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GOODWILL | 12 Months Ended
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Dec. 31, 2014
GOODWILL [ABSTRACT] |
GOODWILL | (6) GOODWILL Goodwill consisted of the following (in thousands):
|  | December 31, 2013 |  | Acquisitions / Adjustments |  | Impairments |  | Deconsolidation of Subsidiary |  | Effect of Foreign Currency |  | December 31, 2014
Customer Management Services | $ | 19,819 |  | $ | 6,358 |  | $ | - |  | $ | - |  | $ | (306) |  | $ | 25,871
Customer Growth Services |  | 30,128 |  |  | 267 |  |  | - |  |  | - |  |  | - |  |  | 30,395
Customer Technology Services |  | 42,709 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 42,709
Customer Strategy Services |  | 10,087 |  |  | 21,210 |  |  | - |  |  | - |  |  | (1,567) |  |  | 29,730
| Total | $ | 102,743 |  | $ | 27,835 |  | $ | - |  | $ | - |  | $ | (1,873) |  | $ | 128,705
|  | December 31, 2012 |  | Acquisitions / Adjustments |  | Impairments |  | Deconsolidation of Subsidiary |  | Effect of Foreign Currency |  | December 31, 2013
Customer Management Services | $ | 20,288 |  | $ | - |  | $ | - |  | $ | - |  | $ | (469) |  | $ | 19,819
Customer Growth Services |  | 24,439 |  |  | 5,689 |  |  | - |  |  | - |  |  | - |  |  | 30,128
Customer Technology Services |  | 42,153 |  |  | 478 |  |  | - |  |  | - |  |  | 78 |  |  | 42,709
Customer Strategy Services |  | 11,361 |  |  | - |  |  | - |  |  | (1,274) |  |  | - |  |  | 10,087
| Total | $ | 98,241 |  | $ | 6,167 |  | $ | - |  | $ | (1,274) |  | $ | (391) |  | $ | 102,743
Impairment The Company has eleven reporting units with goodwill and performs a goodwill impairment test on at least an annual basis. The Company conducts its annual goodwill impairment test during the fourth quarter, or more frequently, if indicators of impairment exist. During 2014, the Company identified indicators of impairment for the TSG reporting unit, including lower revenues and profits than had been anticipated at the time of the acquisition and the 2014 budget/forecast. Upon identification of the impairment indicators, we completed a quantitative assessment of goodwill (Step 1 of the goodwill impairment analysis). The carrying value of TSG was $34.1 million at December 1, 2014, including $23.0 million of goodwill. Based on our assessment, the estimated fair value of the TSG reporting unit exceeded its carrying value by approximately 19.0%. The estimate of fair value was based on generally accepted valuation techniques and information available at the date of the assessment, which incorporated management's assumptions about expected revenues and future cash flows and available market information for comparable companies. For the annual goodwill impairment analysis, the Company elected to perform a Step 1 evaluation for all of its reporting units, which includes comparing a reporting unit's estimated fair value to its carrying value. The determination of fair value requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term growth rates for the businesses, the useful lives over which the cash flows will occur and determination of appropriate discount rates (based in part on the Company's weighted average cost of capital). Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. As of December 1, 2014, the date of the annual impairment testing, the Company concluded that the fair values of all reporting units were in excess of their respective carrying values and the goodwill for those reporting units was not impaired. The process of evaluating the fair value of the reporting units is highly subjective and requires significant judgment and estimates as the reporting units operate in a number of markets and geographical regions. We used an income approach to determine our best estimates of fair value which incorporated the following significant assumptions: Revenue projections, including revenue growth during the forecast periods ranging from 3% to 20%; EBITDA margin projections held flat over the forecast periods ranging from 10% to 15%; Estimated income tax rates of 27% to 40%; Estimated capital expenditures ranging from $0.1 million to $24 million; and Discount rates ranging from 12% to 17% based on various inputs, including the risks associated with the specific reporting units as well as their revenue growth and EBITDA margin assumptions. As noted above, the Company has concluded that goodwill for all reporting units was not impaired at December 1, 2014. While no impairment indicators were identified, due to the small margin of fair value in excess of carrying value for two reporting units, Revana (approximately 6.0%) and WebMetro (approximately 11%) , these reporting units remain at considerable risk for future impairment if projected operating results are not met or other inputs into the fair value measurement change. If all assumptions are held constant, a 1% increase in the discount rate would result in approximately $4.5 million decrease in the estimated fair value of the Revana reporting unit. A 5% percentage annual decrease in the projected revenue over the forecast period would result in a $9.2 million decrease in the estimated fair value of the Revana reporting unit. Such a change in either of these assumptions individually would have resulted in the Revana reporting unit failing Step 1 of the goodwill impairment analysis at December 1, 2014. If all assumptions are held constant, a 1.5% point increase in the discount rate would result in approximately $2.8 million decrease in the estimated fair value of the WebMetro reporting unit. A 5% annual decrease in the projected revenue over the forecast period would result in a $3.3 million decrease in the estimated fair value of the WebMetro reporting unit. Such a change in either of these assumptions individually would have resulted in the WebMetro reporting unit failing Step 1 of the goodwill impairment analysis at December 1, 2014.

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