |
|  | 2012 |  |  | 2011 |
|  | (in thousands) |
Net revenue |  | $ | 1,118,410 |  |  | $ | 964,388 |
Net income |  | $ | 55,931 |  |  | $ | 25,363 |
Basic earnings per share |  | $ | 0.93 |  |  | $ | 0.42 |
Diluted earnings per share |  | $ | 0.93 |  |  | $ | 0.42 |
(c) Acquisition of BeijingWits Medical On February 15, 2012 the Company acquired 100% of the common stock of BeijingWits Medical Consulting Co. Limited (BeijingWits Medical), a leading Chinese CRO, for an initial cash consideration of $9.0 million. BeijingWits Medical offers full-service clinical development capabilities and has a strong track record in clinical trial execution in China. It is a renowned expert in Chinese regulatory processes and a leading advocate of International Conference on Harmonisation Good Clinical Practice (“ICH GCP”) in China. In addition to boosting the Company’s service capabilities in the region, BeijingWits Medical will also strengthen the Company’s presence through the addition of over 100 highly qualified and experienced professionals in Beijing, Shanghai, Chengdu, Guangzhou, Wuhan and Hong Kong. Further consideration of up to $7.0 million may become payable if certain performance milestones are achieved in respect of periods up to December 31, 2013. On June 13, 2013 the Company paid $3.8 million in relation to the remaining performance milestones for the year ended December 31, 2012. At December 31, 2013 the Company has recorded a liability of $3.2 million in respect of the additional consideration. The following table summarizes the Company’s estimates of the fair values of assets acquired and the liabilities assumed:
|  | February 15 |
|  | 2012 |
|  | (in thousands) |
Property, plant and equipment |  | $ | 172 |
Goodwill* |  |  | 13,512 |
Intangible asset – customer relationships |  |  | 1,761 |
Intangible asset – order backlog |  |  | 376 |
Intangible asset – non-compete arrangements |  |  | 97 |
Cash and cash equivalents |  |  | 587 |
Accounts receivable |  |  | 657 |
Unbilled revenue |  |  | 176 |
Other current assets |  |  | 228 |
Deferred tax liability |  |  | (559 | )
Current liabilities |  |  | (1,007 | )
Liability arising from contingent consideration arrangement |  |  | (7,000 | )
Net assets acquired |  | $ | 9,000 |
Cash consideration |  | $ | 9,000 |
Contingent consideration |  |  | 7,000 |
Amount of total consideration |  |  | 16,000 |
Liabilities included in preliminary purchase price allocation re contingent consideration |  |  | (7,000 | )
Net assets acquired |  | $ | 9,000 |
* Goodwill represents the acquisition of an established workforce with experience in clinical trial execution and regulatory processes in China and is not tax deductible. The proforma effect of the BeijingWits acquisition if completed on January 1, 2011 would have resulted in net revenue, net income and earnings per share for the fiscal years ended December 31, 2011 and December 31, 2012 as follows:
|  | Year Ended |
|  | December 31, |
|  | 2012 |  |  | 2011 |
|  | (in thousands) |
Net revenue |  | $ | 1,115,355 |  |  | $ | 989,942 |
Net income |  | $ | 55,349 |  |  | $ | 22,549 |
Basic earnings per share |  | $ | 0.92 |  |  | $ | 0.37 |
Diluted earnings per share |  | $ | 0.92 |  |  | $ | 0.37 |
(d) Acquisition of Firecrest Clinical On July 14, 2011 the Company acquired 100% of the common stock of Firecrest Clinical Limited (“Firecrest”), a market leading provider of technology solutions that boost investigator site performance and study management, for an initial cash consideration of €17.0 million ($24.5 million). Headquartered in Limerick, Ireland, Firecrest Clinical provides a comprehensive site performance management system that is used to improve compliance consistency and execution of activities at investigative sites. The acquisition agreement provided that further consideration of up to €33.0 million ($46.8 million) would become payable if certain performance milestones were achieved in respect of periods up to June 30, 2013. At the date of acquisition the Company recorded a liability of €31.3 million ($44.0 million) in relation to these performance milestones, with the balance recorded as a non-cash finance charge relating to the acquisition contingent consideration. In March 2012 €3.0 million ($4.0million) was paid by the Company in relation to performance milestones for the six months ended June 30, 2011 and in July 2012 a further €10.0 million ($12.5 million) was paid by the Company in relation to performance milestones for the year ended December 31, 2011. In May 2013 €10.0 million ($13.0 million) was paid by the Company in relation to performance milestones for the year ended December 31, 2012 and in September 2013 a final payment of €10.0 million ($13.2 million) was made. The acquisition agreement also provided for certain working capital targets to be achieved by Firecrest Clinical on completion. In March 2012 the Company paid €0.4 million ($0.5 million) on completion of this review. The acquisition of Firecrest has been accounted for as a business combination in accordance with FASB ASC 805 Business Combinations. The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed:
|  | July 14 |
|  | 2011 |
|  | (in thousands) |
Property, plant and equipment |  | $ | 687 |
Goodwill* |  |  | 48,073 |
Intangible asset – technology asset |  |  | 11,169 |
Intangible asset – customer relationships |  |  | 5,243 |
Intangible asset – order backlog |  |  | 1,172 |
Intangible asset - trade name |  |  | 1,357 |
Cash and cash equivalents |  |  | 1,965 |
Other current assets |  |  | 3,713 |
Deferred tax liability |  |  | (2,367 | )
Other liabilities |  |  | (2,521 | )
Liability arising from contingent consideration arrangement |  |  | (44,028 | )
Net assets acquired |  | $ | 24,463 |
Cash consideration |  | $ | 24,463 |
Contingent consideration |  |  | 44,028 |
Amount of total consideration |  |  | 68,491 |
Liabilities included in preliminary purchase price allocation re contingent consideration |  |  | (44,028 | )
Net assets acquired |  | $ | 24,463 |
* Goodwill represents the cost of an established workforce with experience in the development of site performance and study management systems and process related efficiencies expected to be generated from the use of the Firecrest site performance management system and is not tax deductible. The proforma effect of the Firecrest acquisition if completed on January 1, 2010 would have resulted in net revenue, net income and earnings per share for the fiscal years ended December 31, 2010 and December 31, 2011 as follows:
|  | Year Ended |
|  | December 31, |
|  | 2011 |  |  | 2010 |
|  | (in thousands) |
Net revenue |  | $ | 952,729 |  |  | $ | 906,311 |
Net income |  | $ | 25,851 |  |  | $ | 86,127 |
Basic earnings per share |  | $ | 0.43 |  |  | $ | 1.44 |
Diluted earnings per share |  | $ | 0.42 |  |  | $ | 1.42 |

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- Definition The entire disclosure for goodwill. + References No definition available. + Details
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