Impairment and Facility Closure Costs

12 Months Ended

Aug. 31, 2011

Impairment and Facility Closure Costs [Abstract]

IMPAIRMENT AND FACILITY CLOSURE COSTS

NOTE 7. IMPAIRMENT AND FACILITY CLOSURE COSTS

The Company evaluates the carrying value of property, plant and equipment and finite-lived intangible assets whenever a change in circumstances indicates that the carrying value may not be recoverable. Facility closures and changes in market conditions and economic environment could impact future operating results and cash flows.

During the fourth quarter of 2011, the Company prepared an impairment analysis on its steel pipe manufacturing operation at CMCS based on the following impairment indicators: management determined that improvements in key operating areas could not be achieved and maintained without additional capital expenditures; CMCS could not achieve adequate market share for billets as the mill is currently designed; the down-turn in global economy, especially debt issues in Europe, further delayed recovery and will likely result in continued losses in future years; accession of Croatia to the European Union which is required to allow the operation to be competitive was further delayed until 2013 or mid-2014; and uncertainties in the Middle East and North Africa, the primary markets for CMCS. As a result, the Company recorded impairment charges to impair the CMCS operation. The operations of CMCS are included as part of the International Mills segment.

Additionally, the Company decided to close certain rebar fabrication and construction services (“CRP”) locations and the Company’s fabrication operation in Germany during the fourth quarter of 2011. As a result, the Company recorded impairment charges for these locations. Additionally, the Company determined that based on current market conditions and operating results as part of the Company’s annual budget process, one of the Company’s rebar fabrication customer base intangible assets was not recoverable. As a result, the Company recorded an impairment charge to reduce the customer base intangible to its estimated fair value. The rebar and CRP operations are included as part of the Americas Fabrication segment and the German fabrication operation is included as part of the International Mills segment.

The impairment of property, plant and equipment was based on the fair values calculated by independent appraisals. The fair values include estimated cost to sell the assets. The CRP locations are leased properties. Lease termination costs represent the estimated fair value of future lease payments less any sub-lease income which the Company recorded at the cease use date of the leased property.

In connection with these actions, the following pre-tax charges were recorded in 2011:

	(in thousands)
Impairment of property, plant and equipment and other assets	$	106,655
Impairment of customer list intangible asset		12,140
Write-down of inventory		8,500
Severance costs		5,051
Lease termination costs		2,196
Other closure costs		7,700