Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]


	Goodwill and Other Intangible Assets

Goodwill

The Company tested the recoverability of its goodwill at December 31, 2012. See Note 2 for a complete description of the methodology and key assumptions used for this test. For purposes of this analysis, the Company determined that: the Resources operating segment constitutes a reporting unit; the Molycorp Silmet facility, which is included in the Chemicals and Oxides operating segment in relation to the REO production and in the Rare Metals segment in relation to the manufacturing of tantalum and niobium, constitutes a reporting unit; the MMA facility, which is part of the Magnetic Materials and Alloys operating segment, constitutes a reporting unit; the Chemicals and Oxides operating segment, exclusive of the REO production from the Molycorp Silmet facility, constitutes a reporting unit; the Magnetic Materials and Alloys operating segment, exclusive of the MMA facility, constitutes a reporting unit; and the Rare Metals segment, exclusive of both the tantalum and niobium production from the Molycorp Silmet facility and the Buss & Buss facility, which are individual reporting units, constitutes a reporting unit.

The Company concluded that, except for the Resources segment and the Molycorp Silmet facility, the estimated fair value of all other reporting units did not exceed their carrying value. As a result, the Company completed step two of the test and determined that the goodwill was impaired for the Chemicals and Oxides, Magnetic Materials Alloys and Rare Metals segments, with the exclusions described above, and for the MMA facility. The Company initially recorded a total goodwill impairment charge of approximately $258.3 million that, except for approximately $2.0 million related to the MMA acquisition, was associated with the reporting units created as a result of the Molycorp Canada acquisition. Inputs used to fair value the Company's reporting units are considered Level 3 inputs of the fair value hierarchy.

In connection with the final allocation of the consideration transferred to the net assets of Molycorp Canada, the Company increased the initial carrying amount of goodwill, but recognized an additional goodwill impairment of $31.6 million that completely offset the incremental goodwill recognized as a result of those adjustments.

Circumstances that negatively affected the Company's estimate of fair value of its reporting units impaired included: longer-than-anticipated soft pricing environment for rare earths and certain rare metals; loss of some end markets due to 2011 rare earths high prices not returning to lower levels as quickly as anticipated; stalled growth for some new bonded magnet applications due to a peak in neodymium prices in 2011; and delays in ramping up the Molycorp Mountain Pass facility that deferred the Company's ability to enter into longer-term contracts and generate the anticipated synergies expected from the Molycorp Canada acquisition.

Changes in the carrying value of goodwill by reportable segment during the years ended December 31, 2012 and 2011, except for the Resources segment, which includes only the Molycorp Mountain Pass facility that has no goodwill, were as follows (in thousands):



	January 1, 2011	Goodwill Acquired		December 31, 2011		Goodwill Acquired		Impairment			December 31, 2012
Chemicals and Oxides	—	$	728	$	728	$	285,633	$	(161,132	)	$	125,229
Magnetic Materials and Alloys	—	1,977		1,977		213,525		(112,694		)	102,808
Rare Metals	—	727		727		27,046		(16,068		)	11,705
Total	—	$	3,432	$	3,432	$	526,204	$	(289,894	)	$	239,742

The goodwill increase in all reportable segments during fiscal 2012 related to the acquisition of Molycorp Canada. The increase in goodwill in the Chemicals and Oxides and Rare Metals segments during the year ended December 31, 2011 was associated with the acquisition of Molycorp Silmet. The MMA acquisition contributed to the increase in goodwill in the Magnetic Materials and Alloys segment in fiscal 2011.

Other Intangible Assets

At December 31, 2012 and 2011, intangible assets consisted of the following (in thousands):



	Customer relationships		Rare earth quotas		Patents			Trade names		Land use rights		Other		Total
Gross carrying amount
At January 1, 2012	$	2,669	—		—			$	786	—		—		$	3,455
Additions	342,105		78,300		39,252			14,800		3,568		4,420		482,445
Impairment	—		—		(6,000		)	—		—		—		(6,000		)
At December 31, 2012	$	344,774	$	78,300	$	33,252		$	15,586	$	3,568	$	4,420	$	479,900

Amortization
At January 1, 2012	$	170	—		—			$	213	—		—		$	383
Amortization	13,925		4,035		9,365			939		66		249		28,579
At December 31, 2012	14,095		4,035		9,365			1,152		66		249		28,962
Net book value	$	330,679	$	74,265	$	23,887		$	14,434	$	3,502	$	4,171	$	450,938



	Customer relationships		Rare earth quotas	Patents	Trade names		Land use rights	Other	Total
Gross carrying amount
At January 1, 2011	—		—	—	$	786	—	—	$	786
Additions	2,669		—	—	—		—	—	2,669
At December 31, 2011	$	2,669	—	—	$	786	—	—	$	3,455

Amortization
At January 1, 2011	—		—	—	$	147	—	—	$	147
Amortization	170		—	—	66		—	—	236
At December 31, 2011	170		—	—	213		—	—	383
Net book value	$	2,499	—	—	$	573	—	—	$	3,072

At December 31, 2012, the net book value of customer relationships, rare earth quotas, patents, trade names, and other intangible assets included, in the aggregate, $482.2 million from the Molycorp Canada acquisition. The original amount of these acquired intangible assets was reduced in the fourth quarter 2012 by an impairment of $6.0 million related to some patents that were recorded under the Magnetic Materials and Alloys segment. The Company used the relief from royalty method to fair value these patents. Circumstances leading to this impairment included lower margins forecast due to patents expiration in 2014. The trade names additions of $14.8 million in 2012 were the only indefinite-lived intangible assets of the Company at December 31, 2012.

Amortization expense for the years ended December 31, 2012, 2011 and 2010 was $28.6 million, $0.2 million and $0.1 million, respectively. Amortization expense for the next five years and thereafter is expected to be as follows (in millions):



2013	$	44.7
2014	37.0
2015	33.8
2016	32.2
2017	30.9
Thereafter	257.6

- 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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