GOODWILL AND INTANGIBLES

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLES

In previous years, the Company acquired businesses relating to the stainless steel blends market and recorded total goodwill of $6.8 million. An independent valuation consultant assessed the fair value of purchased intangibles for each acquisition. Identifiable intangibles totaling $6.2 million were originally recorded. In 2012, the Company recorded an impairment loss for the carrying value of goodwill of $6.8 million based on an outside valuation as described below (see also Note 1 - "Summary of Significant Accounting Policies - Goodwill and Other Intangibles"). In the fourth quarter of 2013, management discontinued the production of stainless steel blends, which is a subset of the stainless steel market, and recorded an impairment loss for the intangibles remaining carrying value, net of amortization, of approximately $3.5 million (see also Note 1 - "Summary of Significant Accounting Policies - Intangibles").

The Company tests for goodwill impairment using a two-step process and at the level of the recycling reporting units to which all the goodwill is related in accordance with ASC Topic 350 - Intangibles-Goodwill and Other. In the first step, the Company determines whether to impair goodwill by comparing the fair value of the recycling reporting unit as a whole (the present value of expected cash flows) to its carrying value including goodwill or by obtaining a valuation from an outside source. A reporting unit is an operating segment or one level below an operating segment (referred to as a "component"). A component is considered a reporting unit for purposes of goodwill testing if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component.

For 2013 and 2012, the Company identified two reporting units. In 2012, the Company obtained a valuation from an outside source to value goodwill and intangible balances as of December 31, 2012. Of the valuation methodologies considered for the valuation of the goodwill, the income approach valuation method was used. In this approach, discounted cash flow analysis measures the value of a company by the present value of its estimated future economic benefits. These benefits can include earnings, cost savings, tax deductions, and proceeds from disposition. Value indications are developed by discounting expected cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation and risks associated with the particular investment. The material assumptions used in the valuation include a discount rate range, a long-term growth rate, a working capital rate, and a terminal growth rate range. The valuation also includes income projections and capital expenditure forecasts as provided by management. These assumptions and estimates were based on information available at the time the valuation was performed. These assumptions and estimates bear the risk of change as future performance, future economic conditions, and continued major customer relationships cannot be predicted or guaranteed. See also Note 1 - "Summary of Significant Accounting Policies" for additional information about these assets.

If necessary, the second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying amount 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. Since the recycling reporting unit’s fair value exceeded its carrying value in 2011, no further computations were required in that year. In 2012, as a result of changes in our long-term projections for stainless steel sales due to decreasing demand for stainless steel and other nickel-based metals, the recycling reporting unit's fair value did not exceed its carrying value. Accordingly, we performed the second step of the impairment test and recorded an impairment loss of $6.8 million. We had no accumulated impairment losses to goodwill prior to this loss.

The change in carrying value, in thousands, of goodwill during the years ended December 31, 2013 and 2012 is shown below:



Balance, January 1, 2012	$	6,840
Additions to goodwill	—
Impairment loss, goodwill	(6,840		)
Balance, December 31, 2012	—
Additions to goodwill	—
Impairment loss, goodwill	—
Balance, December 31, 2013	$	—

- 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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