XML 83 R14.htm IDEA: XBRL DOCUMENT

Note 6 - Goodwill

12 Months Ended

Dec. 31, 2014

Disclosure Text Block Supplement [Abstract]

6.	Goodwill:

In accordance with the Accounting Standards Codification (ASC), on an annual basis, an impairment test of goodwill is performed in the fourth quarter or more frequently if changes in circumstances or the occurrence of events indicate potential impairment. Events or changes in circumstances that could trigger an impairment review include significant nonperformance relative to the expected historical or projected future operating results, significant changes in the manner of the use of the acquired assets or the strategy for the overall business or significant negative industry or economic trends.

During the fourth quarter of 2014, the Company engaged an independent third party valuation expert to assist with the completion of the annual goodwill impairment testing pursuant ASC Topic 350-20-35, “Goodwill – Subsequent measurement.” Due to challenging fourth quarter market conditions, the Company’s recent financial performance and the decrease of the Company’s market capitalization, the Company decided to perform the two-step quantitative impairment test by comparing the fair value of the Integrity Stainless and tubular and pipe products segment with its carrying value.

The first step of the goodwill impairment test showed that the fair value of the Integrity Stainless operations was in excess of its carrying value and no goodwill impairment was identified. For the Company’s tubular and pipe products segment, it was determined that the carrying value of the operations was in excess of the fair value and a potential goodwill impairment was identified. Based on the second step of the impairment test, the Company concluded that the implied fair value of goodwill for the tubular and pipe products segment was less than its carrying value and a goodwill impairment of $23.8 million was recorded.

The determination of fair value of the reporting units used to perform the first step of the impairment test requires judgment and involves significant estimates and assumptions about the expected future cash flows and the impact of market conditions on those assumptions. Due to the inherent uncertainty associated with these estimates, actual results could differ materially from these estimates. Although management believes the assumptions used in testing the Company’s reporting units’ goodwill for impairment are reasonable, it is possible that market and economic conditions could deteriorate further or not improve as expected. Additional declines in or a lack of recovery in market conditions from current levels, weaker than anticipated Company financial performance, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact the impairment analysis and may result in further goodwill impairment charges that, if incurred, could have a material adverse effect on the Company’s financial condition and results of operations. A 1% change to the weighted average cost of capital would impact the goodwill impairment by $16 million to $20 million and a 1% change in the terminal growth rate would impact the goodwill impairment by $10 million to $13 million.

Goodwill, by reportable segment, was as follows as of December 31, 2014 and 2013:

(in thousands)	Flat Products		Tubular and Pipe Products			Total
Balance as of December 31, 2012	$	500	$	40,287		$	40,787
Acquisitions		-		-			-
Impairments		-		-			-
Balance as of December 31, 2013	$	500	$	40,287		$	40,787
Acquisitions		-		-			-
Impairments		-		(23,836	)		(23,836	)
Balance as of December 31, 2014	$	500	$	16,451		$	16,951

The goodwill is not deductible for income tax purposes. The goodwill represents the excess of cost over the fair value of net tangible and intangible assets acquired. The Company paid goodwill in conjunction with the acquisitions, as they enhance the Company’s commercial opportunities by adding new product offerings to an expanded customer base and by increasing the Company’s distribution footprint.