XML 64 R11.htm IDEA: XBRL DOCUMENT

Asset Impairments

12 Months Ended

Dec. 31, 2011

5. Asset Impairments

Gatling West Virginia. In October 2011, the Partnership was informed by Gatling Ohio, LLC, a Cline affiliate, that it was idling the operations and was no longer projecting production from the West Virginia mine. The Partnership and Gatling have amended the lease with respect to this property to provide that the existing minimum royalty balance of $24.1 million is non-recoupable, that Gatling will pay $3.4 million in non-recoupable minimum royalties when they become due in January and April of 2012, that the minimums will be reduced after the first quarter of 2012, and that Gatling will continue to maintain and ventilate the mine. Considering all information available at that time, the Partnership determined that its investment in the Gatling West Virginia property was not fully recoverable by future cash flows. The assets include coal reserves, certain above market intangibles and coal transportation equipment.

The net book value as of the measurement date and calculated fair values of the assets relating to the Gatling West Virginia operation are as follows:


	Fair Value		Net Book Value
	(In thousands)
Coal and other mineral rights, net	$	6,618	$	76,003
Intangible assets, net		—		43,855
Plant and equipment, net		2,600		7,775

Total	$	9,218	$	127,633

The asset impairment of $118.4 million was offset by $24.1 million of recoupable minimum payments received from Gatling, LLC to date and $3.4 million in cash payments to be received, resulting in a net asset impairment of $90.9 million, which is included in operating costs and expenses on the Consolidated Statements of Income.

Gatling Ohio. In December 2011, the Partnership was informed by Gatling, LLC, a Cline affiliate, that it was idling its operations and was no longer projecting production from the Ohio mine. Gatling Ohio’s recoupable minimum royalty balance as of December 31, 2011 was $9.6 million. Considering all information available at this time, the Partnership has determined that its investment in the Gatling Ohio property will not be fully recovered by future cash flows. The assets include coal reserves, certain above market intangibles and coal transportation equipment.

The net book value as of the measurement date and calculated fair values of the assets relating to the Gatling Ohio operation are as follows:


	Fair Value		Net Book Value
	(In thousands)
Coal and other mineral rights, net	$	20,035	$	56,769
Intangible assets, net		—		33,670
Plant and equipment, net		2,947		2,947

Total	$	22,982	$	93,386

The asset impairment of $70.4 million is included in operating costs and expenses on the Consolidated Statements of Income.

In determining impairments of the Gatling West Virginia and Gatling Ohio assets, the fair values of the coal rights were estimated using a weighted combination of Level 3 expected cash flow and Level 2 market approaches. The fair values of the transportation equipment were estimated using Level 2 market approaches. The expected cash flows were developed using estimated annual sales tons and administrative expenses, as well as forecasted sales prices and anticipated market royalty rates. The market approaches include references to recent comparable transactions that were adjusted for each mine’s specific characteristics. Since Gatling, LLC is no longer projecting production in the near term future for the West Virginia and Ohio properties, the related royalty and transportation contract intangible assets were estimated to have no fair value as of the measurement date.