Goodwill

Changes in the carrying value of goodwill for the years ended December 31, 2012, 2011 and 2010 are as follows:



	(In thousands)
Balance at January 1, 2010	$	113,701
Consideration paid related to prior business acquisitions	1,262
Balance at December 31, 2010	114,963
Consideration paid related to prior business acquisitions	829
Acquisition of ICG	480,311
Balance at December 31, 2011	596,103
Impairment	(330,680		)
Balance at December 31, 2012	$	265,423

During the second quarter of 2012, a significant drop in the Company’s stock price, combined with continuing weak demand for thermal coal during the quarter and the Company’s resulting production cuts, indicated that the fair value of the Company’s goodwill could be less than its carrying value. Accordingly, the Company performed the first step of the two-step goodwill impairment test as of June 30, 2012. The value of the Company’s Black Thunder reporting unit in the Powder River Basin, where $115.8 million of goodwill had been allocated, is sensitive to market demand for thermal coal. The further weakening in thermal coal markets had significantly impacted the projected demand for and pricing of coal produced at Black Thunder. In step one of the goodwill impairment testing, the fair value of the Black Thunder reporting unit did not exceed its carrying value, primarily due to the impact of lower demand on near term sales volumes and pricing. Based on initial estimates of the fair values of the assets and liabilities and the deficit of the fair value when compared to the related book values, the Company recorded a preliminary impairment charge for the entire $115.8 million carrying value of Black Thunder's goodwill during the second quarter of 2012. We subsequently performed a valuation of Black Thunder's assets and liabilities to determine the fair value of the reporting unit's goodwill, which supported the estimation that the goodwill allocated to the Black Thunder reporting unit had no value.

The goodwill amounts allocated to certain reporting units in the Company’s Appalachia segment acquired with the ICG acquisition are sensitive to volatility in the demand for metallurgical coal. During the 2012, metallurgical prices fell substantially from the peaks reached during 2011, when the reporting units were acquired with the Company's purchase of ICG. This caused the fair value of two of these reporting units to fall below their carrying value. The allocated goodwill of $214.9 million for those reporting units was determined to be fully impaired, based on the discounted cash flows used in the ICG acquisition valuation, adjusted for current market conditions and estimates of production levels. The Company recognized the impairment charge in the fourth quarter of 2012.