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Annual report pursuant to Section 13 and 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES

v2.4.0.6
GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES
 12 Months Ended
Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract] Ìý
GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES
NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS AND LIABILITIES
Goodwill
Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies and is not subject to amortization. We assign goodwill arising from acquired companies to the reporting units that are expected to benefit from the synergies of the acquisition. Our reporting units are either at the operating segment level or a component one level below our operating segments that constitutes a business for which management generally reviews production and financial results of that component. Decisions are often made as to capital expenditures, investments and production plans at the component level as part of the ongoing management of the related operating segment. We have determined that our Asia Pacific Iron Ore and Ferroalloys operating segments constitute separate reporting units, that our CQIM and Wabush mines within our Eastern Canadian Iron Ore operating segment constitute reporting units, that CLCC within our North American Coal operating segment constitutes a reporting unit and that our Northshore mine within our U.S. Iron Ore operating segment constitutes a reporting unit. Goodwill is allocated among and evaluated for impairment at the reporting unit level in the fourth quarter of each year or as circumstances occur that potentially indicate that the carrying amount of these assets may exceed their fair value.
During the fourth quarter of 2012, upon performing our annual goodwill impairment test, a goodwill impairment charge of $997.3 million was recorded for our CQIM reporting unit within the Eastern Canadian Iron Ore operating segment. The impairment charge for our CQIM reporting unit was driven by the project’s lower than anticipated long-term profitability coupled with delays in achieving full operational capacity and and higher capital and operating costs. Additionally, the announced delay of the Phase II expansion of the Bloom Lake mine also contributed to the impairment.
ÌýÌýÌýÌýAdditionally, a goodwill impairment charge of $2.7Ìýmillion was recorded for our Wabush reporting unit. This charge was primarily a result of downward long-term pricing estimates and increased costs.
After performing our annual goodwill impairment test in the fourth quarter of 2011, we determined that $27.8 million of goodwill associated with our CLCC reporting unit was impaired as the carrying value with this reporting unit exceeded its fair value. The fair value was determined using a combination of a discounted cash flow model and valuations of comparable businesses. The impairment charge for the CLCC reporting unit was driven by our overall outlook on coal pricing in light of economic conditions, increases in our anticipated costs to bring the Lower War Eagle mine into production and increases in our anticipated sustaining capital cost for the lives of the CLCC mines that are currently operating.
No other goodwill impairment charges were identified in connection with our annual goodwill impairment tests in 2012 and 2011.
Refer to NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS for further information.
The following table summarizes changes in the carrying amount of goodwill allocated by operating segment for the year ended DecemberÌý31, 2012 and the year ended DecemberÌý31, 2011:
Ìý
(In Millions)
Ìý
December 31, 2012
Ìý
December 31, 2011
Ìý
U.S. Iron Ore
Ìý
Eastern Canadian Iron Ore
Ìý
Asia Pacific
Iron Ore
Ìý
North American Coal
Ìý
Other
Ìý
Total
Ìý
U.S. Iron Ore
Ìý
Eastern
Canadian Iron Ore
Ìý
Asia Pacific Iron Ore
Ìý
North American Coal
Ìý
Other
Ìý
Total
Beginning Balance
$
2.0

