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Long-Lived Asset Impairment
12 Months Ended
Dec. 31, 2012
Long-Lived Asset Impairment  
Long-Lived Asset Impairment

13.  Long-Lived Asset Impairment

 

During 2012, we evaluated the future deployment of our idle fleet and determined to retire and either sell or re-utilize key components on approximately 930 idle compressor units, or approximately 318,000 horsepower, that we previously used to provide services in our North America contract operations segment. As a result, we performed an impairment review and recorded a $97.1 million asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit was estimated based on the expected net sale proceeds compared to other fleet units we recently sold, as well as our review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use.

 

In connection with our review of our fleet in 2012, we evaluated for impairment idle units that had been culled from our fleet in prior years and were available for sale. Based upon that review, we reduced the expected proceeds from disposition for most of the remaining units and increased the weighted average disposal period for the units from the assumptions used in prior periods. This resulted in an additional impairment of $34.8 million to reduce the book value of each unit to its estimated fair value.

 

In the fourth quarter of 2012, we committed to a plan to abandon our contract water treatment business as part of our continued emphasis on simplification and focus on our core businesses. In conjunction with the planned abandonment, we recorded an impairment of long-lived assets of $46.8 million, including property, plant and equipment impairment of $17.7 million and intangible assets impairment of $29.1 million. The fair value of our contract water treatment assets was based on projected cash flows of active assets currently under contract, which expire in 2013, and expected net sales proceeds of idle assets that have been culled from our fleet. We expect the abandonment of our contract water treatment business to be completed by December 31, 2013.

 

During 2012, we evaluated other long-lived assets for impairment and recorded long-lived asset impairments of $4.7 million on these assets.

 

During 2011, we reviewed the idle compression assets used in our contract operations segments for units that were not of the type, configuration, make or model that are cost effective to maintain and operate. Our estimate of the fair value of the impaired long-lived assets was based on the expected net sale proceeds compared to other fleet units we recently sold, as well as our review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. The net book value of these assets exceeded the fair value by $5.7 million for the year ended December 31, 2011 and was recorded as a long-lived asset impairment. In addition, in the fourth quarter of 2011, we recorded a $0.4 million impairment of other long-lived assets.

 

During 2010, we completed an evaluation of our longer-term strategies and determined to retire and sell approximately 1,800 idle compressor units, or approximately 600,000 horsepower, that we previously used to provide services in our North America and international contract operations businesses. As a result, we performed an impairment review and recorded a $133.0 million asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit was estimated based on the expected net sale proceeds compared to other fleet units we recently sold, as well as our review of other units that were recently for sale by third parties.

 

As a result of a decline in market conditions in North America during 2010, we reviewed the idle compression assets used in our contract operations segments for units that were not of the type, configuration, make or model that are cost effective to maintain and operate. We determined that 323 units representing 61,400 horsepower would be retired from the fleet in 2010. We performed a cash flow analysis of the expected proceeds from the salvage value of these units to determine the fair value of the assets. The net book value of these assets exceeded the fair value by $7.6 million for the year ended December 31, 2010 and was recorded as a long-lived asset impairment.

 

In addition, in the fourth quarter of 2010, 105 fleet units that we previously utilized in our international contract operations segment were damaged in a flood, resulting in a long-lived asset impairment of $3.3 million.