Goodwill

Changes in the carrying value of goodwill for the three years ended December 31, 2013 are as follows:



	(In thousands)
Balance at January 1, 2011	$	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
Impairment	(265,423		)
Balance at December 31, 2013	$	—

The Company performed its annual impairment testing as of October 1, 2013 on the two Appalachia reporting units with goodwill balances, the Leer mining complex and an undeveloped property adjacent to it. These two reporting units are sensitive to the volatility in the demand for and pricing of metallurgical coal. Continuing weakness in the metallurgical coal markets caused the Company to reassess key marketing and operating assumptions during the Company's annual budgeting process, which is the source of the projected cash flows for the goodwill impairment review. As a result, the book values of the reporting units exceeded their fair values after the first step of the goodwill impairment tests. It was also determined that the goodwill had no fair value, and the Company recognized an impairment loss for the remaining reporting units totaling $265.4 million.

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, was 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. The Company recorded an impairment charge for the entire $115.8 million carrying value of Black Thunder's goodwill in 2012.

During 2012, metallurgical prices fell substantially from the peaks reached during 2011, when the reporting units were acquired with the Company's purchase of ICG. Because the goodwill amounts allocated to certain reporting units in the Company’s Appalachia segment acquired with the ICG acquisition were sensitive to volatility in the demand for metallurgical coal, the fair values of two of these reporting units fell 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.