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GOODWILL | 9 Months Ended
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Sep. 30, 2012
GOODWILL |
GOODWILL |
10. GOODWILL Goodwill acquired in connection with business combinations represents the excess of consideration over the fair value of tangible and identifiable intangible net assets acquired. Certain assumptions and estimates are employed in determining the fair value of assets acquired and liabilities assumed, as well as in determining the allocation of goodwill to the appropriate reporting units. We performed our goodwill impairment test in the fourth quarter of each year, or whenever events indicated impairment may have occurred, to determine if the estimated recoverable value of each of our reporting units exceeded the net carrying value of the reporting unit, including the applicable goodwill. The first step in performing a goodwill impairment test is to compare the estimated fair value of each reporting unit with its recorded net book value (including the goodwill). If the estimated fair value of the reporting unit is higher than the recorded net book value, no impairment is deemed to exist and no further testing is required. If, however, the estimated fair value of the reporting unit is below the recorded net book value, then a second step must be performed to determine the goodwill impairment required, if any. In this second step, the estimated fair value from the first step is used as the purchase price in a hypothetical acquisition of the reporting unit. Purchase business combination accounting rules are followed to determine a hypothetical purchase price allocation to the reporting unit’s assets and liabilities. The residual amount of goodwill resulting from this hypothetical purchase price allocation is compared to the recorded amount of goodwill for the reporting unit, and the recorded amount is written down to the hypothetical amount, if lower. Because quoted market prices for our reporting units are not available, management must apply judgment in determining the estimated fair value of these reporting units for purposes of performing the annual goodwill impairment test. Management used all available information to make these fair value determinations, including the present values of expected future cash flows using discount rates commensurate with the risks involved in the assets. As a result of the level of decline in our stock price and corresponding market capitalization in the third quarter of 2011, we performed a goodwill impairment test of our aftermarket services and fabrication reporting units’ goodwill as of September 30, 2011. We determined the fair value of these reporting units using the expected present value of future cash flows. This decline in our market capitalization led us to increase the estimate of the market’s implied weighted average cost of capital and reduce the present value of the forecasted cash flows. The test indicated that our aftermarket services and fabrication reporting units’ goodwill was impaired and therefore we recorded a full impairment of the goodwill associated with these reporting units in the third quarter of 2011 of $196.1 million. The table below presents the change in the net carrying amount of goodwill for the nine months ended September 30, 2011 (in thousands):
|  | Aftermarket services |  | Fabrication |  | Total |
Balance as of December 31, 2010: |  |  |  |  |  |  |
Goodwill |  | $ | 63,095 |  | $ | 221,154 |  | $ | 284,249 |
Accumulated impairment losses |  | — |  | (87,569 | ) | (87,569 | )
|  | 63,095 |  | 133,585 |  | 196,680 |
Impairment losses |  | (62,852 | ) | (133,290 | ) | (196,142 | )
Impact of foreign currency translation |  | (243 | ) | (295 | ) | (538 | )
Balance as of September 30, 2011: |  |  |  |  |  |  |
Goodwill |  | 62,852 |  | 220,859 |  | 283,711 |
Accumulated impairment losses |  | (62,852 | ) | (220,859 | ) | (283,711 | )
|  | $ | — |  | $ | — |  | $ | — |

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