Ìý
$
986.2

Ìý
$
83.0

Ìý
$
—

Ìý
$
80.9

Ìý
$
1,152.1

Ìý
$
2.0

Ìý
$
3.1

Ìý
$
82.6

Ìý
$
27.9

Ìý
$
80.9

Ìý
$
196.5

Arising in business combinations
—

Ìý
13.8

Ìý
—

Ìý
—

Ìý
—

Ìý
13.8

Ìý
—

Ìý
983.5

Ìý
—

Ìý
(0.1
)
Ìý
—

Ìý
983.4

Impairment
—

Ìý
(1,000.0
)
Ìý
—

Ìý
—

Ìý
—

Ìý
(1,000.0
)
Ìý
—

Ìý
—

Ìý
—

Ìý
(27.8
)
Ìý
—

Ìý
(27.8
)
Impact of foreign currency translation
—

Ìý
—

Ìý
1.5

Ìý
—

Ìý
—

Ìý
1.5

Ìý
—

Ìý
—

Ìý
0.4

Ìý
—

Ìý
—

Ìý
0.4

Other
—

Ìý
—

Ìý
—

Ìý
—

Ìý
—

Ìý
—

Ìý
—

Ìý
(0.4
)
Ìý
—

Ìý
—

Ìý
—

Ìý
(0.4
)
Ending Balance
$
2.0

Ìý
$
—

Ìý
$
84.5

Ìý
$
—

Ìý
$
80.9

Ìý
$
167.4

Ìý
$
2.0

Ìý
$
986.2

Ìý
$
83.0

Ìý
$
—

Ìý
$
80.9

Ìý
$
1,152.1

Accumulated Goodwill Impairment Loss
$
—

Ìý
$
(1,000.0
)
Ìý
$
—

Ìý
$
(27.8
)
Ìý
$
—

Ìý
$
(1,027.8
)
Ìý
$
—

Ìý
$
—

Ìý
$
—

Ìý
$
(27.8
)
Ìý
$
—

Ìý
$
(27.8
)

Other Intangible Assets and Liabilities
Following is a summary of intangible assets and liabilities as of DecemberÌý31, 2012 and DecemberÌý31, 2011:
Ìý
Ìý
Ìý
(In Millions)
Ìý
Ìý
Ìý
December 31, 2012
Ìý
December 31, 2011
Ìý
Classification
Ìý
Gross
Carrying
Amount
Ìý
Accumulated
Amortization
Ìý
Net
Carrying
Amount
Ìý
Gross
Carrying
Amount
Ìý
Accumulated
Amortization
Ìý
Net
Carrying
Amount
Definite-lived intangible assets:
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Ìý
Permits
Intangible assets, net
Ìý
$
136.1

Ìý
$
(31.7
)
Ìý
$
104.4

Ìý
$
134.3

Ìý
$
(23.2
)
Ìý
$
111.1

Utility contracts
Intangible assets, net
Ìý
54.7

Ìý
(32.4
)
Ìý
22.3

Ìý
54.7

Ìý
(21.3
)
Ìý
33.4

Leases
Intangible assets, net
Ìý
5.7

Ìý
(3.4
)
Ìý
2.3

Ìý
5.5

Ìý
(3.0
)
Ìý
2.5

Total intangible assets
Ìý
Ìý
$
196.5

Ìý
$
(67.5
)
Ìý
$
129.0

Ìý
$
194.5

Ìý
$
(47.5
)
Ìý
$
147.0

Below-market sales contracts
Other current liabilities
Ìý
$
(46.0
)
Ìý
$
—

Ìý
$
(46.0
)
Ìý
$
(77.0
)
Ìý
$
24.3

Ìý
$
(52.7
)
Below-market sales contracts
Other liabilities
Ìý
(250.7
)
Ìý
181.6

Ìý
(69.1
)
Ìý
(252.3
)
Ìý
140.5

Ìý
(111.8
)
Total below-market sales contracts
Ìý
Ìý
$
(296.7
)
Ìý
$
181.6

Ìý
$
(115.1
)
Ìý
$
(329.3
)
Ìý
$
164.8

Ìý
$
(164.5
)

Amortization expense relating to intangible assets was $22.5 million, $17.7 million, and $18.8 million, respectively, for the years ended DecemberÌý31, 2012, 2011, and 2010, and is recognized in Cost of goods sold and operating expenses in the Statements of Consolidated Operations. The estimated amortization expense relating to intangible assets for each of the five succeeding years is as follows:

(In Millions)

Amount
Year Ending December 31

2013
$
17.9

2014
17.9

2015
6.0

2016
6.0

2017
6.0

Total
$
53.8


The below-market sales contracts are classified as a liability and recognized over the terms of the underlying contracts, which have remaining lives ranging from one to four years. For the years ended DecemberÌý31, 2012, 2011, and 2010, we recognized $46.3 million, $57.0 million, and $62.4 million, respectively, in Product revenues related to the below-market sales contracts. The following amounts are estimated to be recognized in Product revenues for each of the five succeeding fiscal years:
Ìý
(In Millions)
Ìý
Amount
Year Ending December 31
Ìý
2013
$
46.0

2014
23.1

2015
23.0

2016
23.0

2017
—

Total
$
115.1